NYCB - Earnings call transcript Q4 2017 | Flagstar Financial, Inc.

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Operator

Good morning and thank you all for joining the management team of New York Community Bancorp for its fourth 2017 conference call. Today's discussion of the company's fourth quarter and full year 2017 performance will be led by President and Chief Executive Officer Joseph Ficalora; together with Chief Operating Officer, Robert Wann; Chief Financial Officer, Thomas Cangemi; and the company's Chief Accounting Officer, John Pinto. Certain comments made on this call will contain forward-looking statements that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those the company currently anticipates due to a number of factors, many of which are beyond its control. Among these factors are: general economic conditions and trends both nationally and in the company's local market; changes in interest rates, which may affect the company's net income, prepayment income and other future cash flows or the market value of its assets, including its investment securities; changes in the demand for deposit, loan and investment products and other financial services; and changes in legislation, regulation and policies.

annual about in factors and the this filings, its more company's with its quarterly find XX-K including statements Form XX, forward-looking morning's XXXX period will ended the XX-Q XXXX. associated risk the SEC and September You Form on for report earnings release discussed of call. conference The reconciliations and financial this certain release also measures during non-GAAP GAAP includes that may be

visit department ir.mynycb.com. release, like please this call at a XXX-XXX-XXXX Investor company's you'd or If morning's Relations copy the of

As call in this listen-only today's a all mode. time, At reminder, recorded. being is participants a are

questions You line Instructions the a brief will go Ficalora, for have that discussion, a the chance the given this of please ahead. be overview now following to time. remarks. Mr. performance ask call prepared will will start before to opening the during Q&A. I who management's provide at company's Ficalora, To Q&A Mr. will turn over

Joseph Ficalora

thank prior year-ago. fourth you, full you $X.XX our XX% share to for discuss all And us of performance. the up as earnings we joining compared for Earlier XX% per reported today, quarter months the XXXX, December common Thank up and XX, the diluted Melissa. compared we ended this quarter and three to XXXX year morning

XXXX. For share reported from of the the full XX% diluted year, the common $X.XX, of for year company full down earnings per the reported $X.XX

and a average current into average on translates a of this return For X.XX% quarter, stockholders' on X.XX%. the equity return common of assets

return was numbers average our on assets stockholders' a basis, on tangible the and tangible tangible XX.XX%. For On was common the quarter the the full are X.XX% average comparable X.XX%. and equity year, for return X.XX%

numbers and XX.XX%. the were year, comparable full the For X.XX%

of on into the Based declared price, for of XX our translates per XX. Board an as February dividend yield February that share paid to on dividend The a announced closing X.X%. last dividend $X.XX will shareholders common record annualized Directors be also of We the quarter. common of night's

turning quarter in the on quarter. The including in year Now, fourth expenses we margin, of achieved third ways, to net credit the of noteworthy company's loan stable built the was quality. pristine several operating performance and lower strong is our performance quarter highlights growth, a the interest the and

lending quarter. $X.X quarter billion of That's the up We during for from XX% previous front. the on investment First, from held originated XX% year-ago the loans the and quarter.

originations growth the prior loan prior multifamily quarter from XX% held and for to compared Our annualized in of main increasing also million real Commercial engine originations from The quarter. year-end the and and the quarter origination year-ago respectively XXXX. XX% billion into XX% to year-ago volumes translated high the the X%. portfolio. from estate core multifamily and $XX.X our from Total growth strong XX% investment $XXX single-digit up the jumped be quarter. The rose prior loans of this to increased continues billion, $X quarter

billion. As the grew an we an annualized increasing of have amount fourth by of quarter in then quarter, at rate $XX.X greater even grew previously third discussed, the loans X% at in and an annualized multifamily

changed. by has see our the can various you in release, our underwriting as Importantly, not metrics press

We continue conservatively. to we prudently both always lend and as have,

in about including the time Our continued $XXX us pipeline at loans. the gives which of two loan from stands comfort and million billion quarter, The $X.X the $XXX pipeline ahead. last of is loans $X.X about years. pipeline at multifamily in This currently CRE our growth up was quarters billion, highest million

fourth the to based has for we ample assets. on the sheet balance the the by over stood year, approximately $XX SIFI the pass billion, grow as balance capacity the the threshold be course we billion threshold This total where room wait company at and quarter to of of $X average the over year to of Given reform the without trailing gives the our its us grow lifted. sheet to regulatory end crossing SIFI

of not sheet, currently balance three balance after Importantly, organic growing growth. we to the years sheet are resume well our positioned

came quarter, interest at down X.XX% margin Second, points the sequentially. basis current the in X in net

point contribution from income, XX-basis traditional margin than of in have we're X.XX% level interest portfolio with quarter the of stable net would with current to X.XX%, the our rates and trending Excluding prepayment compared product higher, multifamily five-year the seeing better expectations. yield Moreover, management's X.XX%. third coupons interest been market

rose sale borrowings the loan the quarter majority and the wholesale the and the covered basis, deposits portfolio proceeds provided sequential was mortgage by of fourth growth a which of by was modestly, our during operations. While funded from on cash, banking

primarily to this our this to year. continue and will cash growth loan fund We utilize securities

total third expenses was to we the non-interest of the the lower million anticipated, on was X% our in operations on quarter. the a quarter compensation Moreover, decline quarter's drop linked $XX of level expense experienced $XX year-earlier a expense benefits attributable quarter. side, and the as prior primarily and expense, basis. million banking from This ahead from management's both our The also or declined Third, the G&A in sale expectations. also year-over-year and mortgage given

for fourth to was quarter ratio XX% the XX% compared quarter. prior efficiency in Our the

our XXX basis, best on will to the ratio further Fourth, among by in our balance to would and the the ratio reduce operating fourth continue level as XX%. be Excluding quality industry. approximately during non-interest expenses. our grow been credit quarter. of opportunities sheet to metrics points solid we XXXX, there We rank million that, and the the covered basis drive in that loans efficiency overall remain third improved On our continue of and quarter $XX XXXX gain mortgage our believe have operations, sale banking efficiency leverage

net loans. were a mere of quarter, average fourth the charge-offs X.XX% For

we point full year, of medallion X XXXX. have the all taxi For of for took the charge-offs less excluding net reported than charge-offs basis we for related would loans,

