NYCB - Earnings call transcript Q2 2018 | 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 Second Quarter 2018 Conference Call. Today’s discussion of the Company’s second quarter 2018 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 markets; 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.

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

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

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

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

Joseph Ficalora

thank the we compared quarter $X.XX XX, joining results three Good earnings our the the second performance. and XXXX. XXXX on operator. morning share common unchanged per March June as diluted discuss months for us ended to morning, This three webcast XXXX everyone the you, for and $X.XX the XX, Thank ended to we and you reported operating call of months on for

from record yield the news with on of an annualized We for shareholders represents dividend The quarter. starting August is the yesterday’s also announced per that regulatory to closing X%, off our payable common Board of is August Directors this dividend common of declared a share dividend front. X. the price, XX $X.XX on as cash Based

Relief, in May. the late was Protection know, Act Consumer already and you Economic Growth, Regulatory As signed

Relief long do to expect threshold is passage benefit that that means going Regulatory this from pleased for of from billion, DFAST and and game only a forward required. the we $XXX anticipated are no being believe We enactment. to raised changer us for benefit us also longer SIFI the bill with but is Not it this

requirements. We are from also immediately LCR exempt

planning any subject exempts be not from it and to us will requirement. We resolution CCAR

these with second will are help reduce of structure flexibility time become us greater our benefits Some our evident results, operating in further and corporate quarter will evident with to and expenses. others already provide over our

now highlights. of some Turning to the quarter’s

the the Our that performance current past, communicated we is, the assets, expenses. during quarter to redeploy operating our grow the liquidity quarter, excess second reflects in our reduce strategies our and have

excess We increased and growth $XX.X expectations, During of some the the further. a our in came quarter, balance The sheet. expenses saw Operating redeployed total We our liquidity billion. loan the stellar. remains our to interest assets within on portfolio. continued in quality margin net asset decreased

quarter, listed $XXX XXXX, from With the or annualized this up assets from $X.X increased X% the SIFI and total threshold up year-end billion billion, quarter. prior $XX.X to being million

periods compared Our and linked on on quarter. nearly XXXX. December finance for loans the X% held multifamily prior C&I portfolios. driven at or investment consists and growth while basis. portfolio, Multifamily loan originated annualized quarter. grew our million new or the billion portfolio $XX.X $XXX.X both balance basis of a and Originations in on primarily $XXX from quarter, annualized the by strong grew growth compared showed up quarter, on basis. $X annualized a X% increased The C&I The an billion year-over-year specialty was $XXX XX% loans million during this billion Company an XXXX Total to during XX, to million to XX, quarter which basis grew XX% the of March or $X.X the loans second our XX% business substantially

and specialty growth the the increased board basis, double-digit a CRE on categories. across in including originations ADC loans finance sequential theory exception one-to-four of With the family and multi-family

$XXX loan comparable is finance billion approximately CRE and quarter billion multi-family last and includes pipeline loans of the $X.X of year's of specialty second million the Our loans. of at pipeline million to end $X.X loans $XXX

$XXX and growth increased going as pipeline, to threshold New our as SIFI continued billion market. would this CRE loan volumes spend few expect originations minutes to we well forward. I City point, a York discussing the the With like At

We segment have market non-luxury, in XX the sub this nearly years. been an rent-regulated, active participant of for

have we into unparalleled such As marketplace. view this an

$XX with went was with top value us and majority loan loans a strong public, times of majority the This many niche than billion represent our the losses served Since million are have in owners our loans large longstanding this portfolio those XX being portfolio our Today, multi-family properties, our to as our market no of ago, XX is only multi-family years originated as IPO, segment. more relationships including for $XXX of century. multi-family basis well for our quarter our XX service our continues expertise. of the as and in about consistency loan CRE When have We accident. brokers This the we of points. we of is many this well who of portfolio us CRE loans. and with cumulative a the has

changed. best-in-class We time. which have may haven't standards, changed underwriting Others over have

changed. not have We

current We based our are lender flow cash NOIs. based on

it lose small the comfortable are a we lend to do relative with and pricing size property, a Our than also to we because market to consistent. of is the in we fact are value our competitor, is more remains loan when unwilling dollars average loan

and when Community are our [indiscernible] undue market are LIBOR. is on players range, pricing to in commercial players in the that’s to gain able step range market without is becomes view, multi-family loans this currency to like irrational X.XX% Our new the Historically, taking in in irrational New what X.X% off CRE on and share X% some loans York is priced X.XX% risk. while the

into investment higher our strategy yielding, cash rate to excess the and shorter quarter, we start a duration of back sheet, during portion variable a initiated our Turning redeploying balance reinvestment securities.

