Jul 19, 2017
Executives
Susan Lewis - IR Joseph DePaolo - President and CEO Eric Howell - EVP, Corporate and Business Development
Analysts
Casey Haire - Jefferies and Company Ebrahim Poonawala - Bank of America Merrill Lynch Dave Rochester - Deutsche Bank Ken Zerbe - Morgan Stanley Jared Shaw - Wells Fargo Securities Steven Alexopoulos - JPMorgan Lana Chan - BMO Capital Christopher McGratty - KBW David Chiaverini - Wedbush Securities
Operator
Welcome to Signature Bank's 2017 Second Quarter Results Conference Call. Hosting the call today from Signature Bank are Joseph J.
DePaolo, President and Chief Executive Officer; and Eric R. Howell, Executive Vice President, Corporate and Business Development.
Today’s call is being recorded. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation.
[Operator Instructions] It is now my pleasure to turn the floor over to Joseph J. DePaolo, President and Chief Executive Officer.
You may begin.
Joseph DePaolo
Thank you, Laurie. Good morning and thank you for joining us today for the Signature Bank 2017 second quarter results conference call.
Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.
Susan Lewis
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 DePaolo
Thank you, Susan. I will provide some overview into the quarterly results.
And then Eric Howell, our EVP of Corporate and Business Development will review the Bank's financial performance in greater detail. Eric and I will address your questions at the end of our remarks.
Let’s start with our taxi medallion portfolio. During the past two years, we are communicated that the taxi medallion landscape was troubled in terms of usage, acceptance and regulatory support.
During the third quarter of 2016, we largely put the Chicago taxi medallion portfolio behind us and now with this quarter’s actions we have taken steps to put the New York City Taxi Medallion portfolio behind us as well. We wrote down each New York City taxi medallion loan by approximately $168,000 to $358,000.
Additionally we placed the entire remaining New York City Chicago and Philadelphia portfolios totaling $365 million, which represent only 90 basis points of total assets on non-accrual. And now we are looking forward.
Signature Bank delivered a solid performance this quarter notwithstanding these challenges in our taxi medallion portfolio. First and foremost, we remained focused on executing our successful business plan including attracting veteran bankers.
In fact we strengthened our franchise by adding two new banking teams and announcing the appointment of four origination officers for Signature Financial. We also furthered our asset diversification strategy by growing commercial and industrial loans $275 million excluding medallions and increasing our securities portfolio $186 million.
Deposits grew $234 million despite $588 million in escrow deposit outflows and top-line revenues were up 7.5% or $22 million. Now let’s take a further look into earnings.
Net income for the 2017 second quarter was $14 million or $0.26 diluted earnings per share, a decrease of $88 million or 86% compared with $102.2 million or $1.90 diluted earnings per share reported in the same period last year. Excluding provision expense and write-downs for the taxi medallion portfolio, net income would have been $120.2 million or $2.21 diluted earnings per share.
The decline in net income was driven by an increase in charge-offs of $219.8 million for the medallion portfolio as well as an increase in non-interest expense from the write-down of repossessed New York City taxi medallion loans. Also expenses increased due to the addition of new product client banking teams, as well as an increase in costs and our risk management and compliance related activities.
These items are partially offset by an increase in net interest income, primarily driven by deposit and loan growth. Looking at deposits, deposits increased $234 million to $33.2 billion this quarter, affected by a decrease of $588 million in escrow deposits, while average deposits grew nearly $700 million.
Since the end of the second quarter of 2016, deposits increased $3.6 billion and average deposits increased $3.9 billion. Non-interest bearing deposits of $10.6 billion represented 32% of total deposits and grew $329 million this quarter.
Our deposit and loan growth coupled with earnings retention led to an increase of $4.2 billion or 11.4% in total assets since the second quarter end of last year. Now, let’s take a look at our lending businesses.
Loans during the 2017 second quarter increased $326 million to $30.4 billion. Excluding taxi medallion loans, total loans would have grown $598 million for the quarter.
For the past 12 months, loans grew $3.67 billion and represent 74.6% of total assets, compared with 73.1% one year ago. The increase in loans this quarter was primarily driven by specialty finance, multi-family and commercial real estate loans.
Turning to credit quality, the remainder of our portfolio is performing remarkably well notwithstanding the taxi medallion portfolio. During the 2017 second quarter we placed the entire tax medallion portfolio of $367 million on non-accrual.