Act. benefit our tax XX.X%. effective will remeasurement the quarter deferred arising In of of expect income tax Jobs Tax due federal our using net that On This a lower from X% front, million tax tax income included $XX the one-time our rate rate rate. tax fourth the XXXX, tax about the liability about for Cuts be and we was to

ask Finally, form, that on current remain last is on which be regulatory by and the encouraged reform a made since On the quarter a the your the changes I Community SIFI out for what to has the for as York the will would New are been questions. and optimistic operator in potential we and banking open We progress whole. both the that, regulatory guardedly Washington of by industry front, believe threshold. the line note, now positive coming

our of remaining. time But free feel week. don't, we all within you do best We to to call today get the later if will this to or please us

Operator

Poonawala of line Please Thank you. Our first [Operator Merrill Lynch. comes with from America of with Bank question Instructions] your question. proceed the Ebrahim

Ebrahim Poonawala

Good morning, guys.

Joseph Ficalora

can Joe, number the XXXX. So, by terms for look on When going opportunity that, leverage where of operating tell for you see into that that come be in the run savings the I and fourth XX:XX] was at actually we mentioned quarter us just if could positive in $XXX where those where wondering end expenses. headed XQ. so from could could of you you start expense rate [indiscernible And beyond if you XXXX. expense million

Thomas Cangemi

Ebrahim. morning, Good

typically say that, for So, point is high year. obviously, I the QX calendar would a typical

in QX reduction about the down off see to we point considerably. QX And, guide for million, would I XXXX. so obviously, being high $XXX of expect throughout QX, at So, further

significant So, XXXX XXXX, fair see versus that it's say to you'll expense reduction.

be the couple That about guided you was could ago, it million a down company, look mortgage at million potential where was going high That a XXXX target was quarters lower high $XXX of to run When now. close of the point run into look If estimated million $XXX We of beyond. $XX the versus at high and $XXX we for guess, the for back rate. banking. to is rate that mid-XXs. ratio million the we for efficiency the the point. number – I much the you should point

we the to So, efficiency as XX% end ratio. by far as up, end XX% of XXXX, should between somewhere the

Ebrahim Poonawala

right. Excellent. All

annual to rate, $XXX $XXX million give about the take? run gets million or So, minus $XXX gets you million

Thomas Cangemi

Look, of given the guidance is mind, is QX. bear quarter, our year, so QX the down payroll for from taxes and point simply million, specific QX for about like. the high the But $XXX in

Ebrahim Poonawala

we there. year, if And quarters? Not debt about sure I year. the separately, the of up margin terms Understood. what's as in the give of maturity the us thoughts or a core sense first some that outflows think you up, some quarter to margin get of and can next non-interest-bearing of few was just saw sort held for if your love of would seasonal over you the And next the related. coming end at But change deposits tax Tom,

Thomas Cangemi

so and deposit the banking operation. mortgage respect So, shuffling impact up has that we partners towards an escrow balances. had some the like, in various of to with given had We settled the movement

next market to Actually, that going estimate year said, But on would be the billion XXXX to deposits reprice. that year. being $X.X some XXXX. we're and had We as billion can have priced side. approximately liabilities have this we see, So, that do $X.X you be the in liability in $X.X in to for billion

that's depending is billion, extend will duration. billion be $X XXXX on $X.X about with they ratably the to quarter and how if quarter, per marketplace, going so about repricing be approximately So, that per

of deposits money, slightly for do that, the to X.XX% depending X.XX%. be at raise just looking that's If are. rates we cost south X% that's you're around deposits, If two-year of going raise type somewhere probably market, to where we X.XX% if not

as impact hike in was that coupons. each has of in the X probably our so end in would get margin. We're the rate And had Last going March. we late So, margins came at expected. another into a the hike. coming of we're hike quarter, some slightly Possibility down said rate nickel, QX. far previous better far points the rate of another recent are calls, loan of like given go-forward rate impact say, basis full in looking in at benefits I as as next to to It hike weeks than the negative going most as my the in few concerned, the I about QX,

has kind historical ten-year beyond. appears particular this that analysis our month. think We story to a the book for low the did I of looks the X.XX% loan going company. the be and was We X.XX% it produced a of – bottomed. loan The and for that's it like XXXX coupon

we at as two-fold the forward yield, offering as five the As we coupons with up the the X.XX% indicated, X.XX% out That's or the in in and in Mr. past four look pipeline market. weeks. a Ficalora have about current rate

be in the coupons states, the to like it the rates raise beneficial for are in portfolio. So, seems the which rising the opportunity will

that. So, we're hopeful for

patient. towards very But security As well can as portfolio as be the normalization, putting linked-quarter We've putting That million see we the rebalance cash to the you $XXX work. should being yield about our basis. be been increase actively. beneficial to increased which securities well. work ongoing as cash book will to an We're

Ebrahim Poonawala

So, cash had end is that I about guess, of you pace the of at $X.X the billion year. in the –

way is about of per million quarter investing $XXX the is So, terms right securities? in to think in

Thomas Cangemi

very cautious the were to putting securities. in on We the money work

loan The very a into going strong strong have We very QX. was pipeline actually pipeline. strong. It's

opportunities So, that good the to current obviously, were market part further. securities And being balance book to to some even loan With those continue the put priority of the ultimately, latter into the the in start utilize in then, there environment, year. towards growing greater. and is cash the our said, look opportunities our sheet

to on, it in So, put we not one an going increased do will time, balance. We're quarter. all over

it XX%, somewhere to XX% X%, we But be X%. not will for big should picture, time. We over between do the

the assets. respect group, So, as you recall, typical industry to peer our with at the securities group is look total peer XX% for if you to

below are We still well that.

portfolio. in up to quarter-end about enhance moving higher. So, We yield that exited fact during able We over some like the the swap by to we of coupon are fact at basis six out deploy bump a had points the around the have that of of to our that that the just securities we're actually we quarter like the rates securities the portfolio. time. lower-yielding We

been So, we've very active.

see Although active. been don't you growth in the the we've portfolio,

Ebrahim Poonawala

the type And the for yield, you're today securities Tom? if what's you be buying, what those? to would Like, went coupon of on the the market

Thomas Cangemi

low ago, two it's still the that So, But right was Xs. Xs. now, quarters high in

up. a bump it's nice So,

Xs. low So,

Ebrahim Poonawala

Understood. Thanks for taking questions. my

Thomas Cangemi

Sure.

