Welcome to Signature Bank's 2021 fourth quarter and year-end results conference call. Hosting the call today from Signature Bank are Joseph J. DePaolo, President and Chief Executive Officer, and Eric R. Howell, Senior Executive Vice President and Chief Operating Officer. Today's call is being recorded. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. We ask that you please pick up your handset to allow optimal sound quality. Lastly, if you should require operator assistance, please press star zero.
It is now my pleasure to turn the floor over to Joseph J. DePaolo, President and Chief Executive Officer. You may begin.
Thank you, Brittany. Good morning, and thank you for joining us today for the Signature Bank 2021 fourth quarter and year-end results conference call. Before I begin my formal remarks, Susan Lewis will read the forward-looking disclaimer. Please go ahead, Susan.
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 in 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 many possible events or factors, not all of which are known to us or in our control. These factors include those described in our quarterly and annual reports filed with the FDIC, which you should read carefully for further information. You should keep in mind that any forward-looking statements made by Signature Bank speak only as of the date on which they were made. Now, I'd like to turn the call back to Joe.
Thank you, Susan. I will provide some overview into the quarterly results, and then my colleague, Eric Howell, our Chief Operating Officer, will review the bank's financial performance in greater detail. Eric and I will address your questions at the end of our remarks. 2021, which marks Signature Bank's twentieth anniversary, was a sensational year of growth and achievements. All our businesses contributed to the bank's stellar performance, whether it be from our established New York banking franchise and emerging West Coast presence to our newer nationwide businesses. The performance includes a multitude of accomplishments, such as record growth in deposits of $43 billion, which comes on the heels of our 2020 record deposit growth of $23 billion. Additionally, growth in non-interest-bearing deposits, loans, and investment securities all reached record levels.
It is our founding client-centric model that drives this robust organic growth, and when combined with the inherent best-in-class operating efficiencies of Signature Bank, it results in record revenue growth and record net income. Throughout the 20 years that we have been in business, we seldom take time to acknowledge our achievements, such as our recent inclusion in the S&P 500 index, for which we are very honored. Instead, we remain focused on our bright future and commitment to staying at the forefront of innovation as the financial services industry continues to undergo digital transformation. Now, let's take a look at earnings. Pre-tax, pre-provision earnings for the 2021 fourth quarter were a record $385 million, an increase of $124 million, or 47% compared with $262 million for the 2020 fourth quarter.
Net income for the 2021 fourth quarter increased $99 million or 57% to a record $272 million or $4.34 diluted earnings per share, compared with $173 million or $3.26 diluted earnings per share from last year. The increase in income was predominantly driven by substantial asset growth of $45 billion over the last twelve months, as well as the decrease in the provision for credit losses, which was substantially impacted by COVID-19 in the fourth quarter of 2020. Looking at deposits. Deposits increased $10.6 billion or 11% to $106 billion this quarter, while average deposits also grew $10 billion.
This quarter's growth was driven by the digital asset banking team, which grew deposits by $5.7 billion, including $2.4 billion of growth on the Signet Payments platform. Additionally, our New York banking teams grew by $6.9 billion. For the year, deposits increased a remarkable $43 billion or 68%, and average deposits increased $35 billion. Our growth for 2021 can be broken down as follows. Our digital team grew $21.4 billion. Our specialized mortgage banking solutions team grew $3.9 billion. Our venture banking group grew nearly $900 million. Fund banking grew $700 million. The West Coast grew nearly $400 million. Our New York banking teams grew $15.4 billion, which includes 18 teams that were over $100 million in growth each.
This growth led to a further reduction in our loan-to-deposit ratio, which now stands at 61%. Lowering our loan-to-deposit ratio is a primary initiative, and we have certainly achieved that, our goal. During the quarter, non-interest-bearing deposits increased $10 billion to $44.4 billion, which represents a high of 42% of total deposits. This tremendous growth in DDA can largely be attributable to the attraction of our Signet Payments platform, which grew by $2.4 billion to $7.7 billion this quarter. In fact, we just surpassed $10 billion several times in the Signet platform in the first weeks of January. Our substantial organic deposit growth led to an increase of $44.6 billion or 60% in total assets since the fourth quarter of last year.