and position loans rest the cash yielding our the of to remaining securities expect We year. throughout redeploy into higher excess

taxi onto the held XX% medallions of our quarter expenses, year-ago to witnessed operating Operating improvements which repossessed would write-down compared or the Moving assets. $XXX with excluding line declined expectations. million as is in million we base, have million, of a expense $XX.X further in expenses $X

operating half For expenses $XX compared million this of the first XXXX. first year, declined of to months the six

exceed Our Company XX.XX% modestly which due meet during $XXX from quarter, for track to lower to efficiency remains previously XXXX, of quarter. in we ratio increased expense revenues the previous reductions or XX.XX% in million discussed. The to the on have

next reform opportunities additional completed, expect addition, reduce further XX operating Dodd-Frank months. In to expenses we over with the

margin, margin this was a the to Of basis to prepayment X.XX%, interest XX quarter year. net basis rose the basis points on sequential down quarter note, first X on to XX% the on points loans the Moving this relative contributing margin. of income

second On during the asset quality remain metrics our the quarter. front, pristine asset quality

XX% basis loans the quarter. NPLs XX During of to million to or declined compared previous the $XX points quarter, total

to or of point. Excluding loans. non-approval basis taxi medallion-related were total Net loans, million points or $X or charge-offs NPLs $XX declined sequentially million basis $XX X XX% million X

losses. continues Excluding to taxi medallions, core our generate little to portfolio no

medallion-related this quarter, had In charge-offs. taxi recoveries net fact, excluding we

Despite the open current are quarter that reinvestment we benefit that shows generate and Regulatory lines opportunities we levers control. focused to note, rate the and from operating that expenses. interest to now On for we we Lastly, can to environment, ask this would believe on several are growth, we poised have further earnings what improvements controlling sheet that questions. operator your I further significant growth, in the Relief balance

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

Operator

will we question of questions. time, [Operator Bank proceed conducting is Ebrahim this Our Instructions] be with At America session. question-and-answer Poonawala you. Thank Please a Lynch. from from your Merrill first

Ebrahim Poonawala

Good morning, guys.

Joseph Ficalora

How Ebrahim. you? morning, are Good

Ebrahim Poonawala

it guess lower. question, One if should was watermark you upon touch for just high mentioned I this Thanks. that first continue Good. trend to can the you Tom XQ is, expenses. year;

the as threshold So be this game just moved, $XXX in think half any give as don't to you your in quarter, XXXX? a event we clarity I can the would know relative you being guidance the what's outlook with give million beyond SIFI expenses annualized like of mentioned XQ you to And about given but changing was to like in back one, expenses? think that, the tied XXXX I

Thomas Cangemi

Good morning, Ebrahim.

in mean anticipated and $XXX , I I So when look the quarter upon gets we high rate, which at which million million, walked obviously, obviously year, previous We is that run adjustment exit $XXX you the that, banking tell you control us of the would operation, management. $XXX million. from a million $XXX mortgage the to at running the expense

bank. million from that you then is I below right I’d front QX potentially $XXX favorable said second size to slightly million, would million $XXX are CCAR continue that say I than the obviously QX, that lower a quarter about guide slightly regulatory would very as bank We slightly be so previous now of $XXX will get the will so into you on target with million QX year. the we million, $XX better $XX to you million expected the are for our about a being probably indicated, and our $XXX be below which should say changing we on down in the versus initial dive numbers, for into will gearing which be up

that as the guidance, but the focusing are we into well million. and give on driving some now. So would into initiatives elongated anticipate reduction $XXX you further We XXXX we be low we somewhere containment number don’t clarity that give generally as right cost I’ll

going as So which grow be sheet leverage as operating XXXX continued expense reduction ultimately well. the balance we will into

growth we Obviously, reinvesting pressure, XXXX we on and continued book on still we balance leverage. as with good the a as and leverage about expense into see management. balance goes from cash well operating flows the that So excess good a we on we security sheet the the balance trending we margin loan sheet going cash driven the both are are sheet higher, have higher operating growth the anticipating but rates with have talked

Ebrahim Poonawala

yield on on Helpful the to the I you in One, expect the at? it balance look to much – and lands been would that that moving tied margins sheet feels of like into and as third duration end of you quarter sitting mentioned. and margin had love we are update How this guess what redeployed I think June? do the to on about on an what you $X.X very the clear, has and billion cash where at to – redeploy get that the you