Joseph Ficalora

you. Thank

Operator

you. Thank

with proceed Our from Ken comes question the your Please with of line Zerbe next Stanley. question. Morgan

Ken Zerbe

Great, thanks. morning. Good

Joseph Ficalora

are you, Ken? How

Ken Zerbe

quarter, about you've we, Should if doing sort being on $XX gets quarters, call but billion over I'm the a well. this modest meaningful a growth the Thanks. for the I threshold basis. SIFI still let's expect Joe, know or bit balance this well it to positioned at talk little growth point, last raised? net-net the sheet growth grow really accelerated but few only of

Joseph Ficalora

is out that banks I billion. have be that in possibilities are already think variety final there over over will, be banks of written the a versus there's question when no would that there an rules different fact, that coming impact $XX will that $XX billion on

our So, as have that we has we $XX the I approach we're to cautious do of being mark, believe grow somewhat in quarters been guess, for several now. but room indicated, billion

billions designated have in our $XX a and could being fact, we earnings that our into dollars will, of as We not of growth enhance being billion trigger that average institution. characterized

is going growth to well. not the But to important by I message it's trigger is think and precipitous. are that something going billions here to So, that that we grow for important manage us reasonably

Thomas Cangemi

Ken, first of our net portfolio Joe's bear is I to comments add mind, phase just growth. there that, will growth the in

excess We the the covered $X.X balance. portfolio. was are of the banking cash sale utilizing from about billion liquidity operations asset That mortgage a

prepared every quarter expectation we will that balance the up in to being be quarter mindful moving and sheet a threshold, in SIFI as said, start and in low liquid be to SIFI. indicated balance over where That growth. Xs. we sheet remarks. trip the our $X grow enough Now, the Joe's we of this tripping portfolio have point go have cash billion With we can over until We are we'll very the and

blend can When happens, hopeful there So, moved. is before we some the We will have trip movement that of Washington threshold. year it be quarter. and of SIFI growth. the the throughout and pace year over this throughout that them room We're have that a that in the threshold faster very is

Ken Zerbe

Got it.

you on reprice the that the Tom, high. bit the you of And $X if last I billion say with grow liabilities, to of X%? versus to that? one correctly, just there deposit if did seemed using you deposits little That just Is unusual actually Okay. costs be would then, heard your answer questions, borrowings under a anything

Thomas Cangemi

market quoting yields, Just Ken.

now, market a one-and-a-half thrift look we're money. the the just two-year If model, you at type X% are CD the into go traditional to costs if CDs, you around right for

Joseph Ficalora

We're talking not deposits, new the portfolio. about

Thomas Cangemi

the Not portfolio. current

Joseph Ficalora

Right.

Thomas Cangemi

for in fees. Loan points for be deposits. So, – looking offering duration, of we the XX bring would to the same Home to Bank comparing attractive plus with more that basis X.XX% assessment It's Federal FDIC

Ken Zerbe

Got it, understood.

And more Joe, That little Okay. worse, the just market rest better, market? not? in what's just But then, Like, of multifamily you curious, CRE, happening disciplined, saying. are can goes guys question. getting market. know a talk bit Is about the the aggressive, the right? without you more broader I'm I

Joseph Ficalora

properties our consistent, been for are are overpriced. are the very in are are in lend I There lending have product in our some properties being decades, going discussed. have that long as way Those in you deviations elongates, that aggressive for our very, the the up portfolio. think are depending been that in are to market this and years. are market, we market a positive difficulty. and We've There very valuations type the various no markets a has actually changes that on in in at wind valuations properties in there been and which and plateau people how

their want to will They use people to have this to in our have we that as They cycle. as more appeal fact, the in refinanced flows And that do discounted, There for that today, is marketplace. the refinance to tomorrow, cash to be changes, portfolios us willing available greatest market don't therefore, portfolio the in. the and property. that though consistent. owners in us They the buy upon, even owners for from buy after are to properties very happens already done foreclosed the It they're property us to to buy. ability property less to successfully cycle inevitably So, so have lend take not property so are change. certain have

not elongated very So, happening has of I all The elongation positive I'd good to that economy. a think obvious things that of with cycle been any inevitable. we're in failing we're you the will be very, to occurs, the well-positioned we way expectations. say by this in are that when will something consistent more the And lend positive The place. that the turn. change cycle cycle not does money. very And anticipate. It's to our with It's

Ken Zerbe

you. right. All Thank

Operator

you. Thank

Please Rochester Deutsche from with Dave comes question next Bank. your Our of question. with the line proceed

Ken Zerbe

Hey, morning, good guys.

Joseph Ficalora

morning, Good Dave.