As a result, non-accrual loans increased to $393 million or 130 basis points of total loans, compared with $226 million or 75 basis points from the 2017 first quarter. 93% or $367 million of the non-accrual loans are taxi medallion with some closed [ph].
Therefore, for the remaining portfolio of over $30 billion in loans, we have only $26 million in non-accruals or less than 10 basis points that's exceptional credit quality. Because we placed the taxi medallion loans on non-accrual, we saw a decrease in our 30 to 89 day pass-due loans $28 million or 90 plus pass due loans decreased to $5 million.
The provision for loan losses for the 2017 second quarter was $187.6 million compared with $19.6 million for the 2017 first quarter and $33.2 million for the 2016 second quarter. Net charge-offs for the 2017 second quarter were $229 million all from of which were for taxi medallion loans, compared with $9.2 million for the 2017 first quarter and $15.4 million for the 2016 second quarter.
The allowance for loan losses decreased to 60 basis points of loans versus 75 basis points in the 2017 first quarter. And now onto the team front, we added two teams during the second quarter and our team pipeline remains active.
Additionally, we added four origination officers to Signature Financial. We look forward to the ongoing opportunities to attract talented banking professionals to our network.
At this point, I'll turn the call over to Eric and he'll review the quarter's financial results in greater detail.
Eric Howell
Thank you, Joe, and good morning everyone. I'll start by reviewing net interest income and margin.
Net interest income for the second quarter reached $307.2 million, up $25.6 million or 9.1% when compared with the 2016 second quarter, an increase of 1.8% or $5.5 million from the 2017 first quarter. Net interest margin decreased 8 basis points in the quarter versus the comparable period a year ago, and 3 basis points on a linked quarter basis to 3.11%.
Excluding prepayment penalty income core net interest margin for the linked quarter decreased 5 basis points to 3.04%. 1 basis point of the linked quarter decline was due to the reversal of interest related to the New York City taxi medallion portfolio and from day count for the quarter.
Let's look at asset yields and funding cost for a moment. Interest earning asset yields remained stable from a year ago and increased 2 basis points from the linked quarter to 3.66%.
Yields on the securities portfolio increased 1 basis point linked quarter to 3.05% giving a slight slowdown in premium amortization on securities from slower CPR speeds and better reinvestment yields. The duration of portfolio slightly decreased to 3.2 years.
Turning to our loan portfolio, yields on average commercial loans and commercial mortgages increased 2 basis points to 3.89%, driven by an increase of $2.4 million in loan prepayment penalty income. Excluding prepayment penalties from both quarters, yields would have declined 1 basis point.
Now looking at liabilities, our overall deposit cost this quarter increased 5 basis points to 49 basis points compared to the 2017 first quarter. Average borrowings excluding subordinated debt decreased $148 million or $2.9 billion or only 7.3% of our average balance sheet.
The average borrowing costs increased 11 basis points from the prior quarter to 1.48%. Overall the cost of funds for the quarter increased 5 basis points to 61 basis points.
On to non-interest income and expense, non-interest income for the 2017 second quarter was $9.6 million a decrease of $3.6 million when compared with the 2016 second quarter. The decline was due to a decrease in net gains on sales of securities of $2.9 million and an increase in other losses of $2.3 million due to increased low income housing tax credit investments.
Non-interest expense for the 2017 second quarter was $116.3 million versus $92.3 million for the same period a year ago. The $24 million or 26% increase was principally due to increased write-downs of $10.7 million on repossessed of New York City taxi medallion loans and the addition of new private client banking teams, as well as an increase in cost in our risk management and compliance activities.
The Bank also incurred increased FDIC assessment fees. The Bank’s efficiency ratio increased to 36.7% for the 2017 second quarter versus 31.3% for the comparable period last year.
The increase was due to the aforementioned write-downs on repossessed New York City taxi medallion loans. And turning to capital, our capital ratios were all 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 9.52% and a total risk-based ratio of 12.95% as of the 2017 second quarter.
And now, I’ll turn the call back to Joe. Thank you.
Joseph DePaolo
Thanks, Eric. Signature Bank’s financial strength was evidenced this quarter by top-line revenue growth of 7.5% or $22 million.
Despite a troubling environment for taxi medallion lenders, we were able to take the necessary measures to effectively put the issue behind us and our fortress like balance sheet was able to sustain the impact. That’s truly a testament to our deposit first strategy.