Thomas Cangemi

give envision So don’t the long-term short-term in come quarter. than down in the previous margin the we we We think guidance. obviously will better margin

to front probably in in funding happened that we're expectations. June growth. bringing we’re X came obviously basis around and our quarter, looking continue line assumes impacted rate it that’s being was on XX, That in QX increase a our we obviously competitive points. fund So deposit in to Last had in

that’s looking has Obviously we So the investment be will at the deployed cash loan consistent of position the this the been opportunities X%. key growth and clearly been on side, believe year. that sliding the throughout

somewhere multi-family stay loan if still numbers for to We’re between that numbers X%. staying X% the you growth, that which at around net look X% running

high quarter-over-quarter. that about was put we're So the is yield towards XX was we up The the for of the coming June. that that’s second basis portfolio. quarter on end X.XX%, was points seeing in What rack out the X.XX% was average have rack quarter interesting the

unfortunate right not in the it’s moving that’s fast So enough, moving direction.

now, that rate discussed we we’ve view lower with had our for such So shareholders that long. so elongated which

about that’s coupon as X.XX%. out embedded refinance higher rate. as We in to the positioned at weighted-average funding have We be to to contractually think have opportunity portfolio far some its take and/or a more we low great very

market the for we’re was was – on in current commentary the north of that As rate. X%

started – hit this half to get the the as towards started Now year. second portfolio we of

favorable to the be stabilization. Now very margin

Ebrahim Poonawala

quarter what And over like that how that two? assumes can $X.X go next of number or Tom it billion, low have the

Thomas Cangemi

Well, range. our $XXX somewhere probably probably hold $X we'll position and in cash to envision I million between that billion

Let’s million say will $XXX hold total cash.

threshold for most into in reduced as securities mind, we securities loan. the And So both we bear years. and we of our that deployed being SIFI manifest money have portfolio

that. So to we have replenish

is guess growth quarter we’re securities $X our is And by X% reasonable. for end of now So year at could on the that that be billion a right XX%.

direction. and the average We as growth that right expected. So time. over moving industry, in median we're the in still well the building portfolio But on loan is throughout below plan coming it’s

Ebrahim Poonawala

now? that or Or would a one just that, have bottom do close every the add point grow NIM so to like feel on final reported we're which I million So as to securities at where you begin can obviously the guess a we NII, do to you at last quarter, NII? downside question $XXX impact you that's – still

Thomas Cangemi

elongated will would I'm guidance say I give obviously on going Fed funding I impact the base. to you do Yes. that our – increases NIM. not again, to have

portfolio However, we’re of bullish opportunity very about repricing. the

When that X.X we’re years, about curve We that becomes a for dynamic to seen the U-shaped V, up the rates that the like multi-family haven’t position very changes average become speed is loans about that the because a portfolio, it a slow. and very a even V. for speeds we think CRE be reaction and it’s running, margin. could game And speed in interest changer becomes we

average quarter, had which up each building elongation powerful of kind change if weighted that very and that, of we do react out that finance time So a which get the get they we of We're interest are stabilization as drive obviously, quarter, is re-fi we're the enough. towards over this to optimistic to laying very with and time, could maturity, had was be customers dealing some coupon start an – quarter we quickly rates, slowly, the of origination closer towards in – building you this a up significant as and margin. and

Joseph Ficalora

All capacity our Ebrahim, restrained result that we means the a earnings. earnings. increased have for which to assets, years, growth we in We've have the earnings. grow obviously to will terms, in been restrained simple assets capacity also in in the way our grow the

will a simple earning earnings bottom the assets the able we So balance means sheet to line. for that we just add to be will fact and

Ebrahim Poonawala

my taking for Got it. questions. Thanks

Operator

question Ken from Our Morgan Zerbe with proceed. Stanley. Please is next

Thomas Cangemi

Good morning, Ken.

Kenneth Zerbe

morning, Good Tom. Thanks.

Thomas Cangemi

How are you?

Kenneth Zerbe

margin, that I In to pressure can increased you I part mean growth that appreciate of of terms downward sheet funds how because to you the have certainly get sheet of Thanks. the plan on flexibility curious But just addressed can the I'm balance funding leading curve to the I is grow. on balance the the incremental kind growth? you but side

Thomas Cangemi

Sure, Ken.