Ken Zerbe

For you that you Is mentioned year? your are you including hike hikes the rate guys just assuming guidance, efficiency or ratio it in for March what others? are

Thomas Cangemi

that there Two year. increases. rate to three expect we to Again, ongoing be going is this

current to X we basis to So, loan points and XXXX in in three. have potential go compression. two depends If model, that, of It the it's our then they hikes all reacts three, Dave. another it's rate how coupon

So, encouraging, the in of surprised obviously, yield curve sloping the couple basis loan a but been to in to quarter. the pickup overall see the to respect we points has were

that So, in original our margin actually based us previous guidance on quarter. expectations helped our the beat

for now, likely expecting If It's anybody's is it's I say, I probably two. internal three again, So, coupon we which closer given potential react to our unique we coupon. given to right portfolio, going now. magnitude purposes, the were that within this a coming. to modeling will mitigate favorably, than will But it's right two. three the some four, own it's customers guess have more believe really And the X%, very of target. situation moving get a help we refinancings starts low – think If pressure. it's of But, not, to would

we in perhaps year. be you. as one it's So, another of there But again, closely and the at watching end this maybe the then one all and as – may are in one June March

Ken Zerbe

the XW is the the guide bps for down are is or NIM impact just hike expecting? it you So, X rate in

Thomas Cangemi

the we've few consistent Again, over years. the NIM. I don't pretty been of give elongated guidance And

We particular this rate liabilities. that NIM quarter, as some expect basis in we points parts, other most as well compression have recent hike driven by X the moving

about $X.X billion have year. We this coming due

We position benefit in have is deposits, out potential a pushing with that out interest the cost put could local risk been If curve. to our we've that where replaced longer-term is, be that us. longer and also for rate given

active over This years because you three We grown where years The So, growth market. in we're be – deposit year and be under much deposit studying balance past for long. very will balance the see number we pretty sheet. in first probably have a believe of $XX been a that the half we carefully. that that the sheet the just has billion will

So, Hopefully, our been growth. we've at participations selling back assets. holding that higher our portfolio assets put those we'll be we've to will We've on coming been participated yields.

Ken Zerbe

guess, And you on a got you've deposit to deposit because you do don't mentioned, you growth growth you I of growth lot can front, loans. expect in deposit the invest – growth exceed expect loan cash

expect this the increase to to ratio loan-to-deposit So, year. continue would you

Thomas Cangemi

The the from that's of you it? of invest can it? left the resources that very That's plan XXXX. that. the sheet mortgage banking the excess Do invest deposit cash and sheet to balance grow how portfolio then to you you all of or And have of balance on keep it think by sale that any can in to We're for you much the do the is liquidity start comfortable the funded with strategy exhaust growth. operations covered in

Thomas Cangemi

We probably of a loans putting been and securities. to we've billion liquidity another billion half into and that have a

is was the as the quarter, But time the that the obviously, at that cash this moved and simultaneously. to pace more in loans. we'll same particular, on part market of In market that loans active depending if down. of securities So, attributed securities you balances attractive, saw we security be – the

Ken Zerbe

year, So, cash this I think be by invested, would the that right? gone will end of excess and

Thomas Cangemi

end the of Hopefully, by the quarter.

Ken Zerbe

of By end okay. quarter, the the

Thomas Cangemi

we with money. new announced that just this XX% morning, Let of me is pipeline The clear that be that.

very very So, depending have a not for and growth. It's new portfolio positive but for off, pipeline. strong on money refinancing what prepayment, pays That's a we amortizes negative pipeline.

pipeline having of for into going company, So, very which is typically that's the slow a for quarter net an money QX, XX% new growth portfolio. the future encouraging

Ken Zerbe

Yeah. following purchase yields Where seeing in this point uptick are the you rates? at securities guys

Thomas Cangemi

We've Most and upped res. some the assets in higher quarter portfolio we've low-yielding We've the replaced yielding. coupon. fourth sold with

and high the X.XXish. what securities. be attractive one to to do nice billion continues pickup approximately So, $X an up is which the securities activity. see of as be This have attractive, not to net-net, may higher-yielding That's going basis shape XXXX. market But for assets, quarter three curve will yields patiently. We or a was picked a we lot are This is to analysis rate approaching the on portfolio ongoing We very X going invest a nicely which out swap into Xs. us about we quarters than be very low-yield to some going points low-yielding rising in the is of start it two securities a environment. ago, the low the more into

Ken Zerbe

– back branches one seeing other more opportunities then, you quick one you drive cost on OpEx figure at the And on that forward save the to going of all expense any Are XXX. guide. consolidating – down making to or Where are the Yes.

Thomas Cangemi

covered was to initial a the substantial finished be and the operation. of phase what mortgage this loan the exiting banking business quarter. in completely two-thirds is book going The was That

the will be of XXX% that's done synergies QX in So, XXXX. cost

on going you'll that transaction, happen. the we've But So, that. SIFI important, more on ready get ready, dollars Astoria and, did more close position forward, benefits obviously, company getting in spent to getting the substantial not

model we we at not type for point. the million for run rate company. could $XXX is they That that how indicative its It's of franchises. were the here the too at business a high So, high

$XXX we kind off actually run the to a rate, we it when what down of million that's bringing rate, million a thinking million rate, run is the business. which $XXX high having exited run were So, mortgage $XXX

us. for an that's achievable number So,

QX as we've We're $XXX million as down far for work some guiding rate. done be high in the XXXX run year. good should lower That QX the QX. So, – in

we hopefully, happened. preparing expenses The intervention business me crossover. do very know – be So, to back as bit it. we will on A to consulting proactive for regulatory be the appears and this to to expenses. be favorable should see it a pulling continue very lot Washington relate And ourselves we'll banking that of us, crossover little hasn't

standards gets should cap our Enhanced raised. SIFI bank XXX, there. credential being different benefit size a who somewhat So, for of someone get some we is versus

Ken Zerbe

it. Yeah, okay. Great. guys. Thanks, Appreciate

Joseph Ficalora

You're welcome.

Operator

Thank you.

Our next proceed with Peter comes from question of Wedbush question. Securities. the your Please with Winter line

Joseph Ficalora

Good Peter. morning,

Thomas Cangemi

morning, Good Peter.