Our deposit is who we build this bank for and we never ever lose sight of this. We look forward to the many opportunities ahead of us.
And we are happy to answer any questions you might have. Laurie I’ll turn it over to you.
Operator
[Operator Instructions] Your first question comes from the line of Casey Haire of Jefferies.
Casey Haire
Thanks, good morning guys.
Joseph DePaolo
Hey, Casey. Good morning.
Casey Haire
So on the medallion market at $358,000, can you just tell us how you got there, what’s your comfort level is there and what the provision outlook looks like with the rest of the portfolio in great shape?
Eric Howell
Yes, Casey we use the combination of transfers in the marketplace, as well as cash flow model to come up with the value of $358,000. We put about a 75% weighting on transfers and 25% on the cash flow model.
Last quarter I think we used the 50% breakdown. Since there are more transfers in the market, we decided to weight that more heavily.
I do want to note that these are transfers however not sales. So we see transactions between family members, the transfer of wealth and avoid taxes, there is transfers with notes that are attached that are not recorded, so that’s not included in the values and there is clearly state sales and foreclosures at depressed level.
So most of those transactions are not arm's length transactions, but -- and that’s why we bring the cash flow modeling length in place, that cash flow models are well supportive of the value $358,000 in fact they support the value of closer to $500,000. So that’s how we came up with a value and we feel very comfortable at that level.
It should give us great flexibility to work with our borrowers to restructure in a way that works for both them and us going forward, similar to what we have been in Chicago.
Joseph DePaolo
And let me add Casey that we have an agreement to sell 10 repossessed medallions to well established fleet owner client for $400,000 per medallion with pending standard TLC approval which is expected before the end of the month. And it’s 5% down for each of the medallion and fully cost financing, which ends up supporting our amount as well.
Casey Haire
Okay, great. And so the provision outlook from here with -- is a 60 bps LLR is that the appropriate way to look at providing for loan growth going forward?
Eric Howell
For the next few quarters it’s still pretty fluent situation with the medallions. So if we say if we are going to maintain our guidance of approximately $20 million in provisions for the remainder of this year.
As we look at 2018 we should come down to a more normalized level Casey depending on where our loan growth is coming from. And we certainly anticipate more of it coming out of C&I we should see a 50 to 100 basis point reserve level on those incremental loans.
Casey Haire
Okay, great. And just switching to the core NIM outlook, just some updated thoughts there specifically the deposit betas stepped up a little bit this quarter.
How is the core NIM outlook looking today?
Eric Howell
Yes, given the significant flattening in the yield curve that we’ve seen over course of this quarter, we certainly anticipate that we’d see some NIM pressures moving forward few basis points per quarter looking out the next couple of quarters assuming the yield curve stays the way it is today.
Joseph DePaolo
There is quite an enormous opportunity for us to bring deposits, but what we found recently that the competition for deposits is as competitive as it’s ever been. However, this quarter we were very happy with the DDA growth above the $300 million, but we’re still bringing in core clients and with our team pipeline of bringing other teams adding on to our existing teams it bodes well for us.
But yet we may have to pay up a little on deposits as we bring on the new clients.
Casey Haire
Understood, I’ll step back. Thanks.
Operator
Your next question comes from the line of Ebrahim Poonawala of Bank of America Merrill Lynch.
Ebrahim Poonawala
Good morning, guys.
Eric Howell
Good morning.
Ebrahim Poonawala
I guess, just wanted to shift gears in terms of growth and I think we’ve consistently for a long time talked about $4 billion to $6 billion in asset growth, obviously we’ve not hit that in the first half of the year. I love your thoughts in terms of we think about the back half of the year or the next 12 months, do we think we get to a run rate of that $4 billion to $6 billion.
And how do you think about loan growth versus deposit growth in terms of being the driver of that growth and your comfort around getting there?
Joseph DePaolo
Well, one quarter does not a trend make, and last year in 2016 we almost had a $2 billion growth quarter. So, anything is possible particularly with the choppiness of deposits.
So, we look at it as the next four quarters we would be able to do the $4 billion to $6 billion. I think what’s happened on the loan side this particular quarter was that April and May were very, very slow.
Part of that was due to us keeping our rate higher. And then there was just the general slowness in the purchase and sales of real estate.