due impacted say few higher it the volumes other quarter current over significant the instruments obviously and came we had coming within QX. has $X.X I quarters marketplaces next the That in margin would were in to coming CD's a little about used cost believe $X.XX much came I have had that So the due. a in due. we that bank number deposit We because that of on past fund very $X.X

of that $XXX at we end then will more quarter And not So deal about little $X.XX-ish pricing the have year come the very QX is borrows with we'll another rate. in that towards end towards do. $X.X which the would the pressure of the about

marketplace predominately try will So of sheet. I up of get balance the week franchise. dramatically, rate the what expect are we obvious that are know rates we market, the competitive, putting CD of we the entire saw I pressure on the to you changed obviously retail ahead saw the funded has funding throughout when especially side are

fund at the been on quarter. is and $X.XX the on you’re market in CD looking the current So any that marketplace $X.XX-ish depending $X.XX average reference around it’s In of fund competition competitive. the and on, cost came the very for

banks competing. to addition, retail the for the In bank, center competition traditional are money

marketplace. So that that the

far So deposits, and with as volumes over amount we're to the the and in time. ways public pending down going will as wholesale next at in same much and that both cost opportunistically Fairly, trying comes our pretty in repricing looking costs to the the about to marketplace, is manage be of $X.X due. bring our time funding billion year deal total at the be

Joseph Ficalora

the that new always the there's deploy. we our that and is assets of spread reality the on between earnings cost a then the liabilities And

better high the the we return then very on confidence able to a liabilities. will be get to assets pay have a that We

Thomas Cangemi

miller again, substantial Ken, impact price what stress issue. have we potential

current towards look yes, be margin So substantial well. we will are have on and of speed we sheet, that speed to repricing the a up of where at sides the take favorably. will liability both balance the diverse impact If in change sensitive the the refinancing environment

that very we and low-X's a a profit of those make because their quarter benefit is customers by in us. should can portfolio to haven’t maturity large by low-Xs that we point average by markets coupon and this the seen one in contractual the So quarter reacting that

Kenneth Zerbe

Gotcha.

may meaningful you you Because Siri just just from tend market? We to your I on? a that is number just heard terms increasingly just given hit irrational a in getting talk then targets Thanks. of quarter loan have question, And terms growth. growth pricing of lenders? about your market what banks this Okay. a in know a from non-bank of expectations the be specifically guys to very irrational Can you put disciplined standpoint Siri to loan

Joseph Ficalora

I periods or opportunistically The consistent are a to and question irrational over of are appropriate our rational are lend lenders going new owners in market. with time player take known to an long ask of advantage rate. participants think of the you going course owners successful that to we

a the marketplace there's loan time-and-time again they get ability to with that the have and can the in they buy additional declining a with funding when have turns market because portfolios the done they actually have from and have market our assets we've in willing player money with people to that offer. are somebody consistency given more somebody else have favorable on funding what take put they a get long-term they basis they we else rollover the from a the rate their our into us. have portfolio best know the that lower to from they benefit to though in very where where actually us the been available has actually they We money because they get therefore of rates it can Even owners

is will that over And have then actually. done the of many, So fact decades concept this we're appropriate very is we've what time-and-time this we that share again optimistic marketplace. many is not a new

Kenneth Zerbe

right. you. All Thank

Operator

Our Vandervliet Please from next UBS. question proceed question. for is with your Brock

Thomas Cangemi

Good morning.

Joseph Ficalora

Good morning.

Brock Vandervliet

prior Good morning. rotate wholesale just billion is rolled repricing that for year, what's or on is into my wholesale of additional plan responses, the I that the taking next follow-up you of other your going funding? to or be $X.X Thanks to question. into there are one plan CDs the forms

Thomas Cangemi

deposits plan acquisition, the will current look next go market on balance more table, would transition than to but Obviously, on that any absent – the the that to at year. And will we historical we at likely don’t bring that the through time. in have to transaction bear sheet was whatever market, not, we

Brock Vandervliet

Got it.

Thomas Cangemi

at we’ve still through grown – $XX as historical billion billion position looked a funding from this It's still we But That’s bank to since but trend. it’s been the $X the base our been acquisition, last historical of the to many acquisition. years obviously been go Company.

Brock Vandervliet

Okay.

Joseph Ficalora

for going significant be and our the think is to I the transactions to business way of market model. lend will those marketplace themselves consolidation

benefit the in from have bank, earnings, the So consolidating the front likelihood that to a the and of opportunity market grow us. we grow is

Brock Vandervliet

could increase was in to noticed Okay. And I that? speak there deposits bearing sequentially non-interest an you this quarter,

Thomas Cangemi

No, building in bringing to that have, internally We've escrows. has on customers. of escrow say focus press relationships a deposits, on focus I relationships. base. the core estate lot obviously, court for we And the We well as had then a full relationship significant would real deposit deposits including

in deposits. we important are So, to do obviously the goal to bring have revamp pending And funding. acquisition very the as a not is deposits

better will the be much in but That the bank. then is on the areas, focus in of interest-bearing, So all marketplace non-interest and on bearing than deposit is focus to continue bank, clearly, and all important to goal areas we deposit the growth. both

Brock Vandervliet

you. Thank Okay.