Peter Winter

Coming out of third improved. quarter, the year, strong XXXX of you were looking for just the mid-single-digit is loan the growth given it's wondering, if end what for at outlook XXXX. And the I'm for growth

Thomas Cangemi

the So, Bear obviously, years happens specialty If at given over we in in of our then change C&I multifamily CAGR is loan balance Washington's the and reasonable. are a is for position past moving mindful net the for finance. we book five the focus. current may sooner, mind, acceleration mid-single-digit our XX% very growth on But Washington. sheet very cap growing

good in big Mass. in that we'll up now. But, right So, book year-over-year we're phenomenal us. seeing phenomenal bank, Foxborough, of the some the And pipeline done And there. for is for good clearly, XX% us. see the multifamily business business. given some and the we're the size portfolio, growth It's they've growing benefit very us nicely. It's for a for up a job been

position it for think So, to model is don't I year growth want but as on XX% rate I mid-single-digit normal is multifamily. sheet a that or $XX full to of around modeling, reasonable new give I depending money. based X% on growing guidance, X% view the have. balance a That indicated, just we the billion. is based of could change the cash on Remember,

expect, that growing accelerant sheet goes we So, if an sooner to actively. the balance away be more be happens than that could we and

Joseph Ficalora

Obviously, go growing They the growing earnings. is balance the sheet hand-in-hand.

So, rather it this us later. desirable sooner is than for highly do to

Thomas Cangemi

half securities down back to the a previous three been X% the low. the has to substantially from Going to portfolio cut years, and XX%

not XX% have X%. We that range, and should We time. XX%, that to between XX%, X%, maybe replenish to be in over XX% somewhere

going that's the be we carefully manage SIFI growth portfolio So, sheet utilized the that balance reduction to very and of ourselves around threshold. to

could that well. to lifted, sheet were growth balance see as signs we securities threshold good continue So, the eventually of would restore balance have and then SIFI hopeful which loan gets as growth, nice we of

Peter Winter

M&A, a with then, to to from And just Joe, activity has wondering what M&A impact pause seeing we've is what just already I'm from trying are tax taken the side. that M&A as reform. reassess few heard potential kind regards on a And banks you're of sellers the

Joseph Ficalora

external I'd that say, are and the driven factors, course beneficial the and the place many that changes law many broad as are is banks world so buyers will is be to many, us, the regulatory the We so environment that the their many period The the behind such the environment sellers of combinations by picture, when do and forth. law to them. assessing shareholders. been There in which based changing occurs have over banks a us. the in ways be who of where will there may decide are in front that on at many, among reality is on that exactly

when opportunity presents the be you combine. while evolve. to there'll that find and opportunity the waiting we're It's just of plenty that the people a to for who all in And that the think that little I have will itself, it'll desire take game So, here.

Thomas Cangemi

fourth was Joe's the add waiting game. Yeah. quarter And tax just comments, to to

fair to a players that assess. they in it's Now, on position threshold, the here M&A to for if will very move say unique also be some make that,

you'll activity. up see going significantly, it's if fact, more In

Peter Winter

very Thanks it. much. Got

Joseph Ficalora

you. Thank

Operator

Thank you.

comes Morgan. Steven from next line Our Alexopoulos of J.P. Please question with question. the proceed your with

Steven Alexopoulos

Hey, good everybody. morning,

Joseph Ficalora

Steven. morning, Good

Steven Alexopoulos

expenses. to wanted I on start

the tax down any spend, levels of reinvest the like tech moving wage, around commentary XXXX, in the you Given guys are expecting expense cetera. on to et business back items not minimum benefit into

Thomas Cangemi

our years. So, from million way $XXX half expense are wounds bill the how is our company the still we Again, a look, banks business. past even two the run for rate franchise, run the and not licking knowing for high, just to

a position forward part. and unique get substantial that us, time the of for investment expected regulatory put that a call behind SIFI in threshold to a reoccurring to position. have most than oversight, will the have look our we enhanced place were very to being starts amount is the we there's shifted move towards to it, ourselves We to at to threshold opportunity talked the being kind one efficiency world to different right of obviously, believe, its opinion, costs largest fact somewhat get regulatory or, larger as not for costs into ourselves size, given move So, about And, lower company we'll That's like and close focused of the banks that that we lot we'll relating as in be room on the getting diminished ratio. standards the said, believe and the institutions. credential stockholders our now. of banks, That's back priority there. With all

a have better on growth that going forward back difficult We We're reducing plan, looking had leverage the operating ourselves with operating very position. with leverage and to and here, which managing to we're to into continue a XXXX. transition profitable is going expenses

Steven Alexopoulos

okay. you, Got

market, BankUnited banks New the City most was the multifamily recent market. exit we've fairly had recently several York On the example.

to decision quoting, they terrible the exit the and margins call, On as cited, I'm behind business. their

the two, get margins you Do that better And can then materially comment a than to banks banks exiting? you So, grow two your for questions. which margins the does book? opportunity these are One, on other better give you business? with leaving,

Joseph Ficalora

favorable may be, And levels our us. they're is niche. to question of the no whatever why in lending is is actually they're not doing departure, we're And there think our record niche. their lending in the discussing that I discussing evidence reasons

there. is obvious the So,

properties people kind in be than in will our been that in has are in take people that the our actually most the we on. decades. have As very important refinancing cycles else. they The we in to the market, departure the market they're the lend we with portfolio are somewhere period us that from the more the we less evolves. as us will important getting people the for are the that is people lend Their And more market Most ahead rather with or do reality very, consistent. depart nothing of The do way market. our people

however, that this model Whatever is people we are our in that's for be reasons – grow but market, doing in departure, evolving. not not other articulated as market the not actually means there's leaving they if business not may doing us. the their just for they're we the loans. Their and issue. may doing they're consistently loans, think other our we've sound loans demonstrating I more that be it's in doing issue, can if niche, So, loans clearly niche they're And our

Thomas Cangemi

year quality, asset And guarantee the in target about given if and and just of But talk that's that's curve spreads spreads. when pretty X.X-year forward. X.X-year when looking to compare margins. us a no other current going yield. we types past to we average prudently, and going is reasonable the out for The pristine underwritten investment coupon mean, big there's X.XX% believe will be picture somewhere the in life it's yield years you average to few or has been X%. this – get XX got attractive XXX will business I is five I five at life spreads up They be the basis that spreads where putting Typically, XXX. was the here. yield that XXX-ish to again, between curve We'll the you're Steven, when attractive points, the about ago, curve. bump love were XXX And seen wider. weeks we've model,