However, in the month of June it really picked up and we’ve seen a robust pipeline for the third quarter on the loan side. So, with the robust pipeline and the opportunities to bring in -- continue to bring in deposits, I think one of the things you have to realize is that although the point in time deposit growth wasn’t as great.
In the first quarter we had $1.1 billion growth, but the average growth was a $580 million whereas the average growth for this quarter where we only had $220 million point in time growth was over $700 million. So, as we get larger the choppiness of the deposits continue to be there, but on average over the next four quarters, there is no reason why we shouldn’t be able to grow.
Ebrahim Poonawala
Understood. And how much of that is sort of based on this growth from the existing teams versus some -- you mentioned in your opening remarks around hiring and you're looking to sort of bring on teams and bankers.
Like how much of new hiring will drive that? And can we do get that growth without really seeing a significant sort of deterioration in the efficiency ratio?
Joseph DePaolo
I think that clearly the existing teams continue to support growth at a level that's a comparable anyone else in the industry, I think our growth is extraordinary. However, you still have to bring on new teams to keep certain levels of growth.
And that's what we're going to continue to do. And we're also going to continue to add bankers on that have books of business to existing teams.
So you really need both to happen. You need new teams, plus the existing teams to continue to grow which they're doing.
We have teams that came onboard in 2001 that are still growing at double-digits, not all of them, but some of them. So you really do need both.
Ebrahim Poonawala
Got it. And just as on a sort of separate topic I mean I think tied to loan growth, would love your thoughts on just the New York CRE multi-family market.
Clearly, we've seen a slowdown in deal activity and pricing, like where do things stand right now in terms of as you look out over the next year, are you feeling better about the market today than you did at the start of the year?
Joseph DePaolo
Well, I always feel good about the multi-family market that we're in, primarily the low-to-moderate income. We're not in those areas where the rents would be $5,000 to $6,000 to $7,000, $8,000.
We're in the areas where the rents are much lower, there are some rents stabilized rent control, and there is rarely vacancy. I think that's when you hear about vacancies in the New York City market, we have to think at the high end and then there were a lot of condominiums built over the last decade where they were used for investor purposes and their rental.
And they're hurting the vac, they're hurting the market as well, and that's where the vacancies are. But the vacancies are not where we lent and it’s rare to have a vacancy, in fact when you build apartment buildings that have the 20% that need to be the low-to-moderate income or rent control.
There were thousands of applications, but each upon tens of thousands of applications sometimes each upon. And therefore we're not worried about the space that we're in as it relates to the multi-family market.
Ebrahim Poonawala
Understood, thanks for taking my questions.
Joseph DePaolo
Thanks, Ebrahim.
Operator
Your next question comes from the line of Dave Rochester of Deutsche Bank.
Dave Rochester
Hey, good morning guys.
Joseph DePaolo
Hey, Dave. Good morning.
Dave Rochester
Hey, on that NIM guide overall, what do you guys expecting for securities reinvestment rates in premium and expense in that. And what do you think you need to see in the interest rate curve to get a flat NIM guide at this point?
Where the tenure need to be so you get more comfortable with that NIM trend?
Eric Howell
I mean, we're seeing reinvestment yields in the high-2s I'd say give a wide range 2.70 to 2.90 somewhere in that. Ultimately we need the tenure to be at around 2.50 basically to get to a flat NIM.
Dave Rochester
Okay. And then on the cost of fund side, what are you anticipating for deposit cost creep in that?
Joseph DePaolo
2 to 3 basis points.
Dave Rochester
2 to 3 bps per quarter on increase on deposit cost?
Joseph DePaolo
Yes.
Dave Rochester
Okay. And just on the deposit side, can you just give us an update on competitive pressures there, where you're seeing the most competition?
And if you’ve actually bumped up deposit rate again since the last call?
Joseph DePaolo
Well actually the rates are going to by the end of this month for the higher balance client are going to go up 10 basis points on the personal money market. On the business side, we're trying to keep them where they are although we're having some pressure there.
Or some of the pressure is the awareness of short-term alternatives. We haven't had that for a while, our treasuries and off balance sheet money market.
So where we used to have them there and we move them on to the balance sheet because there was no return. Now there is a return and there is a decision on the client’s part sometimes to decide where or not they want to put it off balance sheet, which gives us fee income.
But it’s close right now, I would say when we have another raise, the alternatives are going to put pressure on us and there were some banks don’t go on names, I am sure you know who they are, where we recruited some recently that are pulling out all stuffs for interest rates to keep the client because that’s the only bullet that they have left to try to keep the client in the interest rate. So I would say the competition is pretty intense.
