Signature Bank (SBNY) Q1 2022 Earnings Call Transcript

Signature Bank (SBNY)
Q1 2022 Earnings Call
Apr 19, 2022, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to the Signature Bank's 2022 first quarter results conference call. Hosting the call today from Signature Bank are Joseph J. DePaolo, president and chief executive officer; Eric R. Howell, senior executive vice president and chief operating officer; and Steve Wyremski, senior vice president and chief financial officer.

Today's call is being recorded. [Operator instructions] It is now my pleasure to turn the floor over to Joseph J. DePaolo, president and chief executive officer. You may begin.

Joe DePaolo -- President and Chief Executive Officer

Thank you, Ashley. Good morning and thank you for joining us today for the Signature Bank 2022 first quarter results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer.Please go ahead, Susan.

Susan 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. 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 expectations regarding 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 the COVID-19 pandemic on each of the foregoing and on our business overall. Forward-looking statements often include words such as may, believe, expect, anticipate, intend, potential, opportunity, could, project, seek, target, goal, should, will, would, plan, estimate, or other similar expressions. 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 and can change as a result of the many possible events or factors, not all of which are known to us or are in our control.

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.

Joe DePaolo -- President and Chief Executive Officer

Thank you, Susan. Before discussing this quarter's results, we are making a few changes to our earnings call. Along with our earnings release, you will find a presentation deck has been posted to the Investors section of our website. I would also like to introduce Steve Wyremski, our chief financial officer.

Welcome, Steve. As always, I am joined here today by Eric Howell, our chief operating officer. Good morning, Eric.

Eric Howell -- Senior Vice President and Chief Operating Officer

Good morning, Joe.

Joe DePaolo -- President and Chief Executive Officer

Together, the three of us will provide an overview of the quarterly results. We will address your questions at the end of our remarks. Signature Bank continues to prove its earnings power, driving both profitability and efficiency at a rapid pace, while expanding the balance sheet and maintaining a robust risk management discipline. This is exhibited by strong profitability and growth metrics achieved across the board.

Let me take a step back one moment. The quarter played out as we anticipated. Interest rates rose and as a result, our deposit growth normalized but still remains strong. We deployed some of the excess cash into high-yielding assets and monetized our balance sheet, reducing excess cash for the first time in two years.

For the quarter, net income increased 78% year over year to $338.5 million, and diluted earnings per share increased $2.06 or $0.64 to $5.30. The significant earnings expansion this quarter is in large part driven by the deployment of our cash into securities and loans, which drove revenues up 38% year over year. While we are actively spending to support our growing businesses, our revenue growth far outpaced expense growth. This resulted in operating leverage where our efficiency ratio further improved to a low point, and our ROE expanded to a high 17.4%.

Now adjusting for these onetime tax items, ROE would still have been a high 15.2%. Not bad for a growth company. Moving on to the balance sheet. Growth remained strong on all fronts.

Total assets grew by $3.4 billion. We grew our securities portfolio by a record $4.1 billion. And our patient and prudent deployment has proven to be advantageous as we are now more active in a higher rate environment. We continue to see opportunities to grow across all lending verticals, and total loans expanded by $1.5 billion.

Total asset growth of $3.4 billion means, as I just stated, we were able to reduce cash balances for the first time in two years. Now let's take a closer look at deposits, the core of our philosophy. Deposits increased $3 billion or 2.8% to $109 billion this quarter, while average deposits grew by $5.3 billion. Since the end of the 2021, first quarter deposits increased a remarkable $35.2 billion or 47.6% and average deposits increased nearly $37.1 billion.

Of the $3 billion in growth of total deposits, noninterest-bearing deposits grew $2.4 billion to $46.7 billion, which represents a high 42.8% of total deposits, which will be extremely valuable in a rising rate environment. Let me repeat it. $2.4 billion of the $3 billion total growth was in noninterest-bearing. The quarter's growth was across the board and all of our businesses positively contributing.

Essentially, we are seeing the power of diversification. Over the last two years, we have expanded to new geographies and industries. As a result, we have created a very stable franchise that is not reliant on any one business line for deposit growth, which was one of the vital goals of our transformation. On the digital front, we are seeing tremendous positive momentum.

The business continues to grow as evidenced by the onboarding of a record 160 new clients. Also, we doubled the amount of major exchanges to eight at the top 12 where we are now the primary bank, which should bode well for future growth. All of these exchanges are integrating onto Signet in part due to our latest enhancement. This new feature allows for our clients to execute automated Fed wires from within Signet in addition to blockchain-based payments, creating efficiency for our client and streamlining their payments process.

As one of the leading banks in this space, we listened to our clients and developed Signet into an all-in-one payment solution. Now I'd like to turn the call over to Eric.

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you, Joe, and good morning, everyone. I'd like to turn our attention to our lending businesses. We had success on several fronts, leading the growth in total loans of $1.5 billion or 2.4% to $66.4 billion and core loan growth of $1.9 billion. For the prior 12 months, total loans grew $15.5 billion or 30.3%.

The largest driver of growth continues to be the Fund Banking Division, which grew loans by $1.3 billion. Similar to deposits, the power of diversification is taking hold with our lending verticals with numerous teams contributing to our growth this quarter. Corporate mortgage finance had a solid quarter with $160 million in growth. And already this quarter, they have grown over $300 million.