X back attractive, customers somewhere you'll to starts So, too of government pricing their absolute to is X.XX. agency as between because really coupon from end be lenders see as high. the more portfolio And to the which the at go product the the is it's curve back market, the not been

ahead. another that's us business the of for potential quarters sign So, more in encouraging

Steven Alexopoulos

you in rush a your [indiscernible are rates that Is recent year, have five refi? happening or XX:XX]? move chart seeing Tom, to the given

Thomas Cangemi

I'll tell has been interest you what our in we're a the seeing. of Increases rush to offering applications. three weeks two or past rate

five-year the, no think I the customers commercial-type X.X, duration. mindful are that it, X.XX So, pristine paper, X.XX is call paper. longer type quality offering for for the we'll normalized five-year

all and think think raising their about if the not as are offering, as far NYCB. of much in higher attention. rates And the because it's coupon. marketplace banks spreads the you just getting So, movement the I is rate It's it's

that this realize into continues throughout So, time, the period three be get your of at come block but significant to that X.XX% the next It's back this the if or a catalyst X%. encouraging. of short customers the guess may least for to is will I next be spring, that is my summer, think could And refinancing years. four

Joseph Ficalora

So, refi. I to thing important of you recognize think the speed here, prepay tells the

very, is prepay Our low. very

earlier. we rapid share discussed of We're of gaining not market there's refi. So, what because

lending particular are at in later. seeing rushing So, to Prepay may others But of time, are because market we're taking come market the in point not not share not prepay. and this refi. we're owners

actively the So, higher pay not future are a of indication looking up a people literally or best for against being prepay prepay willing rates and to at rate. potential a going single is whether

Thomas Cangemi

if But seeing. that XX:XX] [indiscernible was a definitely accelerated we're positive you trend

Steven Alexopoulos

Okay, for Thanks color. great. the all

Joseph Ficalora

Sure.

Operator

Thank you.

from KBW. comes question your Please the next question. Collyn Our line proceed Gilbert with with of

Collyn Gilbert

gentlemen. Good morning, Thanks.

Joseph Ficalora

Good morning, Collyn.

Collyn Gilbert

up what you've Joe, growth landscape but I XXXX or and, paydowns follow activity you're described, type for for Just broadly. projections, just broadly. asking loan obviously, I'm with outlook know and sort you Tom, on of to not comment, of prepayment are quickly your that given the sort not just assuming that – mid-single-digit in just Tom,

Joseph Ficalora

we Prospectively, has which not occur. the could well expect prepay a assets for this that we individual over the to of pay because in speed We an choose that loan it time. that low. portfolio complex will we many period to current foretell having are their a said But our our will have are of in for said environment, access refinance be and we owners cannot good we prepay We've the to see competitively so we actually will in increase place good acceleration very reasonable win And why do There decades. very been very plenty penalty period reasons to deals. quality prepay ahead with loan. believe some that,

Thomas Cangemi

higher as difficult say, less to Collyn, prepayments are off. number expected. But, than pay a less means because would again, becomes So, X% So, right? who's I loan higher the growth, obviously, going very to prepay Joe estimate indicated, it's

portfolio good encouraging a to of loans this the with And which due indication year. have going final stay have they're the – typically is coming they much actually go went us or that We how of elsewhere, those to period always is time coupon, higher X.XX%. a at a by way, positive went the in coupon is to do in X.XX% something from thing. What's the to

be which believe, effect a haven't margin, decade, risk market If rates. these positive really us current towards help rates given seen the help We ship more rate we profound a to very go continue, higher, will a margin in the that a of for stabilize the sign uptick is will stabilization. book position and of interest market our towards an large at business. That move a positive direction

trend So, to downward a upward in signs of we're encouraged coupon XX-year coupon first an a rate the by of the higher environment.

to the about that rise, said believe optimistic that good And bill last very rates portfolio favorably. previous changing. very are which customers us. like I sentiment on caller, for to [ph] going I we're yield commentary continue that be before, strong out a as is seeing So, we're you'll my based see the rates react higher, to

Collyn Gilbert

higher, guidance that or beginning surprised, near right, of come projection for you as would then, kind guess little core Tom, just X%, the NIM of reinvestment certainly the cash pressure any the or quarter, Okay. in quarter. lines, you I least expect those the in I at of along over funding just to sitting year think X%. got I'm the first in said, talk of or is because, first That's you've not the of part offset at helpful. $X.X the that would whatever And this billion term, a

Thomas Cangemi

late That little that substantial and amount a had our a of flows. address what happened around we quarter. the December. a rate bit impacts me specificity Let Obviously, more give deposit in increase in

that, of to out. Bank moved maturities billion two addition Home Loan about advances of we years $X.X In

So, that also impacts quarter. the future

points X basis is reasonable. So,

Let's transition growth in we pretty stabilizing exceed to But and the continue and XXXX to that the good the the balance come the a make stabilize, moving That's number. those get low participated to book, perform Xs, to – comfortable we billion We is cash conservative. in once three. then be There to upside to sheet a hopefully, trying go we that when be lot book. dynamics balance to than coupons. the year and quicker has want of, point are the loan the months. we sheet, marketplace. be If X-basis the $X $X paper that QX our margin. on be hopefully that a that guidance out XX all XX we into We to the will it to our nuances hope and favorable work. into from we part toward surprise. in the had next of refinancing Those XXXX parts of billion like as we're sure accelerates a If In in margin interesting loan ripe lion better given going have back to of share want that within putting types of we we'd some that, meanwhile, growth you're conservative. we for the maybe had into in to respect came should had showing will we're the four, will continues, to again flat. We been a and five, but expectation But want

guidance. respect So, cautiously our we're want but to optimistic, to we in be conservative

Collyn Gilbert

Okay.

had Okay, cost that's that – coming you the the the year. in reprice And that billion $X.X helpful. – this to you then, are mentioned borrowings

maybe – some the where what currently of mentioned go those? – to. are of where current is pricing You they the would But they would cost