Having said all that the opportunities will continue to be enormous, I mean the opportunities for deposits are mind boggling, how much they are out there and it’s not nearly from the banks that we are competing with trying to get those deposits, it’s really from the banks that are to big fail.
Dave Rochester
Okay, got it. And your earnings, correct if I am wrong is a lot higher than it is than other banks, so I would think that that’s a nice competitive advantage that you guys have.
Are you still seeing that big differential there versus the competition on that front?
Joseph DePaolo
Good question, actually great question. We started to talk about that yesterday, because we want to see we haven’t seen much of a change it’s creeping up in others.
So we want to make sure we stay ahead of that curve and be a little bit more competitive than others, because one should bring the client over, you have them because of the service levels that are provided by the teams. So growing the NIM with the service and a little bit more of an earnings credit is the way to do it.
And I would say we haven’t had to make much of a change yet.
Dave Rochester
Okay. But are still decently higher than your competition rate at this point?
Joseph DePaolo
Right, I don’t want to say what it is, but it’s yes.
Dave Rochester
Yes. Okay.
And just one last a more housekeeping. The tax credit rotation expense picked up in 2Q, is that other line -- other income line going to remain at negative and then how you are thinking about the tax rate for the back half for this year and next year?
Eric Howell
That other income line item will remain that negative, it will probably slowly increase as we make more tax credit investments. On the tax rate for the remainder of the year to stick with 39% to be safe hopefully, we can beat that.
But I think 39% is a reasonable number for that.
Dave Rochester
Okay, great thanks guys.
Joseph DePaolo
Great, thank you.
Eric Howell
Thank you, Dave.
Operator
Your next question comes from the line of Ken Zerbe of Morgan Stanley.
Ken Zerbe
Great, thanks. I guess just on the efficiency ratio, obviously it’s higher because of the taxi piece.
But you also mentioned things like the regulatory compliance expenses. Can you just elaborate on that, I mean, is that have a meaningful impact going forward, are you seeing sort of a more meaningful step up in those regulatory expenses and how should we think about it going forward?
Thanks.
Eric Howell
We have seen those expenses pickup over the last several years as we prepared across the $50 billion threshold. They are certainly going -- they are certainly in the run rate and we can see some more pressure from there.
But our actual expense growth ex-the write-down of the repossessed medallions was about 11.4% for the quarter. So is at the low end of our 10% to 15% guidance and we hope to keep it at the low end of our guidance.
But it is a highly regulatory environment that we’re in who knows what they’re going to ask for next. So that’s why we have that wide range of 10% to 15% there.
So ultimately we should see our efficiencies maintain the levels that they are at as we are crossing through the $50 billion threshold, it’s hard to believe we can improve them significantly further from where they are today.
Ken Zerbe
Got you. Understood, okay.
And then just in terms of the provision expense/taxi. If I heard right, you still estimate call it roughly $20 million of provision expense, but I am trying to reconcile that, which presumably include some large amount of taxi charge-offs/provision versus the fact that you have taken the taxi portfolio down to fair value, right, which to me implies it is truly fair value.
Now and you probably shouldn’t have losses leasing the near-term on this, how do we reconcile the two pieces? Thanks.
Eric Howell
I mean, you are certainly right at a point in time, remember our books and records are as of the point in time and based on our modeling and sales we came up with that value, but it’s a very fluid situation in the medallion landscape. So we are trying to be conservative in our provisioning guidance for the rest of this year, Ken.
If we see things shake up next quarter similarly to how they did this quarter, then we could see a fairly large decline in the provision expense, but we're just trying to be careful there.
Ken Zerbe
All right, great. Thank you very much.
Eric Howell
Thank you.
Joseph DePaolo
Thank you.
Operator
Your next question comes from the line of Jared Shaw of Wells Fargo Securities.
Jared Shaw
Hi, good morning.
Joseph DePaolo
Hey, Jared.
Jared Shaw
Just a couple of final questions on the taxi for me what's the current specific reserve that you have remaining on that $325 million portfolio?
Eric Howell
There is really a de minimis reserve on it right now because as we move it to non-accrual you write it down to its fair value and you take back your reserves.
Jared Shaw
Okay. And then what's the cash flow coming off for that portfolio?