Additionally, we saw $109 million out of Signature Financial, which is great to see as the first quarter tends to be slower business for them. And our Venture Banking Group had a record quarter of $88 million in growth. And our West Coast C&I, ABL Group, and SBA originations platform all positively contributed to growth. Furthermore, commercial real estate grew by $157 million as we've turned our attention back to growth in the space.

The growth was all in multifamily CRE, which increased $300 million. So a very solid quarter in multifamily, but partially offset by a decline of $142 million in other CRE. Despite the strong growth this quarter, our concentration levels further declined below 300% and is now at 299%, which was a goal we finally reached, and we have now put the topic of CRE concentration behind us. Now turning to credit quality.

Our portfolio continues to perform well. Nonaccrual loans decreased $41 million to $178 million or 27 basis points of total loans compared with $218 million or 34 basis points for the 2021 fourth quarter. Our past due loans remained within their normal range with 30 to 89-day past due loans at $100.6 million or 15 basis points of total loans and our 90-day-plus past due loans remained very low at $10.8 million or just two basis points. Net charge-offs for the 2022 first quarter declined to $17.8 million or 11 basis points of average loans compared with $33.7 million or 22 basis points for the 2021 fourth quarter.

The provision for credit losses for the 2022 first quarter was lower at $2.7 million compared with $6.9 million for the 2021 fourth quarter. This brought the bank's allowance for credit losses to 69 basis points, and the average ratio stands at a healthy 259 -- I'm sorry, the coverage ratio stands at a healthy 259%. I'd like to point out that excluding very well-secured Fund Banking capital call facilities and government-guaranteed PPP loans, the allowance for credit loss ratio would be much higher at 119 basis points. And now on to the expanding team front, where we continue to realize success.

We started onboarding teams early in the second quarter after bonuses were paid. Thus far, the bank onboarded six private client banking teams, including one in New York. On the West Coast, we further expanded our footprint to include Sacramento and the Central California region, adding three teams. Additionally, two teams are added to Reno, Nevada, marking our entry into this business-friendly state.

Our overall West Coast presence now consists of 32 teams: 16 in Los Angeles, nine in San Francisco, five in Central California, and two in Reno, as well as representation from all our national businesses. We're excited to see the significant level of opportunity to actively grow with teams on both coasts. In New York, we now have 96 teams serving the marketplace, and we are seeing renewed opportunities with numerous teams in the pipeline. Additionally, we will soon be announcing a new C&I lending vertical as a few members of the team have already joined us with the rest to follow shortly.

In order to support our team expansion, we have hired extensively throughout our operations and support infrastructure so that we can continue to best serve our clients' needs. And at this point, I'll turn the call over to Steve. Thank you.

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Thank you, Eric, and good morning. I'll start by reviewing net interest income and margin. Net interest margin increased eight basis points to 1.99% compared with 1.91% for the 2021 fourth quarter. As we anticipated, our deposit growth moderated as interest rates rose, allowing us to put our cash balances to use.

This led to margin expansion during the quarter, and we expect it will lead to further expansion over time. Excess cash balances remain elevated and continue to impact margin by approximately 36 basis points. Our deployment of cash also led to a meaningful increase in our net interest income, which for the first quarter reached $574 million, up $167 million or 41% when compared with the 2021 first quarter and an increase of $38 million or 7% from the 2021 fourth quarter. We expect continued cash deployment and anticipated higher interest rates to drive net interest income growth in the upcoming year.

Let's look at asset yields and funding costs for a moment. Interest-earning asset yields for the 2022 first quarter increased six basis points from the linked quarter to 2.22%. The increase this quarter was again driven by the cash deployment into higher interest-earning loans and securities. Average cash balances for the quarter decreased $2 billion, while average total loans increased $4.6 billion and average securities grew $3.3 billion.

Yields on the securities portfolio increased nine basis points linked quarter to 1.61% given a much stronger market for reinvestment rates and slower CPR speeds on our mortgage-backed securities portfolio. Additionally, our portfolio duration increased 4.14 years due to the higher interest rate environment. New purchases during the quarter came in at a blended 2.39%. Many of these trades were executed to take advantage of the shape of the curve and came with a shorter term.

Turning to our loan portfolio. Yields on average commercial loans and commercial mortgages declined seven basis points to 3.33% compared with the 2021 fourth quarter. The decline in yields was driven by the substantial growth in lower-yielding, very well-secured capital call lines. However, we are just beginning to see the early effects of this portfolio reprice higher.

Since over 40% of our loans we set within 90 days or less, we expect loan yields to increase dramatically as short-term rates moved higher this year. Now looking at liabilities. Our overall deposit cost this quarter decreased one basis point to 18 basis points. We are now at the bottom on deposit costs as some of our rates have already begun to move slightly higher.

During the quarter, average borrowing balances decreased by $89 million to allow $2.7 billion, and the cost of borrowings remained stable at 2.45%. The overall cost of funds for the quarter decreased two basis points to 25 basis points driven by the reduction in deposit costs. As we have pointed out, the bank is significantly asset-sensitive. The bank's focused on growing floating rate loans, which now comprise 51% of our loan portfolio, in addition to our core deposit funding and significant cash balances to make us extremely well positioned to take advantage of a rising rate environment.