Thomas Cangemi

X.XX average. it's about XXXX, For on

Collyn Gilbert

that X.XX A – blended on

Thomas Cangemi

to on down also our guide the margin. that's So,

Collyn Gilbert

Okay, right.

cost – be is – going So, repricing that's coming this to – okay. in yeah, either

Thomas Cangemi

that in repo FDIC offset other some it successful an And will liability. of also benefit fee, Home costs I of in of money margin market, Bank XX indicated that. the on it nature in assessment deposit the the obviously, bringing bring also funds to given we was and when to because, the bps That Loan

funds to it's So, dealing Bank flows balance bring current grow with more to Home in the in attractive of repayment definitely Loan addition advances. to the deposit sheet of

Collyn Gilbert

Okay.

build. you take know a assets. to my it's the a I just that's then, at even a going And But, And outlook, XX% some XX% helpful. fraction in have big balance right, don't of big obviously, said that I for time. that's it's point – Okay, securities XXXX. sheet of lastly, estimates to

Thomas Cangemi

sheet balance shrink. big a had We

to So, restore just we're ourselves. trying

Collyn Gilbert

my Absolutely, right? is going question capital. But That's, eat into capital, obviously, right? to

capital you are of about year look thinking to and next as maybe structure the you So, and kind next. – add over this the where would it you how out

Thomas Cangemi

the years for at we're Again, in eight company. position highest the capital

very securities So, loan risk that's we – restore portfolio asset. asset. priority if comfortable Obviously, its go to should interest We weighted a time. the and we're long XX% book Not being cautious very We risk, company into We're we're growth. book, a the impact XXX% securities being to restore for build could securities very that cautious rates. its very going and given the over of on weighted securities duration that the market, history [indiscernible] is rapidly. understand a easily of we're so address lower risk the

multifamily, for the build over higher, previous we're At apartment That's we continue time, we same going better strategy. quarters few cautious core book our which loans, substantially priority we see may readily – houses. market build the put rent-regulated as a loan to on will we book cash and were in into securities is the to into of enjoy If, the ahead, depending loans will opportunistic time. be yield are the for sloping securities a be side. gradual We the and over the that The market that have very, company to next flows is environment. be you'll very But on the rates more conditions. higher example, curve the

Collyn Gilbert

$XX comply cross You'll you LCR billion. to still once need with

Thomas Cangemi

be our out hoping We're of so and or banks be some with Washington in that LCR, there'll positive will the stuff size. for billion sorted that all quarter changes $XX

Collyn Gilbert

So, change. will you're that hoping component LCR the

Thomas Cangemi

in running are a we We form. compliant sheet We're balance modified our today. component, as approximately there LCR speak XX%

securities, on the modify us. put selected all we It's we view of As to liquidity that.

that hopefully, under So, believe, We address should version of do change if be, fine. time, they modified they be should will we concerns SIFI and threshold, LCR the over we that. the

Collyn Gilbert

sorry. I'm

said, you're You – Tom,

Thomas Cangemi

$XX or $XXX versus you as far new as determined the billion billion, threshold real to is regulatory billion, it's, be ahead. LCR fluid going reform we'll requirements. what's quarters $XX now, Very with whatever the decide be. in Right securities there billion If some assuming we're will in the deal say, portfolio $XXX

Collyn Gilbert

right. All it you. leave there. I'll Okay, Thank okay.

Thomas Cangemi

Sure.

Joseph Ficalora

you. Thank

Operator

Thank you.

from with comes question line question. Breese proceed Piper Please Matthew next your the of Our Jaffray.

Joseph Ficalora

Matt. morning, Good

Matthew Breese

to XXXX? I commercial in environment was XXXX get transaction significantly talk XXXX, just down estate seeing Read perspective. and from the a transaction little a multifamily but hoping wanted could in what real from you just a bit being a more about late about volumes recent you're lot update

Thomas Cangemi

obviously, XXXX in the real of for estate. of reform estate tax XXXX. the the moving estate going been having commercial for is that accelerated being said, into mean, With fourth looking the depreciation activity significant package – Matt, math portfolios significantly at had real of the end commercial landmark of, the we So, investors, that very real some quarter positive of we'll a fact in the substantial have around. amount place is the That's call, winner years commercial tremendous investor put package determine fact to having be transaction has real XXXX. I tax order a survive, estate reform one in to has you that

because it's attractive that in see advantage the that this estate market So, was clear most We be, the tax to real the tax we're now in hoping slowdown – recent there given a XX% will very code. believe activity. changes life business towards end some a

some very opportunities looking by people that. We lend in very don't environment. at are that that we're seeing drive So, we're signals positive to And that. it. just encouraged We

will property you think compare up pick XXXX if to we So, versus start transactions XXXX.

Joseph Ficalora

of good value I actually been lending. methods by changes will place. plenty of now be the is was that to just news us us there opportunities impacted favorably we good in for is say, The to to be evolving have put in going by assets this marketplace. going which some the for This into going lend to are which

Matthew Breese

across road? be in the rates substantially you and view given would do down a cap and – low have impacts the backup And rates the there potentially on your what devaluations footprint,

Thomas Cangemi

come But, and again, rates. rates simple cap going up to be me go say from where would cap on down. As aggressively, valuations years rates tell give two I now a interest view we'll math, are better you right?

goes relatively are are general, think, when to basis. at X.X%, still World it's rates look in low. I relatively If you low. historical X%, low relatively it rates still it interest still

up that's of significant not So, rather and the roll reasonable take And catalyst and that Cap going borrow rates, borrowers rate. miss cap with they've is there. react. always can created, lock, of the they movement the There's which curve. stock that to lag barrel are a at will think a they valuation moving opportunity enhanced shape what I money for later. expectation I to a the think they're still they're than decline, rent rate on customers to value sooner The because transact creation excited

We will will get points later. And we see more sooner rather than growth.

lending to are the We rent-regulated space.

