NYCB - Earnings call transcript Q3 2020 | Flagstar Financial, Inc.

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Operator

Greetings. Welcome to NYCB 3Q 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. the to turn DiMartino. host, now will conference your over Sal I

may You begin.

Sal DiMartino

thank of for the GAAP. Officer, will to Today's accordance for New you and President performance John you Thank reconciliation and Cangemi; by; Robert Private prepared may in addition during led Wann; Harbor viewed statements joining and our company's Act are materially Such Accounting statements forward-looking cause the to undertake results quarter Safe Certain statements Bancorp expectations. results update measures after to our such conference Chief of today's GAAP will be Officer, the would Officer, expect call of that Chief York made with provision a and any to for that assumptions today's and to with on should management contain today's no are includes could forward-looking We not covered Operating Pinto. Ficalora; conference XXXX. financial risks, Chief of call. Executive from by discussion together and release intended third to XXXX Joseph be Officer, Community differ and that the of substitute team in be not this forward-looking Thomas These and Today's measures conference actual be Litigation non-GAAP Reform certain comments uncertainties a obligation call. non-GAAP Securities subject Chief as discussed call. Financial financial

before its the quarter statements to To and start performance XXXX quarterly will of the XX-K earnings in over factors Mr. now ahead. report Ficalora, the impact will discussion, today's information risk company's turn line that Ficalora release go SEC please forward-looking second on find the and XXXX Q&A. including today's who provide company's call overview more opening for Form the annual will You performance filings on may about and in Form an the financial the Mr. I report XX-Q.

Joseph Ficalora

the for Earlier and per the previous XX% to reported three quarter and on the morning $X.XX you diluted phone the on XX, us that's and today. everyone September of share up ended XXXX thank XX% the webcast, compared Good for common up to months compared this quarter. year morning, earnings ago we joining to

especially, operating We continue are and uneven economic asset better performance, a metrics very experienced as loans to effects and did also quality in fundamentals quarter the with decline the only number recovery given happy along decrease COVID-XX results on pandemic. we improve, third our NPAs from Not of deferral. with lingering the our but the significant

by reflect margin earnings year-over-year expansion. to well-contained At net results a top-line our led loan driven continued per pre-provision basis. with time, compared of basis prior revenue double-digit This declined along growth This on provision net solid linked-quarter revenues. growth operating the credit losses quarter strong third interest was expenses for and levels and to quarter. share growth both growth the higher a on Our and same

loans of declined in amount the deferral importantly More significantly.

mixed-use the at the their deferrals most retail occurring CRE to off XX% CRE of and to November. segments. come is to period our eligible portfolio of majority of Accordingly, October of that disclosed, the on previously the June three-month multi-family in a and of for were in status. loans October to As June is deferral deferral deferral to payment From period. levels overwhelming XX, come deferrals compared loan improvement six-month period with XX unique billion XX, somewhat eligible opposed initial XX% the as $X.X the dropped return their it period program to deferral during an in and off XXXX Both

of as X.X% outreach program represented deferrals to borrowers the guidelines in XX.X% We attribute proactive XX, loan our June deferrals earlier our XX, October during underwriting our substantial of and to total compared conservative XXXX. on As improvement the of pandemic. loans

deferral ahead, scheduled to Looking so their November. period to billion of $X.X we billion of scheduled do are which have an $X.X deferrals off during come additional

about Given trends payment we strong going October's performance, remain deferral confident payment forward.

our results. of Moving We quarter experienced now expansion. another strong to third quarter margin

funding the Excluding This last basis our in basis X.XX% substantial income, our impact The prepayment a expanded the year-over-year in basis. points. has on up the bottoming a net points marks margin XX decline of XX improvement driven margin quarter third margin fourth interest margin basis continues of consecutive on basis points by improved sequential year, expansion. was a from to costs. XX be the Since and quarter to

and to third same the stability to XXX quarter $XXX million to of second X% points the time, overall declined rose pricing. re-pricing third basis of quarter five points our down third XX continued CDs, XX up interest basis on yields the and quarter the Net the sequentially points basis. a year-over-year. only was on basis The a in quarter was by during the funding basis points Our XX cost loan linked-quarter the previous primarily points to loan basis At of in resulted costs year downward owing cost deposits basis of points an compared compared decrease XX% quarter. and basis ago XX income driven average compared to declined in year-over-year funds which for

of During bottomed the last at basis easing cycle, points. XX our deposits cost

and level deposit expectations, the cycle costs Given that the bottom will this rate believe last we below environment experience our during cycle. of the current

sheet, positioned income interest we this further net improvement margin. additional the opportunities funding both in our Given and well and our on re-pricing for of side are balance

we the COVID-XX of their were largely non-interest year was up branches previous on pre-provision systems to revenues XX% net expenses up and and during million our quarter, modest PPNR The quarters. continue PPNR. $XXX efficiency conversion increase $XX $XXX On front, million X% uptick third returned or ago total to the quarter bank-wide offices. million was or to expense and X% from readiness Despite An employees for $XX compared metric ratio in reopened million, leverage. our or sequentially and expenses we operating our the benefit is the focus XX% due up XX% to the as the to positive year-over-year. and improved important to