On to noninterest income and expense. We continue to emphasize fee income. Noninterest income for the 2022 first quarter was $34.4 million, an increase of $1.7 million or 5% when compared with the 2021 first quarter. The increase was generally across the board as many of our fee income initiatives are taking hold.

Noninterest expense for the 2022 first quarter was $193 million versus $166 million for the same period a year ago. The $27 million or 16.2% increase was principally driven by the addition of new private client banking teams and operational support to meet the bank's growing needs. Despite the significant team hiring and substantial investment in our operations, the bank continues to gain operating leverage. And as a result, our efficiency ratio improved to a best-in-class 31.8% for the 2022 first quarter versus 37.9% for the comparable period last year.

Quickly looking at taxes. This quarter, we benefited from multiple onetime tax items, which totaled $41.6 million, and mostly relates to the impact of our annual restricted stock vesting. This lowered our tax rate to 17.8% for the quarter. Excluding these benefits, the tax rate would have been 27.9%.

Turning to capital. Our 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 10.49% and total risk-based ratio of 12.58% as of the 2022 first quarter. Now I'll turn the call back to Joe. Thank you.

Joe DePaolo -- President and Chief Executive Officer

Thank you, Steve. This quarter, our results speak for themselves as we continue to do what we said we would do. We achieved an ROE of 17.4%. Backing out the onetime tax items just mentioned by Steve, it would have been a very strong 15.2%.

Again, not bad for a growth story. Our efficiency ratio improved to 31.8%. We see banks with efficiency ratios over 60% being employed. Deposit growth came from across the board.

It's slow like we said it would, but it was still strong. And if you want to know more information, see Slide 4 of the deck. In our loan portfolio, the CRE concentration fell below 300% for the first time in over a decade. And contributions came from eight different areas, see Slide 5 of the deck.

We continue to geographically diversified, particularly on the West Coast, where we have expanded to Central California and now Reno. We have seen tremendous consolidation of market disruption on both coasts. Recent M&A in New York has already resulted in more veteran bank prospects than seen in many, many years. We will continue to exercise discipline in selecting the very best bankers and teams.

We will invest in all of our colleagues in the support and administrative functions in order to support strong growth. We will stay on top of the enhancements, both current and future for Signet, and we will continue to build infrastructure to support our clients' needs. Today, we are stimulated by the enormity of opportunities to continue to grow our franchise. Now Eric, Steve, and I are happy to answer any questions you might have.

Ashley, I'll turn it back to you.

Questions & Answers:

Operator

[Operator instructions] Thank you. And our first question comes from Manan Gosalia with Morgan Stanley. Please go ahead. 

Manan Gosalia -- Morgan Stanley -- Analyst

Hi. Good morning. I wanted to start with a question on Fund Banking loans since it's been one of the biggest drivers for loan growth. Can you talk about what you're seeing in demand since the first rate hike? And maybe talk about what you expect for both the market overall as well as your market share gains in that segment given that interest rates are likely to rise pretty rapidly through the year.

Eric Howell -- Senior Vice President and Chief Operating Officer

I mean we continue to really see strong demand in that market. We don't anticipate with the early moves that we'll see much of a falloff in demand at all. Really, I think you'd need to see meaningfully larger moves by the Fed at much higher rates before we really see the demand fall off in that space. And we continue to have the opportunity to take significant market share there, and we anticipate it will be a strong area of growth for us moving forward.

Manan Gosalia -- Morgan Stanley -- Analyst

Got it. And then maybe one follow-up on your comments on expenses. Just given that you're one of the most asset-sensitive banks among peers and with rates moving up, I think you said your expense growth is likely to be in the mid-teens. But given that you're already at a 32% expense ratio, if I model that out, it seems that if you continue at this loan growth pace and the asset sensitivity comes through, your expense ratio will be comfortably sub 30%.

Is there anything that we're missing here? Any onetime investments or costs that you need to incur this year or next?

Steve Wyremski -- Senior Vice President and Chief Financial Officer

No. I mean everything is in -- you mentioned teams of expense growth guidance. 16% is what we're forecasting. And certainly, the asset sensitivity that we have is providing a significant amount of operating leverage and will continue to as rates continue to increase.

So there's no -- nothing missing in that, no onetime expenses. Everything is built into that 16% forecast.

Joe DePaolo -- President and Chief Executive Officer

And to add, one of the things that we don't have is a retail component. So our offices to service clients are in space that is on the upper floors. And we don't have a large teller area because they're privately held businesses and usually, we're picking up from them. So we don't have the real estate costs of a retail group.

We don't advertise. So advertising, marketing and retail costs for locations on The Street are very expensive. And if you cross that out, and that helps us with the efficiency ratio.

Manan Gosalia -- Morgan Stanley -- Analyst

Great. Thank you. 

Operator

We will take our next question from Dave Rochester with Compass Point. Please go ahead.

Dave Rochester -- Compass Point Research and Trading -- Analyst

Hey. Good morning, guys. Nice quarter.

Joe DePaolo -- President and Chief Executive Officer

Hey, Dave. Good morning.