The bank has increased in deposits by nearly $66 billion over the last two years, which is the equivalent of acquiring a top 50 U.S. bank in each of the last two years. We did it completely organically, no goodwill. We believe this is by far the most efficient use of capital. Not bad for a 20-year-old bank. Now let's take a look at our lending businesses. Loans during the 2021 fourth quarter increased a record $6.3 billion or 11%. For the year, loans increased $16 billion or 33%. The record growth in loans this quarter was again driven primarily by the fund banking, capital call facilities, which rose $5.4 billion.
This includes a $1.3 billion purchase of a high-quality loan portfolio from a money center bank that is comprised of loans to well-known borrowers, most of whom are already clients of the bank. Moreover, our commercial real estate team grew loans by $707 million, and we expect them to begin growing again. This marks the end of a multi-year planned slowdown for that business, where we substantially reduced our CRE concentration from a peak of 593%- 312%. This was another major initiative successfully accomplished. We also saw growth for our West Coast banking teams, Signature Financial, and our newer corporate mortgage finance and SBA originations businesses. Turning to credit quality, our portfolio continues to perform well. First, let me point out, we essentially have put full non-payment COVID modifications behind us. I'll say it again.
We have essentially put full non-payment COVID modifications behind us, as we now have only $8 million remaining. That is down from $1.3 billion at the end of 2020. Loans with $218 million or 34 basis points of total loans, compared with $165 million or 28 basis points for 2021 third quarter. Our past due loans remained at 89-day past due loans at $97 million and 90-day-plus past due loans at $17 million. 2021 fourth quarter with $33.7 million or 22 basis points of average loans, compared with $17.3 million for the 2021 third quarter. The provision for credit losses for the 2021 fourth quarter $0.9 million, compared with $4 million for the 2021 third quarter.
This brought the bank's allowance for credit losses to 73 basis points. The overall coverage 217%. Excluding very well-secured fund banking capital call facilities and government-guaranteed PPP loans, the allowance for credit losses ratio would be much higher at 124 basis points. Now on to the realized success. During 2021, the bank onboarded total two in New York, four on the West Coast, as well as the corporate mortgage finance team and the SBA origination team. Additionally, the bank team and Signature Financial sales offices across the national footprint. It was another initiative that we successfully. At this point, I'll turn the call over to my colleague, Eric, and he will review the quarter's financial results in greater detail.
Thank you, Joe, and good morning, everyone. I'll start by reviewing net interest income and margin. With our emphasis on growing net for the fourth quarter, it reached $536 million, an increase of $55 million or 11% from the third quarter, an increase of $141 million or 36% from the prior year. Our robust growth in net interest income during 2021 can be attributed to our record deployment of cash, which led to an increase of $27.5 billion across our securities and loan portfolios. Net interest margin on tax equivalent basis increased three basis points to 1.88% for the 2021 third quarter. Primarily driven by the continued decrease in deposit costs as well as the decrease in pressure on overall asset yields as rates.
Our massive excess cash balances decreased net interest margin by 53 basis points. Again, our focus is on net interest income growth. Let's look at asset yields and funding costs for a moment. Interest earning asset yields for the 2021 fourth quarter decreased 2 basis points from the linked quarter to 2.16%. The rate of decline in asset yields has significantly slowed, and it appears that we are at or near the bottom. However, asset yields continue to be affected by the excess average cash balances, which grew $1.3 billion to $30.5 billion during the quarter. This is despite asset growth of $10.6 billion.
Yields on the securities portfolio increased 3 basis points linked quarter to 1.52% due to higher reinvestment rates as well as the slowdown in CPR speeds on our mortgage-backed securities portfolio. Additionally, our portfolio duration increased to 3.6 years due to the higher interest rate environment. Turning to our loan portfolio, yields on average increased 5 basis points to 3.4% compared with the 2021 third quarter. Excluding prepayment penalties from both quarters, yields decreased by 7 basis points. Now looking at liabilities. Our overall deposit costs this quarter decreased 3 basis points due to both the low interest rate environment as we gradually lower our relationship-based deposit rates, DDA growth. At this point, we think we're near the bottom on deposit costs, and it will be difficult to lower.