Joseph Ficalora

are You welcome.

Operator

Deutsche Bank. Dave Our question with Please is from next proceed. Rochester

Joseph Ficalora

Good morning, Dave.

David Rochester

morning. Good

a on cash. the real quick Just

to sounds to that will think I guys going right? level, earlier, that or million that that, year that guess to you you're billion about by like thinking be $X gone is talked where keep $XXX down you You it are end

Thomas Cangemi

Yes.

I of think, obviously some this have – putting at floating we money we’ll the instruments. be rate

rise, So benefit of if we’ll that. continue to the rates do get

are long where a $X that slug of longer but tranches, yields are. duration a and still for. rate money floating running by duration $XXX level slug very next X% cash. a first instrument, rate into we're given for little probably broken risk, But past the that securities, difficult points put haven't gone hopeful about The on asset. up first The the in gives various obviously slug floating getting at interest bit rate of really all We good more go money XXX rates given will XX-year clearly, us to to to clearly million which repricing a maybe is that billion basis more we

came each will average trend quarter. of around depending next So be between X% going on somewhere conditions. I be think and market to slug X.XX% That’s the The the X%. money

think engine. over started a $X and floating comfortable us. significantly And grow coupons the CAGR a about which That business finance growth putting going lot out for high money the with the rate net of has are had Continued that marketplace. but at at much feel running but through could into hit us. is portfolio billion slightly zero. priority, be running expectation of It X% obviously, to that put nice higher, We're pretty very we reduced, replenishing we committed XX% classes It's those it’s securities loan loan, to year. especially, business our Xs growth can the we other expected well that's been beginning the current target business XX% that both we at since

the the this all X.XX and is $X.X about have we the which yield pipeline So being about X.XX, previous situation unique pipeline billion, quarter. equal, on that higher is things of than slightly

one look helpful you been significant duration when such finding our on in coupon that you multifamily latter was at of in if loans to our put these we loan. a a closing into CRE is short we takes X%. lag loans at look so will I've that as be I at X% portfolio loan to time encouraging, X.XX, have getting And multifamily transitioning I think quarter; It that very from that of transition, close what’s to closing part the the are these originating know book. the on that and

David Rochester

of into at right? securities? cash the as thought to this talked rest borrowings at about is roll to repay go that's barrowings? a going loans well, going point you I go just to know this going the the You’re but not Is to the that point,

Thomas Cangemi

Like Yes. end in at the million the a small we that coming said, QX of very money I have due $XXX quarter.

David Rochester

Okay.

Thomas Cangemi

to bank the has end asset the $X at we're we're money into the level, liquidity fourth between put so the of best as $XXX and FDIC-backed growth and of cash that loans as of ultimate a to utilize big that that certain anticipate mandates. is And XXXX. loan estate and back coming number both we quarter, think we we of to be the – million the sold real Slug to obviously, we'll obviously, line sale that keep will going will the this in use somewhere form what's a from on in be securities laser-focused billion cash of

David Rochester

as should another well? see next the we in quarter $XXX to securities million So in like expect book million, or in growth the $XXX whatever

Thomas Cangemi

$X say in billion QX. maybe I'd

David Rochester

billion? $X

Thomas Cangemi

XX% somewhere as X%. the be wait XX%, right Again size between we'll as long We assets. at of to we’re should now

David Rochester

Yes.

Joseph Ficalora

I think that bottom change is line the line. the bottom to beneficial is only this

Thomas Cangemi

have Yes, obviously come it grow, and impact growth, efficiency but margin, topline revenue will topline does down to obviously. ratio does our revenue the

David Rochester

next million quick that about the year, are low real equates guess $XXX to you quarter [XXX] guys the annualized. expenses, on XXXs when guidance for just And next talking I

the that you're shave $XX another off million $XX Is thought? can So that? you on million thinking or annualized

Thomas Cangemi

trend each XXXX of focus throughout the We're continue going size. on expect really to low been quarter. regulatory of changing going that XXXX. trend a Again, the to for into I I the full think our regarding banks framework has plan

David Rochester

Yes.