Dave Rochester -- Compass Point Research and Trading -- Analyst

On the digital banking side, you mentioned the doubling of major exchanges in the customer base. Congrats on those adds. I was just wondering if all those associated deposits are actually reflected in the 1Q numbers. And then can you just give a breakdown of the digital asset deposit book at this point? If you have that detail on the components that you talked about before, that would be great.

Joe DePaolo -- President and Chief Executive Officer

The deposits of the eight are not reflected because some of them just came on. So that bodes well for us in the future of gathering deposits because they're not all in those numbers. Let's see. You wanted the balances as of 3/31?

Dave Rochester -- Compass Point Research and Trading -- Analyst

The breakout of the -- that digital asset deposit book, yes, if you guys have it.

Joe DePaolo -- President and Chief Executive Officer

Yes. We had $7.2 billion stablecoin issuers. The OTC desks and institutional trades was $5.6 billion. Digital asset exchanges is $12.8 billion.

These are all in billions. And blockchain technology and digital miners is $3.6 billion It should add up to about 29...

Dave Rochester -- Compass Point Research and Trading -- Analyst

I'm sorry. Go ahead.

Joe DePaolo -- President and Chief Executive Officer

And off balance sheet is zero.

Dave Rochester -- Compass Point Research and Trading -- Analyst

OK. And the total of that? I mean I can add it up, but what we...

Joe DePaolo -- President and Chief Executive Officer

It's about $29.2 billion. And $18.5 billion of the $29.2 billion is in DDA.

Dave Rochester -- Compass Point Research and Trading -- Analyst

Great. Thanks for the detail. And maybe just overall on deposits, it seems like -- we know you have a lot of drivers for growth going forward. Back in March, you highlighted that growth is normally slower in 1Q, but it looked like trends really picked up in March just from an end-of-period basis.

Can you just talk about the momentum you're seeing there on the deposit side? It sounds like you've got the exchanges that are still coming in. Anything else you guys can point to going forward, just on your thoughts?

Joe DePaolo -- President and Chief Executive Officer

It's really across the board. We had the Reno banking teams. We're excited about the California teams that not only have just come on board -- we don't expect them to bring their deposits right away, but we have the situation where we hired a lot of the teams last year. They're starting to kick in.

Specialized mortgage banking solutions is starting to kick in even more. They had over $7 billion in deposits throughout the year, and we expect some larger ones to come in throughout the second quarter and the fourth quarter. Fund Banking is contributing. It's coming from all over.

Dave Rochester -- Compass Point Research and Trading -- Analyst

Great. That's good detail. Thank you. Then switching to the asset side.

You mentioned the new asset vertical that's coming, something you already brought some of those guys over. Can you just give us an update on what you see as the growth potential in that vertical? And then if you had any update on the payroll ecosystem that you've been working on, I know that's more a deposit driver. But if you've gotten a test company up and running now -- I know you were close to linking them in into your -- the Signet network. And then how you see that ramping up from here this year, that would be great.

Eric Howell -- Senior Vice President and Chief Operating Officer

Sure. Yes. The new loan vertical, you're probably looking at a $200 million to $500 million in growth per quarter. A couple of members of the team on board are waiting on a few more to really join us really in the next month or really, hopefully, in the next couple of weeks, but certainly within the next month.

And then we'll have them up and running, and they should hit the ground running pretty quickly. There's a potential to have some growth in the second quarter. But certainly, the third and fourth quarter should contribute nicely to our growth.

Dave Rochester -- Compass Point Research and Trading -- Analyst

Technology, I guess, is already in place for that team?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. Yes. No, no. Technology is in place for that vertical.

It's nothing that we don't already have. That's right.

Joe DePaolo -- President and Chief Executive Officer

And for the payroll, the ecosystem, the payroll processes, we have them lined up and ready. And what they're doing now is trying to get their clients, their customers on board so they could use Signet.

Dave Rochester -- Compass Point Research and Trading -- Analyst

Great. Do you anticipate that panning out in 2Q, 3Q? Or is it more of like a...

Joe DePaolo -- President and Chief Executive Officer

Yes. 2Q and 3Q. Yes, 2Q and 3Q.

Dave Rochester -- Compass Point Research and Trading -- Analyst

OK. Great. All right. Thanks, guys.

Appreciate it. 

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you, Dave. 

Operator

We'll take our next question from Matthew Breese with Stephens Inc. Please go ahead.

Matthew Breese -- Stephens, Inc. -- Analyst

Good morning. I wanted to go back to the quarterly asset growth guidance of $4 billion to $7 billion. Can you just comment on the breakdown of that guidance between loan and securities in light of higher rates and the shape of the yield curve at this point?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. Yes, Matt, looking at probably $1 billion to $2 billion of loan growth, hopefully, at the higher end of that range. And then securities growth should be $2 billion to $4 billion, again, probably closer to the higher end of that range as well given where the yield curve is shaped.

Matthew Breese -- Stephens, Inc. -- Analyst

OK. And then in your prepared remarks, you had mentioned NII growth and NIM expansion on the back of cash deployment. You still have $26 billion of cash on the balance sheet. How much of that over the next year are you anticipating using up and deploying into loans and securities?