During the quarter, average borrowing balances decreased by $14 million to a low of $3.4 billion, and the cost of borrowings remained stable at 2.8%. The overall cost of funds for the quarter decreased 5 basis points to 27 basis points, driven by the reduction in deposit costs. As we pointed out, the bank is significantly asset sensitive, which is another of our initiatives that we executed on. The bank's focus on growing floating-rate loans, which now comprise 49% loan portfolio, coupled with our core deposit funding, make us extremely well-positioned to take. On to non-interest income and expense. With our plan to grow non-interest income, we achieved growth of $9.3 million to $33.5 million when compared with 2024 across the board as many of our fee income initiatives are taking hold.
Noninterest expense for the 2021 fourth quarter was $183.9 million versus $157.6 million for the same period a year ago. The $26.3 million or 16.7% increase was principally due to the addition of new private client banking teams and operational support to meet the bank's growing needs. Despite our significant team hiring initial cash balances, the bank continues to gain operating leverage. As a result, our efficiency ratio improved to 31.3% in the 2021 fourth quarter versus 37.6% for the comparable period last year. Turning to capital, our capital ratios remain well in excess of regulatory requirements, given the relatively low risk profile of the balance sheet. Tier 1 risk-based ratio of 9.58% and total risk-based ratio of 11.73% as of 2020.
Now I'll turn the call back to Joe. Thank you.
Thanks, Eric. They demonstrated their dedication to our clients and their needs during the pandemic. Times like these, our clients truly value the level of care and advice that my colleagues provide, and our performance for the year reflects their extraordinary efforts and the strength of our franchise as we continue to execute on many fronts. 2021 was truly an astonishing year of growth and achievement for Signature Bank. We delivered 68% on top of record deposit growth in 2020 of $23 billion. Demand deposits increased a record $25.6 billion for the year and remain at a high, which is in large part due to the adoption of our Signet platform. Most importantly, our deposit growth was across the board, thanks to all of our newer national businesses. $16 billion.
The real estate portfolio during the fourth quarter CRE loans was increased by $707 million. We grew our securities portfolio by a record $11 billion. To sum up, our balance sheet grew by $44.6 billion. Our growth propelled the bank's pre-tax, pre-provision earnings by $318 million, or 32% for the year, substantially increased by $390 million, or 74% to a record $918 million for the year. We had a strong return on average common equity of 13.8% despite margin compression due to excess balances while the bank was growing by leaps and bounds. Noninterest income grew by 61% or $45.6 million for the year.
We improved our already best in class to 35%, and we set the stage for continued growth with the teams consisting of two in New York, four on the West Coast, in addition to onboarding the SBA lending team and the corporate mortgage finance team. There have been a number of transformative goals and initiatives that we have looked to achieve over the last several years. We lowered our loan to deposit ratio from a high of 104%- 61%. We significantly increased floating rate loans as a percentage of assets, and we are now firmly in an asset sensitive environment. We lowered our CRE concentration level from a high of 593% to 312%. We've geographically diversified with our expansion into the West Coast, as well as our onboarding of several national businesses.
We've increased our fee income substantially. Lastly, we have become the recognized leader in the digital banking arena. Signature Bank enters 2022 as a strong financial institution. We very much look forward to the years to come. Now we are happy to answer any questions you might have. Brittany, I'll turn it back to you.
The floor is now open for questions. At this time, please press star one on your telephone keypad. If at any point your question has been answered, press the pound key. Again, we do ask that while you pose your question, that you pick up your handset to provide optimal sound. We will take our first question from Dave Rochester with Compass Point. Your line is now open.
Hey, good morning, guys. Nice quarter.
Good morning, Dave.
On the Signet deposits, I just want to make sure I got the numbers right that you gave. Did you say that you were at $7.7 billion in Signet at the end of the year, and now you're up over $10 billion now in the first few weeks of January? Did I hear that right?
Yes. We've hit $10 billion several times during several days and weeks here in January. $10 billion, but it's moving toward that number.
Yeah. Okay. That's a great start to the quarter. Do you happen to have the end of period breakdown for that, digital asset deposit book?
Yeah, sure, Dave. Stablecoin issuers, we had $6.9 billion in deposits, of which $4.8 billion were operating balances and $2.1 billion were reserves. Institutional traders were at $4.5 billion. Digital asset exchanges were at $14 billion, and blockchain technology and digital miners were at $3.4 billion.
Perfect. Thanks for that. You guys had mentioned potentially doing some upgrades to Signet this year, early this year, I guess. Are there any updates on that front? As a part of that, are you anticipating that you'll be the customers at some point?
