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Signature Bank seeing better prices on CRE credits

Signature Bank CEO Joseph DePaolo said Jan. 19 that the competition for commercial real estate credits is easing and prices are moving higher with the recent increases in interest rates.

Since the U.S. presidential election in November, the yield on the 10-year Treasury has risen as much as 70 basis points, reaching a high of 2.60%. The yield has fallen more recently, closing Jan. 18 at 2.42%.

The increases in rates are leading to better prices on commercial real estate credits but should also cause growth in those loans to slow since refinancing costs are increasing, DePaolo said on a conference call to discuss fourth-quarter results.

The executive said the company is seeing less competition for CRE credits in its markets as some smaller institutions have exited the space. Other bankers made similar comments during third-quarter earnings season, noting that a number of competitors had slowed CRE lending, often at the behest of regulators. The retreats have come after regulators reminded banks late in 2015 that additional scrutiny would be applied to companies with elevated CRE concentrations.

DePaolo said on his company's earnings call that five-year, fixed-rate CRE loans are now being priced in the range of 3.875% to 4%, up from 3.375% in early November. Prices on seven-year, fixed-rate CRE loans have risen to a range of 4.5% to 4.75% from 3.875% in early November, he said.

DePaolo said the increases in rates have allowed Signature to not only raise prices on CRE loans but pursue credits more selectively.