Eric Howell -- Senior Vice President and Chief Operating Officer

Super hard to predict, right? That really comes down to what deposit growth will be. And given the environment that we're in and the rapid rate rises that we're all anticipating, it's really hard to predict deposits right now. So it really comes down to that, Matt, is what is deposit growth going to be.

Matthew Breese -- Stephens, Inc. -- Analyst

OK. Just staying on the topic of the deposits. Last quarter -- well, actually, in your prepared remarks, you had mentioned some of the deposits are actually already repricing higher. And then last quarter, you had mentioned that you are running a 40% deposit beta on total cost in your model, and that's higher than last cycle.

I guess I'm curious as to why. So today versus last cycle, you have more in DDA. You have more specialized verticals. These verticals tend to have moats.

I think you'd have better price control versus last cycle. What am I missing?

Eric Howell -- Senior Vice President and Chief Operating Officer

I think we're just trying to be conservative as it relates to that. We do have a couple of new verticals in digital and mortgage banking solution. So we're really trying to be conservative in modeling those out right now. But you're absolutely right.

A high level of DDA is going to be very protective for us. I mean, thus far, the deposit beta has been extremely benign. We've seen five basis points of a pass-through with the Fed increase, and that's through April 11. So over approximately a month, we've seen about a 20% deposit beta thus far.

But we do anticipate, as there's more rate rises, if they're more severe, right, if we see the frequency and severity of those rate rises pick up and we see more 50 basis point rate rises that we'll see betas pick up substantially. So we're trying to be protective with that 40% assumption, but we're hoping for better.

Matthew Breese -- Stephens, Inc. -- Analyst

OK. The last one for me is on an older topic, but it's really around credit. I've been getting more questions particularly in New York City office. And I was hoping you could remind us just the size and the credit characteristics of that portfolio and whether or not either in office or generally across any of your real estate-oriented asset classes you're seeing any sort of credit deterioration.

And if so, where and how?

Eric Howell -- Senior Vice President and Chief Operating Officer

We're financing the latter part, we're really not, right? We saw all of our metrics improve this quarter. As it relates to office specifically, we've got about $3.9 billion in the portfolio with a 56% LTV and a 1.39% that Fed service coverage. So we feel well protected. There's a lot of noise this quarter based on one of the big lenders turning back the keys on a CMBS property.

Our office looks nothing like that of a CMBS lender, right? We have to own the risk as a balance sheet lender. They get to slice it up and sell it off. And we lend to well-established generational families who are really expert in what they do, and particularly in that office space. So thus far, we have zero nonaccrual loans right? And we have no loans in full deferral in office, right? We are, however, very aware of potential issues in the space, and we're monitoring it very closely.

But fortunately, we built up reserves throughout the pandemic, and we feel that we're adequately provided to be able to deal with whatever issues come along.

Matthew Breese -- Stephens, Inc. -- Analyst

Perfect. That's all I had. Thank you for taking my questions. 

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you, Matt. 

Operator

We'll take our next question from Casey Haire with Jefferies. Please go ahead.

Casey Haire -- Jefferies -- Analyst

Yes. Thanks. Good morning, guys. I guess some questions and some follow-up on the NIM.

The new money yields on -- I think, Steve, you said the reinvestment yields were 2 39. Where are reinvestment yields today?

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Yes. I mean the increase from there on the security side, we're investing in the low 3% range. CRE is in the low 4% range, 4.25% about. And then on the Fund Banking, we're looking at a mid 2% range.

Casey Haire -- Jefferies -- Analyst

OK. Sorry, did you mention -- those are the loan yields. Did you mention the securities reinvestment yield?

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Yes. That upfront, a little over 3% growth rates.

Casey Haire -- Jefferies -- Analyst

OK. And just on the cash, can you just give us a reminder of what's an optimal cash balance rate as a percentage of earning assets? I think in the past, you guys have said 10% to 15%. Just trying to figure out -- yes.

Joe DePaolo -- President and Chief Executive Officer

Yes. It's still 10% to 15%.

Casey Haire -- Jefferies -- Analyst

OK. Very good. Thanks, that's all I had. Thank you. 

Joe DePaolo -- President and Chief Executive Officer

Thank you. 

Eric Howell -- Senior Vice President and Chief Operating Officer

Thanks, Casey. 

Operator

And we'll take our next question from Steven Alexopoulos with J. P. Morgan. Please go ahead.

Steven Alexopoulos -- J.P. Morgan -- Analyst

Hey. Good morning, everyone.

Joe DePaolo -- President and Chief Executive Officer

Hey, Steve. Good morning.

Steven Alexopoulos -- J.P. Morgan -- Analyst

Morning. The new slide deck looks great. Thanks for that. Joe, I wanted to hit this issue, if we could, on the FDIC problem list.

I mean you know your stock was pretty weak. Once their report came out, right, the assets went up $120 billion, which is about your size. I've said publicly, I don't think it's you guys. But based on my conversations with investors through the quarter, there is still a concern out there.

I know you can't comment specifically on the Camel's rating, but can you give any color on this situation?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes, Steve. I'll start this off, and I'm pretty sure Joe is going to want to jump in at some point. But by law, we're not allowed to talk about Camel's ratings and such, as you know. But we are not aware of any bank, any bank with capital ratios, credit metrics, growth, earnings like ours ever being anywhere near a troubled bank list.