Well, the enhancements that we refer to will be during this first quarter, will be announced as part of what we're doing with the enhancements.
that is coming this quarter, definitely?
Yes. Yes.
Great.
If I had to give an answer, the answer would be yes right now.
Sounds good. What does the customer pipeline look like for the digital asset group at this point?
It's pretty robust.
Has been increasing. Is it higher than it was previously?
Yes. It's been growing. We surpassed 1,000 a while ago.
Yes.
1,000 active clients.
Great. Maybe just one last one. Can you just give an update on the use cases of Signet? I know you've been working on the payroll company. When do you expect that will be fully online and integrated with your platform? And what is your thought on how large that ecosystem can ultimately be for you guys over time?
Oh, it's fully integrated, and some of the payroll company we expect it to grow this year in 2022. We had some success during the fourth quarter and hit our stride yet. That's
What kind of deposits?
I'm sorry?
No, that's great. That's great to hear. What level of deposits do you have in that segment at this point?
I'd rather not say because I know there are competitors on the
Okay. All right. Fair enough. Sounds good. Thanks, guys.
Always trying, Dave.
That's right.
We will take our next question from Matthew Breese with Stephens Inc. Your line is now open.
Hey, good morning.
Hey, Matt. Good morning.
You know, just hoping for a little bit of color. Obviously 2021 was impressive on multiple growth fronts, but if you could give us some color as to what you expect for loans, securities, deposit growth this year, and whether or not your guidance on that front has changed.
Well, we expect that on the asset side, that's the guidance we'll give. In the second, third, and fourth quarters, somewhere between $4 billion and $7 billion, that range. That's a combination of loans and investment securities. For the first quarter, we think it'll be $3 billion-$7 billion, probably on the low end, because the first quarter is difficult. There's little activity. Part of our growth, about $1.3 billion, was a purchase that we made in the fund banking unit. Three to seven billion in the first quarter and $4 billion-$7 billion for the second, third, and fourth quarter. We think it'll be primarily funded by deposits growth, or what we have in cash right now, but primarily growth. That's about as much as I can give you on the assets side.
Got it. I appreciate that. Maybe just on the interest rate sensitivity side. It now feels like it's a matter of when and how many rate hikes we're gonna get this year. All else equal, I know it's variable here, 25 basis point hike. What is your expectation for, you know, margin expansion?
I think it's if you look at a 100 basis point move, we go up, you know, a little over 10%. It's pretty linear, so each 100 basis point move, we're going up an additional 10%. If it's 200, we're going up 20, 300, we're going up 30% and so forth. For a 25 basis point move, I think it'd be, you know, a 2%-3% range increase.
Got it. Okay.
Our goal is to grow net interest income.
Yeah. That's on a, you know, on a static balance sheet. Obviously we'll have growth. Hopefully the mix shift of moving cash into securities or loans will also be very beneficial to that.
Understood. Okay. Yeah, last one for me. You know, in December, your blockchain real-time payments provider, Tassat, they did a demo of real-time payments using stablecoin. You know, not interbank, but between two banks. Just understanding your relationship with them, I was curious if this is something you're interested in, joining one of, you know, their interbank network. In your mind, what are the potential use cases of linking arms and sharing a stablecoin, and what are some of the benefits?
Well, first let me say that Signet is a partner, a FinTech partner. We like the relationship very much so. What dictates what we're doing is that we listen to our clients. Certain things that allow us to set our priorities and our agenda. Some of the things we're working on now with Signet is our priority. We really haven't given much thought about the Tassat platform. We will be doing that and looking at it. They're working with us on the improvements we're making with Signet.
Fair. Thank you.
Thank you.
We will take our next question from Jared Shaw with Wells Fargo. Your line is now open.
Hi, good morning, guys. Thanks for the questions. Maybe circling back onto the crypto side. You know, great growth there. Can you give a rough breakdown of what is from new customers versus volume from additional volume from existing customers?
We don't have that breakdown, Jared.
I guess shifting. When you look at the allowance and credit, any color around the growth in NPLs. Did that reflect any of the final move out of deferrals? When we look at that, is that probably a good floor given the growth outlook?
I mean, we took a conservative approach and, given the end of our ability to extend the COVID deferrals. We took a conservative approach and put loans on nonaccrual or, you know, mostly got them back to paying us, Jared. On nonaccruals, I mean, we could see it tick higher, but I wouldn't think it would be meaningful, and we're working on resolution on many of those credits. I think it would be equal or below the levels that we're at today.