So I mean it seems like with all of the cash flow going to principle pay-down we could be looking at that ending pretty quickly?
Eric Howell
Well, we received about $3 million in cash flows, little over that $3.5 million in cash flows on the portfolio last quarter. So we expect to see a similar run rate going forward.
Jared Shaw
Okay. And then on the other cost at $10 million is that that's more one-time as you take those charges and markdown the repossessed assets this quarter so we should not expect to see that as higher level of expense right now?
Eric Howell
Correct.
Jared Shaw
Okay, thanks. And then finally, just for me on Signature Financial can you talk a little bit about where you saw growth this quarter, are there certain areas in terms of business lines are doing better than others.
And then are there any thoughts on acquiring or growing into additional business lines with that as you sort of shift focus onto Signature Financial?
Joseph DePaolo
It is across the board the growth and in terms of buying, we look at portfolio as we don't necessarily look at companies. But we do look at portfolios rather frequently to see whether or not they would fit in.
And we would have no issues at all buying the portfolio put into the existing business that we have.
Jared Shaw
As you talked about the next four quarters of that $4 billion to $6 billion growth, what portion of that do you think could be coming from Signature Financial?
Eric Howell
Roughly 20%, 20% to 25%.
Joseph DePaolo
One of the things they have to overcome is they have very quick amortization. The loans are usually three to five years and they amortize over three to five years and we have to overcome that every month.
Jared Shaw
Right, great. Okay, thank you very much.
Joseph DePaolo
Thank you.
Operator
Your next question comes from the line of Steven Alexopoulos of JPMorgan.
Steven Alexopoulos
Hey, good morning everybody.
Joseph DePaolo
Hey, Steve. Good morning.
Steven Alexopoulos
I wanted to start, Joe in terms of what drove the movement of the entire taxi book into NPL? The credit materially weaken in the quarter to drive this or was it just you wanted to put this issue behind you?
Joseph DePaolo
With the latter. We wanted to put it behind us and we thought it make sense to do.
Plus the combination of as Eric was explaining earlier, how we come up with the value we moved -- we were 50-50 between cash flow and transfers for sale. And now we moved it to 75-25, which make more sense and then that drove the value down.
Steven Alexopoulos
Great. Joe, it's not clear to me, because in terms of putting this behind you, Eric has mentioned a couple of times now that it’s still a fluid situation.
So I'm not getting the feeling it is fully behind you especially with the provision being guide at still at $20 million. Eric, could you give more color, you said fluid situation a few times, what do you mean by that?
Are you expecting traverse to come in lower and have to further write these down, what are you expecting?
Eric Howell
We're expecting that we're going to have 10 sales at a $400,000 level that Joe referred to that's kind of hope to firm up the marketplace, but there are these other transfers taking place, many of which are historic too. But we don’t know how much of that's going to happen over the course of the next several quarters Steve.
So there is still is some unknown in this space. But clearly at 90 basis points versus the 2% where we were before this is predominantly behind us.
Joseph DePaolo
I mean if you think about the sales we've talked about the 10 sales that occurred this month, in fact that every dollar we’re taking in is going to go against principle and not for interest income. And so that looks like it’s very stable, but then again you have these credit union and something could happen with a credit union that will force us to do something.
Steven Alexopoulos
Got you. And I think you’ve gotten out of this road -- sorry go ahead, Joe.
Joseph DePaolo
No, I’m just saying we feel we’re in a position that at $350,000 it allows us to negotiating with each of our client borrowers to put them in a position where they can continue to pay back and make a living and we can get this 90 basis points down even further.
Steven Alexopoulos
Joe, if you tested the market in above sales situation could you sell these for $358,000 where they are being carried?
Joseph DePaolo
Well, I could tell you that whoever -- if somebody bought it at $358,000 usually they want to make a double-digit return like a 20% return and we are not going to do a far sale. We should make, why don’t we make that.
Steven Alexopoulos
Right. So is your preference at this point to hold these at these written down level?
Joseph DePaolo
Yes.
Steven Alexopoulos
Okay. And thanks, I just had a question on the loan growth.
Could you give the more complete breakdown of loan growth by category this quarter, I know you have specialty, but I know you didn’t give the other categories.
Eric Howell
We had commercial property grew $116 million, multi-family was up $222 million, traditional C&I was up $22 million and Signature Financial was up $252 million.