We're nowhere near it.

Joe DePaolo -- President and Chief Executive Officer

Steve, I'm glad you asked the question so we have a chance to speak about it. So we were a little insulted by the marketplace, and quite frankly, embarrassed because of what Eric has said that people would think we could be on the list. But we can't comment whether we are or not because we can't talk about our Camel's rating. But I'm the CEO and I would know, and I know nothing.

So hopefully, that's helpful.

Eric Howell -- Senior Vice President and Chief Operating Officer

Expanding into California, into Nevada, into new markets, right? Typically, if a bank were to be on a troubled bank list, expansion would be out of the question, right?

Steven Alexopoulos -- J.P. Morgan -- Analyst

Yes. Right, right, right. Yes. No, it's good.

I mean it's funny. There are other banks out there with regulatory issues against them, which we know there's none for you guys. But it's good to hear you talk a bit about this because like I said, I've heard it quite a bit through the quarter. So I do appreciate some commentary that you're able to give.

Maybe shifting directions for a second. Joe, you made a comment on the digital asset front. I'm not sure if you said you were the primary bank for eight of 12 exchanges. Can you go into that a bit more? What did you mean by that?

Joe DePaolo -- President and Chief Executive Officer

They're moving their operating accounts from wherever they are to us. And we would primarily be the bank that handles their day-to-day banking operations with the treasury group. We had four of the top 12, and we've got another four this quarter. I mean this -- the first quarter.

So now we have a -- they're moving on board. And it means that we'll have a lot more DDA or at least more DDA, and they'll be on Signet. And that's really it. The operating account is the key in the DDA.

That doesn't mean that they don't have other banks, but we will be considered the primary one.

Steven Alexopoulos -- J.P. Morgan -- Analyst

Thanks. And then finally, regarding the extension into Nevada, is that just you guys being opportunistic with these two teams? Or do you see more of an effort to grow that as a new market as well? Thanks. 

Eric Howell -- Senior Vice President and Chief Operating Officer

A little bit of both, right? I mean, certainly, when you look at Nevada, it's an extension of California these days. We're seeing a lot of business move along the I-8 corridor, moving out of San Francisco and Silicon Valley, right, where they're finding much cheaper operating opportunities in Sacramento and then a little bit further across Interia, right, into a more tax-friendly state. So we're following our clients a little bit, and we're opportunistic in that we found a leader in that market who could attract some real high-quality bankers. Steve, right now, we're at a point where we've proven we can take the show on the road where we can be opportunistic.

And if we see opportunities in other cities and states, particularly those ones that are growing rapidly right now and attracting business, we can act upon it.

Steven Alexopoulos -- J.P. Morgan -- Analyst

Perfect. Thanks for taking all my questions.

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you, Steve.

Operator

And we will take our next question from Ebrahim Poonawala with Bank of America. Please go ahead, sir. 

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Hey. Good morning.

Joe DePaolo -- President and Chief Executive Officer

Good morning.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

I just wanted to follow up on deposits. I know it's hard to handicap, but as we think about growth one quarter -- in the first quarter, it was about $3 billion. Is that at least a steady state in terms of how we should think about baseline deposit growth and it could be stronger than that? And secondly, maybe, Steve, if you can talk to a little bit about how you're thinking about the mix from DDA. Is that 43%? Should that move toward more interest-bearing as you move forward the next few quarters given the Fed hike? Or do you expect that mix to hold on pretty much steady state?

Joe DePaolo -- President and Chief Executive Officer

On the deposits, the amount that we project, it's hard to do that. We put a lot of businesses that we have now on the book with new teams and new lines of businesses so that when one area is going short, the other areas can pick up. The $3 billion in deposits that we had growth this quarter, we've been in business now about 84 quarters, and this was the eighth highest of the 84 quarters. So it's not anything that we would take lightly.

I think $3 billion is a very good quarter. I think everyone, including us, got used to the $10 billion a quarter during 2021. And we don't expect that to happen. We expect it to be more moderated.

Steve Wyremski -- Senior Vice President and Chief Financial Officer

On deposit mix, we certainly expect coin to be seeking rate again. We're currently forecasting down into the 30%, 35% range that we may have.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

That's what you assume in terms of the DDA is moving to 30%, 35%? And is that...

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Sorry.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

And I just wanted to ask, is that mostly driven by incremental growth, probably comes in interest-bearing as opposed to you actually seeing runoff in DDAs?

Steve Wyremski -- Senior Vice President and Chief Financial Officer

I think it would potentially be a mix of both, certainly, new accounts. But even over a long period of time, we might see some light -- we expect to see some migration from noninterest-bearing, interest-bearing as well.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Understood. And I guess just one follow-up. I know you -- go ahead.

Joe DePaolo -- President and Chief Executive Officer

I was just going to say that some of the deposit growth could come into off-balance sheet. We've seen that in the past where we used to earn $3.25 million a quarter in fees on the off-balance sheet money markets. Now we are in a couple of hundred thousand a quarter, $3 million less. So some of the balances would go off-balance sheet, and that would be the reason why there would be more moderated growth in the on-balance sheet.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. And just going back to the question around expenses, Eric. You mentioned that you've tested the model. It works outside of New York.