Okay. What are you seeing for new money yields in the loan book and in the securities purchases here?
I mean, we're generally seeing a floating rate LIBOR plus 200. On the CRE front, about mid 3s now, Joe?
Probably, mid 3s is a good-
Yeah. I think we're like 350.
Small.
on multifamily and higher obviously on other forms, whether it be retail or office.
What we have in the pipeline right now that we put on the next month, probably, 3.25.
Okay. When you look at the CRE multifamily, what's your view in terms of the outlook for the year in terms of the health of that sector?
Well, we think that they will grow somewhere between a quarter of a billion and three-quarters of a billion. I would say that the $707 million has been primarily multifamily. Because you know, with COVID out there, you know in bad times it's always a good time to make loans because you know the current situation will not likely get any worse. New business this year we haven't had since the third quarter of 2018. It's been quite a while. If we can get back to that pace, that would be very good for us.
Just primarily for me, you know, capital, you know, the balance sheet growth is a little lower than we've seen recently. Capital sufficiency here and not just for where we are today, but for growth?
Jared, you know, if we see an extended period of growth in our future, we're not gonna be shy about raising capital.
Okay, great. Thanks for answering the questions.
Thank you.
Thank you.
We will take our next question from Mark Fitzgibbon with Piper Sandler. Your line is now open.
Morning.
Morning.
First, I wonder if you could help us think about the outlook for expense growth in 2022.
I think we had some anomaly here, which led to, you know, us being up a bit this fourth quarter. If you look at the, you know, first quarter versus the 2021 first quarter, we'll probably be in a 14%-16% range. You know, I would think, you know, closer to the higher end of that one, as we've done many years before, you know, trend down over the course of a year, and bring that expense growth rate down each quarter.
Okay, great. Equity loans, I assume, had pretty good growth again this quarter, which would probably push it up to. I guess I'm curious how large you're comfortable letting that line of business grow to.
I mean, we really haven't set an official. We're pretty comfortable letting that grow quite a bit from where it is. It's an extremely well secured and well diversified portfolio, whether it be the underlying type of fund, the LPs, the areas, it's well diversified geographically. Within that portfolio. That gives us a lot of comfort and clearly it's got a long history of little to no loss. We feel very comfortable with the portfolio.
Okay. Hesitant to say where the next geography is likely to be, but I'm curious if you can give us a sense for what the timing on expanding into a new geography might be, and also, if you could also share with us, what the number of teams in the pipeline look like for 2022. Thank you.
Well, the predominant growth would be west of the Mississippi.
Okay.
Although we do expect to open up an office in New Jersey in 2022. We'll have an office. We're actually doing a lot of business in New Jersey. We're not gonna say where it is right now, but we'll be entering New Jersey and then west of the Mississippi. Very close to California.
On the team front, we've got a number of ongoing discussions with teams in various stages of the pipeline. I think, given some of the new geographies that we are looking to enter, talking anywhere from eight to potentially 20 teams on the high end.
Thank you.
Thank you.
We will take our next question from Brock Vandervliet with UBS. Your line is now open.
Great. Good morning.
Morning, Brock.
Morning. On securities lending, I know that it started, you know, slow with a $25 million loan that was upsized to $100 million, I believe. Where does that initiative stand right now?
In the pipeline, we are very much along in the pipeline for $100 million apiece. But only yet that are in the pipeline, maybe somewhere about a dozen clients. I don't know how much we'll book this quarter. It's likely we'll book the two $100 million ones. $100 million ones rather soon. But it's not gonna be a driver with the fund banking mortgage warehouse business CRE coming back. It'll be at the very, very low end of our generation of business.
Is that, I remember you framing that the potential there in the billions in terms of the demand, engaged, or is there a change in, you know, risk appetite or, can you tell us a little bit more about what the thinking is behind the curtain, I guess?
Well, the appetite is very much there. We wanna go slowly. We wanna make sure that our relationship we have with our third party that manages the collateral for us is up. We've seen movements up and down, and we've seen settlements being done every Friday, because we true-up every Friday for now. No hidden agenda there. It's basically we said we would really crawl before we walked. We said we'd walk before we run, and then we changed that and said we would walk before we walk. We're never gonna run in this business. I know there are some clients that are willing to wait for us, but if we have clients that we go through loans with, they won't stop doing business with us on the Signet platform.