Steven Alexopoulos
Where did you end the quarter on free concentration?
Eric Howell
We were at 561%, which would have been lower had we had a normalized quarter of earnings.
Steven Alexopoulos
Okay, terrific. Thanks for all the color.
Eric Howell
Thank you.
Joseph DePaolo
Thank you.
Operator
Your next question comes from the line of Lana Chan of BMO Capital.
Lana Chan
Thanks. Just wanted to follow up on the CRE competition in New York, I know you talk about it a little bit.
But what are you seeing from competitors now on pricing and I know you alluded to some of the softer growth earlier in the quarter was because you lowered your pricing and tightened underwriting. What are you seeing relative to peers now?
Joseph DePaolo
What happened was, Lana we hadn’t lowered our price quickly enough. We felt that we were at -- one point in the quarter we were at 4% and that 4% was probably 50 basis points higher than our competitors and usually where 25 basis points maybe creates only a 50 basis points higher.
And then we came down to 3.78 and now we’re down to 3.75. So, that contributed to some of the slowness.
Lana Chan
Okay. And on Signature Financial could you remind us exactly what is in that portfolio outside of taxi, probably equipment finance, but could you be a little bit more specific about what you’re growing in that portfolio?
Eric Howell
Yes, I mean as Joe said we’re really growing all across the board. We have indirect vehicle, indirect equipment, our capital markets franchise, municipal all those spaces and it’s all equipment finance businesses.
Lana Chan
Okay, thank you.
Joseph DePaolo
Thank you, Lana.
Operator
Your next question comes from the line of Chris McGratty of KBW.
Christopher McGratty
Great. Thanks for talking the question.
Joe, if we can look beyond the back half of the year and understanding the provision guide, if we think about the -- your previous comments I think that 50% to 75% of the provision is largely taxi related. And you put this thing to bed either today or by the end of the year, that would employ based on your growth assumptions 5 to 10 a quarter in the provision, which is obviously a big step down from the 20 guide you are currently telling the market.
Would you agree with that math based on the portfolios that you are growing in kind of the environment?
Joseph DePaolo
Yes, Chris what you have projected for 2018 for us in provision?
Christopher McGratty
100.
Joseph DePaolo
100, it’s got to be less than 50.
Christopher McGratty
Okay. Based on the resolution that will occur the next two quarters, okay.
Joseph DePaolo
Based on what my small brain knows today, I would say it would be less than 50, which for the listening public out there is got to be good news.
Christopher McGratty
Okay, thanks. And just a small one on the deposits, with the C&I efforts, what are the -- like how much of those relationships are deposit versus lending, you talked about I think $200 million of growth in Signature Finance and C&I.
What’s the dollar or maybe the recent quarter’s trajectory of just deposit growth with those portfolios?
Joseph DePaolo
I don’t necessarily break it out that way, we just look at -- unless there are deposits that are dependent on the C&I business, but large part of our C&I business is Signature Financial which is not dependent on deposits [indiscernible]. So we have quite a few clients that have no borrowing relationship at all, like many law firms or service industries don’t have borrowing relationships and we just have a strictly cash management and deposit relationship.
You would characterize them as C&I, but if they don’t borrow. So there is a number of our deposits that are not dependent on loans.
Christopher McGratty
Got it, great. Thank you very much.
Joseph DePaolo
The large portion. Thank you.
Operator
Your next question comes from the line of David Chiaverini of Wedbush Securities.
David Chiaverini
Hi, thanks. Follow-up on loan growth, why did you keep rates higher in April and May and presumably seed market share did capital levels and taxi issues hold you back in being more aggressive?
Joseph DePaolo
No we just felt that 4% was the right number and we thought that the market had jumped too quickly to lower their rates. And we thought that they would come back and they didn’t so we lowered them subsequently.
Eric Howell
David it’s often a game chicken with us as it relates to how we re-price our CRE portfolio. If we lower our rates quickly everyone else just lowers their rates even faster.
So the only way that our competitors can truly compete against us is on rate. We have a service model that I stellar.
So we are very careful when we lower rates and when we increase rates. Because we find that we tend to be the leader in that arena.
David Chiaverini
Okay. And rating down taxi and the impact on capital levels that’s not going to impact growth going forward?
Joseph DePaolo
Not at all, since we put every dollar of earnings back into capital.
David Chiaverini
Thanks very much.
Joseph DePaolo
Thank you.
Operator
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