As we think about just the hiring pipeline, like do you expect a meaningful ramp-up? I mean you -- revenue growth is strong. Why not make more investments if you find the right talent? Just give us some perspective around the pipeline. And should we be surprised if you see hiring in additional markets as we move through the year?

Eric Howell -- Senior Vice President and Chief Operating Officer

Well, I mean, I wouldn't be surprised. There's nothing really in the near term for additional markets. But we've got a very robust pipeline, numerous teams on the East Coast and West Coast, and it's great to see that renewed interest in the East Coast. And look, there's been a lot of large M&A that's taken place between Webster, Sterling, M&T, Peoples, Investors Bank.

It's creating opportunities in the New York Metropolitan area for us and the Bank of the West, Umpqua, Union, OPUS, CIT, a lot of mergers that happened on the West Coast and then the megabanks who continue to just be in turmoil, right? So that's created a lot of opportunities. So we've got a good four or five teams in the pipeline on both coasts. And we'll see where the next opportunity arises for us.

Joe DePaolo -- President and Chief Executive Officer

We're hiring teams from banks we've never hired from before. And they're really very professional. And the fact that we've not hired from these banks before, it gives us another source of teams.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for taking my questions, and great detail in the slide deck. Thanks.

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you. 

Operator

And we will take our next question from Brock Vandervliet with UBS. Please go ahead. Your line is open.

Vilas Abraham -- UBS -- Analyst

Hey, guys. It's Vilas Abraham in for Brock. Most of my questions have been asked and answered. But I did want to revisit the capital call lending.

Some of the weakness in the private market has obviously been well documented the last few months. And I know you guys are kind of more of a market share gain story there still. But is there any color you can give us anything you're seeing that's changed, utilization levels, shifting at all, anything around that?

Eric Howell -- Senior Vice President and Chief Operating Officer

Really not at all at this point. I mean we've talked with the team around how will rates really affect them. And we think that if we see several hundred basis points higher that we could see utilization rates come down, but not until then. Even at a much higher interest rate, we're adding significant leverage to these transactions that really juice the returns.

So we'd need meaningfully higher interest rates before we really saw an impact on that business. And we continue to hire talent in that space. We've added to that team. We're just bringing more clients to us as well.

Vilas Abraham -- UBS -- Analyst

OK. And then maybe just on the crypto side. At this point, you seem fairly well penetrated into that exchange customer segment based on your comments. Kind of the next leg of growth there, where do you see that coming from? Is it a certain type of customer? Is it going to be more broad based? Just from a customer growth perspective, how are you thinking about that?

Joe DePaolo -- President and Chief Executive Officer

Well, we do institutional. We really don't do client -- personal clients. We do institutional. I think just trying to bring on more of those exchanges, at least in the near term, on the fact that we went from four being the primary bank to eight being the primary bank, that should give us a lot of runway to grow during this year.

And then we have other enhancements that we're making, but they won't be coming on board until probably mid- to end of the year. But you know what we do, we basically listen to the client. In this industry, we listen to the client very closely, and they kind of dictate what we should do next. And that's why we've made the -- that one enhancement with the Fed wires, and we're going to make some more as the time goes along.

Like I said, mid to late in the year.

Eric Howell -- Senior Vice President and Chief Operating Officer

And those exchanges are critical to our growth as well because when we tie in with them and integrate our platform to their platform, it makes it much easier for their clients to trade and transact in business. So they're really leading us to their client base as well, which is helping us to grow along the entire ecosystem.

Vilas Abraham -- UBS -- Analyst

OK. OK. That's very helpful. And are you guys able to give another update on the transaction volumes on Signet that you saw last quarter? It seemed like it was trending pretty close to Q4 during the mid-quarter update.

Joe DePaolo -- President and Chief Executive Officer

The transaction volume on digital was relatively flat. It was -- in the fourth quarter, it was $213.7 billion. And in the first quarter, it was $209.7 billion. So relatively flat.

The market -- the different studies was down between 20% and 40%. So we're feeling pretty good that we were just about flat and the market was down 20% to 40% relatively.

Eric Howell -- Senior Vice President and Chief Operating Officer

And we also had our largest quarter of new client acquisition, where we added 160 new clients in the quarter. So that bodes well for the future as well.

Joe DePaolo -- President and Chief Executive Officer

To give you an idea of that 160, we did 147 clients in -- we grew in 2020. 2021, we grew 382. The 147 and 382. And already in the first quarter, we did 160.

So that is the transaction volume we feel pretty good about.

Vilas Abraham -- UBS -- Analyst

Awesome. Thanks, guys.

Joe DePaolo -- President and Chief Executive Officer

Thank you. 

Operator

We will take our next question from Mark Fitzgibbon with Piper Sandler. Please go ahead.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Hey, guys. Good morning.

Eric Howell -- Senior Vice President and Chief Operating Officer

Morning, Mark.

Joe DePaolo -- President and Chief Executive Officer

Hey, Mark.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Most of my questions have been answered. I just had one. I'm curious, I know you're an organic growth company, but could you ever envision Signature doing an acquisition or maybe a fintech company or another digital payments player?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. Yes. Never say never, right? Certainly, a strategic acquisition in the fintech space or in the digital space could make sense. We've talked about tuck-on acquisitions in our specialty finance group or elsewhere in the bank.