We don't feel the need to do something that we're not yet 100% comfortable with all the pieces.
Okay. Not to try and push into areas you're not comfortable talking about yet, but it sounds like we should expect a broader disclosure on a plan around Signet and other digital initiatives sometime in the first quarter?
That's our plan. Absolutely.
Okay. Okay, great. Thanks for the questions.
Thank you. Thanks.
We will take our next question from Casey Haire with Jefferies. Your line is now open.
Yeah, thanks. Good morning, guys.
Hey, Casey.
Hey, guys. Question on the securities build and loan growth guide. You know, $4 billion-$7 billion per quarter in the later part of the year. It feels like there's an opportunity to be a little bit stronger on the securities side of things with that $30 billion cash position. I was just wondering what is kind-
You know, we are being a little bit more aggressive, Casey, but we do anticipate that rates are gonna continue to rise and rise and rise. Given that, we wanna be smart about how we deploy and enough to deploy into even higher rates in the future. There is, quite frankly, only so much that our treasury group's able to-
Gotcha. Okay. Just following up on that, Eric, I heard you on the loan yields, but I'm not sure I heard you on the new money yields for securities placements. Where are those coming in today? Okay, very good. A couple questions on the asset sensitive profile, beta. You know, what are you guys baking into the, you know, loans that 49% of them floating rate? Is there a level where you wouldn't go any higher or is that not in play at all?
I wouldn't say it's not in play at all and something that we continue to look at, you know, being where we're positioned now and the expectation that rates will continue to rise, and we're happy with that level of floating rate and even pushing it higher. There will be a point as we see rates start to level off that we'll look to be even more aggressive in our CRE portfolio again to help balance that out.
Yeah, we really haven't had CRE able to, you know, under our initiative, we didn't have CRE balancing it out at all for the last three years. Now that'll change.
Okay, very good. Just the deposit beta assumptions in your simulation.
Well, our last time through, when we saw a Fed tightening, we had a 34% beta on our total deposits. I think we're modeling around a 40% beta. Be a little bit more conservative.
Okay. Very good. Thank you.
Thank you, Casey.
Thank you.
We will take our next question from Steven Alexopoulos with JP Morgan. Your line is open.
Hey, good morning, everyone.
Good morning.
Good morning, Steve.
I wanted to start with the bigger picture. If we look at year to date, the run rate pretty consistently is above $10 billion a quarter. Regarding the $4 billion-$7 billion asset growth beyond the first quarter, are you just being conservative with the guidance? I do recognize that you basically beat the guidance every quarter in 2021. Do you see something more specific which should cause asset growth to slow a bit in 2022?
Well, we're not trying to cry wolf. We've had, you know, you said four quarters of growth and that to be less each quarter. Not from a conservative standpoint, but from what we're seeing. Even though we have more initiatives that are starting with the Mortgage Warehouse and SBA, we don't expect there to be $ billions in growth from each of those businesses. The case in of our balance sheet. There's no. Plus, the interest rate's gonna go up. When we've seen interest rates go up, we've seen deposits being used for other things, sometimes, investments in their, for CRE investments in their buildings. For, other businesses, they're using their deposits.
We have a little bit of transfers from the deposits to the off-balance sheet. Then, you know, you have some headwinds where some interest-bearing deposits will be going to other institutions where we have some fluff, like the next 12-24 projection. We're happy that we're better at execution than we are at prediction.
That's a good color, Joe. In terms of the digital asset customers, how many, I know you said you went over 1,000, but how many did you add in the quarter? How's the fall in the price of crypto prices had any impact on the pace of-
The fall affect the adoption at all. We added 139 clients during the quarter, so we're now at 1,042.
That's helpful. Thank you. Final question. Just following up on Mark's question on expenses. It's almost mind-blowing to see the efficiency ratio down to 32%. Given the expense guide and rates going up, it would appear that this is going to go even lower. Is that the right way, Eric, to think about it? Just given the asset level where you're moving to, do you see a need at some point to ramp this expense growth from a regulatory compliance view? Thanks.