Thomas Cangemi

us. Now is said, that million having very being for low in reasonable the $XXX

XXXX You all benefit obviously to for also have that's helpful. contributing discount in a banks

were control management could could be expense to we it range. It in somewhere somewhere that could that, that to addition XXXX grow be as be it’s laser-focused be to operating we X. In continues be low it X.XX, into story But another going balance on and the sheet. leverage the in going X.XX,

David Rochester

that? to you How the Yes, on you expect mentioned much surcharge. save

Thomas Cangemi

million, $XX say $XX million, would I approximate.

David Rochester

and of the Okay, rest then from…? coming it

Thomas Cangemi

contribute also will XXXX the That to for expenses. reductions

David Rochester

or Yes. or of And anything then thinking we're reductions part headcount this? as that consolidation a also about branch like

Thomas Cangemi

David, we're looking everything. at

David Rochester

good. guys. sounds right Thanks. All it Okay,

Thomas Cangemi

day. good a Have

Operator

Our next Please question is from proceed. with JPMorgan. Steven Alexopoulos

Thomas Cangemi

morning, Steven. Good

Steven Alexopoulos

everybody. morning Good

Joseph Ficalora

Steve. Hi,

Steven Alexopoulos

wanted commercial turning to environment on start on I just follow irrational. to estate the real up and

slowing? one guys competition deal the Is it of worse into is a getting so You much market. flow views have Why best clearly just a you the do think here? good

Joseph Ficalora

and it's think cycle. prices elongated go up down. in We've the They a they that are of then the of There allow realities incredible environment stabilize making in they to in markets that's relatively adjustments and cycle, make market that those very, outcome. is the They therefore, value length appropriate making the adjustments. when adjustments very the itself fact go particular this different and slowly aggressively without for were and make it a creating I planning. In rapidly period been for time.

blended irrational you who are uninformed traditional adjustments, in consistent. get market, existing very that impact making appropriate some changing, an in the market. then necessarily sustained. the provide the have under on [$XX] is circumstances is market the lenders, be are but the market cannot this lenders seasoned have fact They So a that you And

our market. in lender consistent very a are We

This market the around expensive get this long markets world of a seasoned. very the you're It has world. market and is over more all you look time plateaus to very, when So markets to virtually the the looking one had in in place, is lend this value through had our market as don't market. The portfolios losses and main consistently is performed is is good reason result, lenders. at because a that to market substantially we And has avoiding at value have better extraordinary than cycles adjustment. appreciation we're so likely and

they will the there the at not necessarily market. doing cycle. the no in plateaus most believe that they're are inevitable. these is right happens to So the adjustment are be willing risks It certainly, ultimately the deformed they sufficiently taking. that understand people don't every they're lend It that thing, question and There's but

Thomas Cangemi

Steven, to went obviously, class. add just asset asset to Joe's the class refinancing commentary, the to that we is

So going to refinance regardless. are our customers

have with have and their to as customers business we maintain that needs. our we good to really a work So opportunity finance

not It's class. for very us. construction the class. asset refinancing a type refinancing good We're asset it's in So opportunity ADC

Steven Alexopoulos

Yes, that’s helpful.

many that give much of said expenses, should not of other guided basically out the examples stress you're practices of where here? smaller the such expect They’re SIFI many now as of the CCAR cost Can some CDs the market to continue basically way savings in savings. going are testing? color CCAR, actually On you the doing

Joseph Ficalora

this with and very CCAR justify to of hundreds a cost CCAR build lot a into company. on lot obviously bank. level coming run given fees, be the need expense a Those to felt becoming of through had bank previous crystal to that say clear our in going assets at becoming off I growth raised of the cost CCAR being had technology were Many It's the of not have we future we of were of That expense potential We're million as CCAR you for of costs. base and of the bank expected a model banks as justify the sustainable to $XXX potential the know went unique a be we the of millions to a to substantial they transaction a our bank journey we would country is advisory year dollars place to a business we that in that. rate.

company We very here have most one been of the efficient has because this marketplace. unique in a the spot always institutions

ratio, in the a not XX% sense we're the in to but make low not XXs efficiency we're low-XXs. saying go back going somewhere So to

bank am which is the continue have the we're on We so If provider. way complex where to math, multi-family model. is CD estate to go We're real focused efficient to do regulation laser I that marketplace. premier the not back the expenses, company, we in ran guiding an business you financial the do somewhere

we of don't we have So around complexities what a do. lot

a management we the The very – with So ahead. sheet. growing confident going with leverage. We're future importantly, finally the very this feel into balance doing operating expense little periods control we're most

sheet grown haven't in years. five almost We our balance

and bottom have reduction leverage benefit to So operating the will line. a expense

Steven Alexopoulos

threshold one now just Maybe helpful. SIFI one final That’s lifted. with the

M&A, talking terms active more the potential back market, are here? you in In of now to guys are sellers you

Joseph Ficalora

that by grow business to company no the banks just there's raises this the This the but that model this generally opportunity, acquisition. for raises of across nation the grow acquisition. not think I to by for have question capacity us is –

in of be of all to people, will shareholders. any that number actively are, fact, possibilities We discussing beneficial with combinations

Steven Alexopoulos

Okay. Great. Thanks the for all color.