So there's always a potential to do acquisition. It's just a very high hurdle for us to cross when you can grow organically in the way that we grow. Acquisitions typically don't make a tremendous amount of sense for us, but you can start to see a tuck-on in a couple of different spaces for us.

Joe DePaolo -- President and Chief Executive Officer

Do you have a high flying one that's a discount to book, we would look at it.

Mark Fitzgibbon -- Piper Sandler -- Analyst

Sounds good. Thanks, guys.

Operator

And we'll take our next question from Jared Shaw with Wells Fargo. Please go ahead.

Jared Shaw -- Wells Fargo Securities -- Analyst

Hey. Thanks. I guess, just could you give an update on what the current spot deposit rate is and on the spot on the digital asset deposits?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. I'm not sure what the spot rate is on digital deposits, but we're up about five basis points on our overall deposit cost. Digital's typically quite a bit lower than that.

Jared Shaw -- Wells Fargo Securities -- Analyst

Still below performance for that 80% expectation really?

Eric Howell -- Senior Vice President and Chief Operating Officer

Excuse me. What was that?

Jared Shaw -- Wells Fargo Securities -- Analyst

You're still outperforming that 80% beta that you had highlighted earlier?

Eric Howell -- Senior Vice President and Chief Operating Officer

Oh, yes. Oh, yes. We're not even close. But we really don't expect -- betas are muted.

We expect that to be the case for the first few moves. But the more frequent and more severe they are, then the betas will catch up over time.

Joe DePaolo -- President and Chief Executive Officer

They have to keep a minimum of 30%, a minimum of 30% in noninterest-bearing.

Jared Shaw -- Wells Fargo Securities -- Analyst

OK. Great. And then when you talk about the -- bringing on those new exchanges, that's great. Where are the -- where are you taking those operating accounts from it? Is it from the biggest national banks? Or is it other more digital specialty banks that are migrating toward you?

Eric Howell -- Senior Vice President and Chief Operating Officer

It's really across the board.

Jared Shaw -- Wells Fargo Securities -- Analyst

OK. And I guess just finally for me, you'd referenced, I guess, 3 25 on the CRE multifamily book. Do you expect to see pricing there really stay pretty sensitive or pretty tied to what we're seeing with the five years as we go forward?

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Yes. I mean -- I don't know if you said 3 25, but 4 25 is really where we're at. I mean, yes, the five-year is really what we spread again. And as that moves, certainly our pricing would move as well.

Eric Howell -- Senior Vice President and Chief Operating Officer

And as we've seen in other rising rate cycles, we've seen credit spreads compress in the early part of the move. We anticipate over time that those will start to widen, and we should get even better pricing than that.

Joe DePaolo -- President and Chief Executive Officer

Yes. You're right. Because at 4 25, the spread is very -- it's like 160 over. Were to get 200 over.

Eric Howell -- Senior Vice President and Chief Operating Officer

True that.

Jared Shaw -- Wells Fargo Securities -- Analyst

Great. Thank you. 

Joe DePaolo

Thank you. 

Operator

We will go next to Chris McGratty with KBW. Please go ahead.

Chris McGratty -- Keefe, Bruyette and Woods -- Analyst

Hey. Good morning. Just a question on the borrowings on Page 17 of the deck. Any reason to believe that we won't allow those? It is almost $1 billion just in the next month, 1.5 quarters, to mature and reprice through the excess cash position.

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. We're definitely going to replace that with cash. So we don't anticipate renewing those at this time.

Chris McGratty -- Keefe, Bruyette and Woods -- Analyst

OK. And then second, on fees. In prior quarters, you've given some expectations for year-on-year growth given the build out there. Any update on fee income growth, either relative to first quarter levels or full year '21 levels?

Eric Howell -- Senior Vice President and Chief Operating Officer

Yes. I think if we look at prior year levels, we should see about a 50% increase in fee income over the prior year.

Chris McGratty -- Keefe, Bruyette and Woods -- Analyst

OK. So 20 -- 50% over 2021?

Eric Howell -- Senior Vice President and Chief Operating Officer

Right. Over Q2 2021 for Q2 2022.

Chris McGratty -- Keefe, Bruyette and Woods -- Analyst

Got it. Thanks, Eric. 

Eric Howell -- Senior Vice President and Chief Operating Officer

Thank you, Chris.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Joe DePaolo -- President and Chief Executive Officer

Susan Lewis -- Investor Relations

Eric Howell -- Senior Vice President and Chief Operating Officer

Steve Wyremski -- Senior Vice President and Chief Financial Officer

Manan Gosalia -- Morgan Stanley -- Analyst

Dave Rochester -- Compass Point Research and Trading -- Analyst

Matthew Breese -- Stephens, Inc. -- Analyst

Casey Haire -- Jefferies -- Analyst

Steven Alexopoulos -- J.P. Morgan -- Analyst

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Vilas Abraham -- UBS -- Analyst

Mark Fitzgibbon -- Piper Sandler -- Analyst

Jared Shaw -- Wells Fargo Securities -- Analyst

Chris McGratty -- Keefe, Bruyette and Woods -- Analyst

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