You know, not so much from a regulatory compliance view. I mean, there are some things that we're asking you to spend there, but it's not, it won't be the primary driver. I mean, as Joe pointed out in the digital front our operations are our existing infrastructures to shore that up and get it in line with what a $100+ billion bank's infrastructure should look like. So we're gonna be spending a lot on human capital and in technology to support all the growth that we put on. You know, I think that if it weren't for the growth, we'd be well below the 14%-16% guidance that we've been talking about.
Really our ability to move the efficiency ratio down is strongly predicated upon a higher interest rate environment where we're gonna, you know, see our NIM actually expand, right?
Mm-hmm. Yep.
That NIM expansion of just three basis points is pretty meaningful this quarter. It looks like we're at or near our bottom, right? We'll see what happens with the interest rate environment, as we all know, can be volatile. If we see, you know, a similarly situated yield curve to what we have today, and, you know, we should see with that.
Okay, great. Thanks for.
Please.
Chris McGratty with KBW.
Hey, good morning. Most of the questions have been addressed. I was interested if you you know, 40% year-on-year growth, how should we be thinking about the sources and the trajectory of growth going forward?
Well, I think if we look at 2022 versus 2021 overall, we'll see a 20%-30% increase in fee. You know, if you look at 2022 versus the first quarter last year, we had a really strong quarter, first quarter of 2021, as it related to loan sales and some trading income, which is a bit more volatile and harder to predict. The first quarter's growth 20%-30%. We've got a number of initiatives there that are truly. The change has been steadily climbing over the course of the last two years. We just barely started on our credit card, so hopefully we'll see that take off.
You know, fund banking and the continued growth so that should be a success in our SBA, where we're starting to drive fee income. Really we've spent a lot of time focusing with all of our private client banking teams on their fee income generation and getting them to see the value of the stellar services that they give to their clients and that they should be paid for that. That's so.
That's great color. Thanks, Eric. Just the asset growth, the 3%-7%. What's assumed MIC guidance?
For good reason. It's really hard to predict both of those. It's, you know, based on really the interest rate environment, and as well as many other factors that come into play. We're just gonna give guidance on overall asset growth at this point.
Okay.
You tell them.
Thanks.
You got it.
We will take our next question from David Long with Raymond James. Your line is now open.
Good morning, everyone.
Good morning.
Good morning, Dave.
Eric, I think earlier you answered the question about NIM upside to 25 basis points. In that discussion, I think you said 10% upside to net interest income and a 100 basis point parallel shift. I think it was 15% last quarter. Has anything materially changed with your asset sensitivity?
It's come down ever so slightly. There are a lot of moving pieces to that equation, David. It's come down a little bit. 18%. It's not 10% either. It's probably closer to 12%-13%.
Okay, got it. Second question, the dollar transfer volume in the digital currency ecosystem that you had in the fourth quarter.
We had not. Our volume transfers were a record high for us of $213.7 billion.
For reference, what was it in the third quarter?
In the third quarter was 127.9.
Awesome. Great. Thanks, guys. Appreciate it.
Thank you.
Thank you.
We will take our next question from Ebrahim Poonawala with Bank of America. Your line is now open.
Hey, good morning.
Good morning.
Good morning.
Just had one follow-up question on the capital down 1%. It should be up 5% given the strength you had. Remind us, Eric, internal capital generation, what's the level of asset growth that you can support? Why not do a preemptive equity raise given how strong growth momentum is? Stock's at an all-time high. Just give us-
I mean, I think our capital generation, you know, roughly generate $1 billion in capital. Depends on what ratio you wanna. We're gonna go raise capital.
You still prefer equity over anything else in terms of shoring up capital? Is that fair?
Yeah, we like a clean capital structure, so commons probably makes the most sense for us.
Got it. Thank you. That's all I had.
Thank you.
Thank you, Ebrahim.
We will take our next question from David Bishop with Seaport Research. Your line is now open.
Yeah, good morning, gentlemen. Most of my questions have been answered. Eric, I wasn't sure if maybe Joe had mentioned the allowance for loan losses to loans, but I hear that may have hit a floor here just given the growth outlook here into 2022. Wasn't sure if I heard that correctly or earlier in the call. Thanks.
I mean, I think we're clearly closer to the floor. I wouldn't necessarily, but we're clearly getting closer to the floor.
Great. Thank you.
Thank you.
If you would like to listen to 1-800-938-1598. A webcast archive of this call can also be found at www.signatureny.com. Please disconnect your line at this time, and have a wonderful day.