Operator

with from Jaffray. next is question proceed. Piper Breese Our Please Matthew

Joseph Ficalora

Good morning, Matt.

Matthew Breese

morning Good everybody.

Thomas Cangemi

Matt. morning, Good

Matthew Breese

don't to XX you some I XXXX quarter points a hoping pieces out guide, as here was market the fluctuation the contraction more see of give of Is than us giving per the is see we abate NIM but do at recently, idea to out could next just few the we contraction some quarters. of typically look going And basis X on the contraction know that into pace in there I quarter? might you pace go some you moving point? and

Thomas Cangemi

with Interest going period you But very that. of go the short the rates curve, visibility past I of strength obviously, are as on out have into time. the indicated, don't a margin

balance situation sheet. we're very and I think bullish growing it stabilize will the our help that definitely we're portfolio about the reprices

grow because topline So as pressure to growth, at putting at indicated, Mr. we sheet going to cost. we're have but Ficalora balance high maybe a funding on under cost, are we're going

about So as in we'll far it's NIM I that's as coming But quarter up. three talk good think the past the it and next attempt. a going quarter not guide, I'm

Matthew Breese

Okay.

go wanted that. the that, XX% you're to sheet timing for of securities. timeframe that a that going Is sense to over right? of mentioned get the do XX% think what You I balance will to to you keep just

Thomas Cangemi

about comments. the couple I already $X quarter a heard in Yes, We $X June quarter that said right billion – quarter. this end hundred you've billion, million in started next billion on $XXX fourth did billion if ahead. We $X market and in not of million quarters sure the approximately the per then quarter the of put we I'm had previous dollars tail me. it I think for about envision But we conditions of $X on quarter. another depending towards the this one

as is we to down classes. the million. do anticipate that than we cash is do need crossing all we earning asset not assets So to have order and very SIFI with, threshold at work, cash replenish we manage short we We within to where other that's slowly to getting less to the put the those need money $XX to a back over lost what

Matthew Breese

Understood.

there? came just tax bit one a than us can outlook rate Okay. give My in an lower you last little expecting, was

Thomas Cangemi

rate clearly We going in lot quarter. highest - I a one of beneficiaries with the tax the one county. clearly do at the banks of around obviously of looking approximately the complexities of with And for third are that. to the tax biggest the probably with we're have the tax has many the were rate rate payers a law; think decided through XX.X%-ish we planning It tax all the change the in benefits.

year. XX, So XX you the know throughout from quarter estimated I forward the think rest third of about going

Matthew Breese

you. Thank

Thomas Cangemi

This there your XX, model guide is specific to XX.

Operator

from Please Our Collyn is proceed. with KBW. next Gilbert question

Collyn Gilbert

morning, gentlemen. Good Thanks.

Thomas Cangemi

Good morning.

Collyn Gilbert

since So low this very are that’s in the do like trying to what I but you don't XXX XXXX. do I below believe have to you efficiency at expenses, not XX% to that mean ability guys point I you reconcile, a $XXX or ratio? targeting back think just your just voice. so conviction on that What been Tom, level – low. your so at that get hear obviously think would to your – you million suggest

Thomas Cangemi

years you a that carve reasonable are mortgage volume bank previous that We So million bank that us. that significant let alone, operating carve $XX mortgage that you out The that for address When me we about statement. of substantial had go into expense. very Collyn, expenses. and had did

to bringing it’s year obviously, a probably south this below reasonable, the for benefit still are $XXX somewhere of environment; high we that. going different very we're we to is finally forms. frank. think it's it I down and company very some be of to $XXX million is regulatory to too $XXX end have getting of But the mindful And be

We’re bullish like what this decade. sense the efficient the and throughout holistic pretty business franchisee about run make said bank most at the retail and looking at been of the expenses franchise to we’ve looking you view in

or to XX% operating ratio, revenue and go we'll absolute on that point same low-X at lower XX obviously Eventually, it's going but maybe in to I that We more efficiency in some throughout guidance are expense the our is be to the expense of where and But million topline we'll comes the expenses and into the pressures hard specific that's this the we very there. have we been QX that stabilize, than stabilization margin on it year being is strategy, operating I the at and months. we bullish control have two into deal growth bit is that QX, going running the and story used the little We core you go getting think split, plan three $XXX efficiency deliver ratios when next end that's deliver gave in year. a this clearly, be lower but we're where we hope years. seeing. leverage as but we're time to a of as we at the we margin with