years, X/XX. past So, after has only if decline you of there one look NOI, at the was build NOI year over the been XX, which the in XX

lending have not unique York We're growth to in market. City. We're a you niche not lending market So, New to rate. market the rent

the unique changes economy, despite a to a long lending movements. very in which very nature is build are of despite historical year-over-year niche, rate NOI interest We

the That's been higher. We going business next lag potential. of upside are the broker which building they bring if our borrower enough will to get to So, the to has their refinancing, model. that lend our build to be knowing to part NOI are on get there's we assuming NOI time assumption. to always cap fact that There rate by table go encouraged react the customers the rates be the will

Matthew Breese

Right, got it.

a given then, for you on you And concentration there, your could And estate you standpoint? the from given where Okay. just can outlook are what add us there limitations cap? are of real any agreed-upon remind growth, commercial

Thomas Cangemi

have So, that that are below public we now, We cap. number cap. a we right know what do is. well And,

capital, over – no our assuming have our income of pay the on with we assuming room what position, is make we there of we growth capital current well that still for in believe we portfolio. XX% So, no additional out excess dividends,

this the grow paying room to but we we we're in that dividends. plan XX% nor have we out what us excess XX% year growing comfort under not we're than it this gives cap. also do year, to plan And So, make money

that will be some So, build there. capital

it cap, is. have it didn't business. have a we're within comfortable with we We very slightly we're where that that our And the continue threshold comfortable So, to internally a capital below position current we growing is we we to what wish managed are. room but and

Matthew Breese

Understood.

had. Okay, Thank I that's you. all

Joseph Ficalora

Thank you.

Operator

you. Thank

question comes Marinac from line Our question. next Please with the with of Christopher FIG Partners. proceed your

Christopher Marinac

can Good morning, that there. and and ask on guys. this the I deposits beat this something that influence mix given deposit the just just wanted discussion morning to is year about

Thomas Cangemi

I our would have to looking say very that at on be proactive growth. we

of going first to growth The the stage be in cast employment.

be the Second growing deposit base. will phase

for multiple that drives the As cost market expense the that operating Home at I up. a position. true to expenses market in repo and our to in that said Bank and expensive the is previous deposit look FDIC Loan the have commentary Paying actual compared we

So, we What better we in from looking our in are be deposits we marketplace is customers. very active successful been at the that. of all to haven't being which getting on, aspects like on,

base, cost book. lower funds, but obviously, the in the we low-lying will Absent be of would the be a CD in but have which We thrift fruit when And to market, and the market savings at franchise. to And, wanted that's more traditional of thrifts in a something have tend of to their probably there. we high-end be traditional they we if market relationships have are much readily range. grow and possibility, deposit we like CD grow best that typically, looking would It's tremendous will market deposit the a funding. be be out the the the source that,

high going So, not cost and happens it's at X% we X.XX%, at to If at to if be X%. at We're X.XX% to expect the money, of be grow be will be deposits. we'll X.XX%.

it's because that, we accretive going cost is margins book to Home The we're Bank the on and higher pay Federal much and are expectations we as borrowings, of proactive. margin advances to our well. proactive repricing some down Loan our the good very repo a So, that be our of if news

Joseph Ficalora

But important five I think recognize, unique an deposits. to have in for which we compete benefit of thing we markets the

because very, the cost in competitor versus the be So, deposits Arizona. very street of the different across of may Manhattan in

of that as tool a we of is us flexibility we the down as some road. actually that cost have deposits go to gives So, that measure the

Christopher Marinac

helpful. That's Great.

Thomas Cangemi

best Just clear, been acquisitions. source deposits has historically to to through of the be the company

So, the model. that's been

transaction. successfully That's very haven't behind us. unique closed that deposits We Astoria the source on for of have a would been But us.

been and we're source the acquisition this model, in for that's So, our we be historically, of in the deal funds are, and not but environment, bank to where a to we the there grow clearly, have expecting is year current announced.

we we could So, ourselves deposit to have through sure make fund growth.

Christopher Marinac

now thinking the want a do difference? your to things the can there make other there right and existing I come are along do know you expense that initiatives initiatives, cash things with Are lines, with don't you management guys, into existing you customers major doesn't I'm same your And, can do. team? to which

Thomas Cangemi

more with we're us. customer So, we going of tell marketplace not we lure our current business out there. the as consistent going some be to not who are. with we business to We're to are models bank strong the to base the can as active banking That's do possibly that

But, somewhat deposit push. that go-forward been results like to been better been and some doing ahead. expect very to bank that from we should the clearly, the We've company. in efficiency reflects That's the We'd the and material successful, changing see it. but overnight. We're have Our the ratio quarters hasn't be business more we culture a not substantial the bank relationships that. of with years

Christopher Marinac

Tom. so Thank great, much. Sounds you

Joseph Ficalora

welcome. You're

Operator

Thank you.

with next your question. Merrill Please line Ebrahim Our question America from of Bank Poonawala Lynch. the with proceed comes of

Joseph Ficalora

you're back. Ebrahim,

start You us. you with end and Good.

Ebrahim Poonawala

moving of And bank update charter are wondering on just was next steps? before with sorry are the consolidation if see waiting what SIFI on we happens missed our or the I commercial if there and any this, to taking we

Joseph Ficalora

This We've hands that do. of done of I the the we process do people. here. not is think on anything the to other We're will evolve others. all to activities depending in expecting need additional

Ebrahim Poonawala

thank it, you. Got

Joseph Ficalora

welcome. You're

Operator

Thank further you. no back for this there to turn to like Ficalora, you I'd Mr. the at closing comments. questions call time. any are

Joseph Ficalora

performance time ended when will look March the our solid performance join a and week last XXXX. the morning. laying the taking this for XXXX. for that to groundwork We in months believe discuss again you the good for we Thank chatting again three Thank we April during you. XX, of with had quarter are a us you We forward

Operator

This concludes today's teleconference.

your at You may Thank your for time. lines you disconnect this participation.

Flagstar Financial (FLG) 1 Feb 182017 Q4 Earnings call transcript