Collyn Gilbert

natural? going anticipate be Do initiatives or that's just to you certain Okay. result get base charges in know down relate large happening any to kind expense would of that you that

Thomas Cangemi

trying because changes unique impact to laser soon XXXX a everyone if for say mean, CCAR to get was very changing bank introduce a to And SIFI changes comfortable tell. Ficalor yes many quote Mr. he XXXX. be obviously is it us be did have negatively. we now. commentary and opportunity, of most when plus I'd Dodd-Frank changing it natural. I and It this game years that’s many, is game act. going to I be expense focused. still going – to Too We're a

So for a it months that we module after being have the and XXXs becomes billion]. [$XXX XX first

very the that level. makes were the able we over was something years past we $XX the for benefit congress we're deliver institution should given think believe under we way I So to few sense just that billion pleased our and the most

So excited it. we're about

Collyn Gilbert

Okay. funding strategy. for targeting What And the you part deposit the just growth? are then to of

Thomas Cangemi

think and on in it from we can borrow I anyway XX% bring deposit in depending marketplace. growth the market conditions will

actually what when bringing would definitely in we a the the that rates. the go in good market others deposits in are we unfortunately higher to market are in We in the Collyn market

that So that the is interesting. we're the through, landscape which including competitive money banks center living

entire course growing of we're feel be there. for deposits up going to throughout retail the banks competitive we So all platform and

Collyn Gilbert

Are ability among you seeing generate in your different terms much of deposits? to differentiation deposit geographies

Joseph Ficalora

yes. Yes,

Thomas Cangemi

obviously York asked far is Because a New York retirement as it’s fairly a kind have market. obviously different market, of New

going yes. very So But well… to overall we are

Collyn Gilbert

funding out better strategies different those markets? do employing you you of get in I those markets Are mean see opportunities to

Joseph Ficalora

very opportunity There's a Being the on this if of do think we have distinguishable as I part a that’s market our is we in strategy. plus. to question no Shame don't.

Collyn Gilbert

good. guys. very Thanks Okay. right, All

Operator

Our Christopher with next question FIG Marinac is proceed. from Partners. Please

Christopher Marinac

morning. Hi, guys, good

Joseph Ficalora

morning. Good

Christopher Marinac

to have deposit you enter loan ratio Do the you on this environment? flexibility new as

Joseph Ficalora

we’ve to down a Obliviously other we had always consolidate when we that deposit number high ratio bring loan very institutions. and materially will

single-digit deposit do level, in It’s historically confident lending CRE, CRE nice But decades down the So always when everyone's potentially markets bring turning there customers it's been our had we in down we’ve that downward forward. is and to need do worried so is is with that’s We to something going well We very If we problem, very run good very loan in up step problem. over high our environments look it a a the we that and and can very they side, to trend up and on for the there a it a a been very if high going that. be us being and we very we well to thing. that when and forward we look effective strategy most. at there about to consolidation book ratio loan further. the feel stabilize grow market starts

I market it. the fund pending growing transaction, we are have very do the to loan so on about book. in we to bullish not as deposit we're And said multiple a be quarters, So going

Joseph Ficalora

deposit model that decades; loan that step problematic We have fact the a lose for ratios course lending. take second recognize a are in lending. Let's over on and that banks back of risk performs a for money demonstrated over on we very little money lose

our of decades historically, So all go assets in issues that banking. the same And life extremely of ratio is high our circumstance in it does the because rest of before ratio of kind public a our the very and loan-to-deposit we the is principally not as even the public, does loan business. high represent

It represents not negative our cycles. unreasonable represented banking risk. what is cycles that fact. to balance Our proven manage represent is business well business It it is not is We does through lending. positive a an sheet. and What in

Christopher Marinac

Thank you, guys. great I that. Joe. on That’s appreciate feedback Tom, thank and the you,

Joseph Ficalora

Chris. you, Thank

Operator

closing question-and-answer Ladies we conference like and I turn management remarks. for gentlemen, to reached session. our back to end over of the have would the

Joseph Ficalora

for forward ended again the October performance to you. look at we this the time XX, months end Thank us when you, taking morning will Thank discuss September our three of nine and you of we chatting with XXXX. again to the join and

Operator

today's concludes conference. This

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

Flagstar Financial (FLG) 25 Jul 182018 Q2 Earnings call transcript