$XXX $XXX million were in multi-family The second lending billion, specialty growth multi-family year-to-date On or quarter. many $XXX We has the finance year. balance activity total sheet or X% their quarter million, date of This by the been quarter up loan $XXX quarter. On lending. is loans result the some by the third deemphasized of continued finance higher second multi-family are the and from a were annualized contractual competitors retrenched re-pricing have market front, to million basis a loans the are portfolio increased the have year-to-date strong growth as during see driven $XX.X a in annualized leases to and Specialty the compared rebound retention of in loans year. or portfolio Multi-family the maturity a grown the higher year or to this million. $XXX either quarter rebound the compared quarter or finance the as bank loans increased On over total compared also basis, gains growth a growth annualized. million, this market to decline CRE. the increasing has rates; factors: in up continued the during specialty nearing date; of portfolio refinancing option X% pleased offset and showed in each portfolio loan course X% second following share

to the quarter for quarter. were X% were compared Our originations originations up billion robust. $X PPP but excluding loans previous to XX% year compared the were quarter, that's the down Total ago

loan continue our for see borrower to exceeded originations XX%, quarter's we demand loans. quarter million last or pipeline, by Third $XXX for pipeline strong as our

money. pipeline pipeline billion. in of quarter heading current XX% into Our is fourth the current Included is the new $X.X

were of billion the year. to funding billion decrease The deposit to unchanged majority during $XX.X in cost of was compared side, CDs lower to year-end and declined other and third $X.X the first of at total the On our of our offset XXXX. with the growth our billion account line during $X.X each quarter previous by this reduce nine-months of categories. strategy quarter cost the the funds, deposits In levels both relatively

borrowings, Federal wholesale advances, interest environment low Bank conditions. million, quarter previous Loan favorable rate as the primarily to increased Home of we market compared the capital $XXX Our consisting take advantage of and to continue

On loan the asset of quality quarter, improved during the front, metrics our strength reflecting credit portfolio. underlying the our

York for segment quarter. $XX in pre-pandemic During $XX Rent have year. to quarter portfolio, City real non-luxury XXXX, with segment multi-family for of levels. this vacancy any the the in CECL X% very be material losses of New credit rates not of returned was strong million under quarter current we first million prior rates well. changes our market, estate $XX and provision September rent-regulated to compared the witnessed continues to segment continue the have as up in and collections the hold of in in residential the vacancy quarter multi-family to below The the Also, million, third our

by provision quarter's This $XX exceeded net million. charge-offs

in $X quarter, $XXX,XXX X.XX% compared reflects basis loans current compared of XXXX previous charge-offs assets of XX $XX the quarter. September of in of million the the last total Nonperforming million During average quarter. to XX had we compared previous million quarter. points XX basis $XX or as recovery to were assets, net to a of net This points

Excluding quarter in total been basis nonperforming assets. of the taxi to medallion-related assets would points $XX have points total compared $XX million or X million basis X NPAs assets, or of prior

per this November The common an dividend record X.X%. Board the as price, dividend payable of that Based dividend translates yesterday's announced on X. XX also Directors We share. November declared $X.XX of will into common closing shareholders annualized a cash be of of to yield on

like those lines have during this to management, front crisis, that this again the employees, line end open comments and who difficult formal note, to Board, would ask of thanking operator extraordinary to dedication I'd the commitment my serve and all the by who for questions. On I our shown once on to and now time. Lastly, your continue

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

Operator

Instructions] this Poonawala And America at question-and-answer from Bank Our first session. question we Ebrahim be a [Operator Securities. is time, with will of conducting

Thomas Cangemi

Good morning, Ebrahim.

Ebrahim Poonawala

assistance, add end additional asked XX% about should into we the XX back deferrals not your What's another that next that we expect? need a in you less the if X%? could basis XXXX? points you the or ones that to loss the terms around than content at And the that of is came around deferral paying, So, that $X of that's outcome of outcome there expectation least what's of go $X so the then, million $XXX remaining additional similar those at billion, why up see to year-end reason any for where billion

Thomas Cangemi

Hey, Yeah. morning, Tom. good It's Good Ebrahim. morning.

So, just you let and me update clarify.

-- So deferral. that we second the have million as that and there remains probability which of down still be and round will has we paid collect night, this unpaid that on we'll it's to XX% money last $XX no number brings

we're with line payment unusual optimistic this our after month in it's very after And quarter runs not typically normal a So that structure. end.

So in knowing some back $XX pleased what's just and with reaction communication regarding us the million that pay, spent sent the CARES additional your optimistic be go we've next question, And various we're decide ahead given payment currently reality we this outcome. a with the some may on going There deal of us customers that forward are very of lot unpaid. status. the three we weeks very that to them of have to customer’s to flexibility to time the to but with may we that under do not is that's to Act work

So very we that continue. feel will optimistic this

came October, slug of than what due that we billion money are first $X was all much approximately The the results that expected. which better in

pleased. very we're So

customers underwriting the high to. the there's was think the standards if COVID-XX very the and where are much cash to a and strong offered choose bar relief reanalyzing request LTV that flow the I additional relief they so is the that a that pretty all original reality now low when is fact for

is abundance that were more we relief, relief. liberal bar caution, CARES amount the analysis So to have call and to Act flow they're do the need allowing on the very of as significant I have as said the of we get going assume an high they But in relief. if cash to really previous going people a very to forward

by chunk results believe Mr. of very are we and end as marketplace all and we're business through that on payment of updating current be those So the the the -- sometime the mid-November, of the in large news that good our are deferrals coming of structures be is we'll coming the anticipate pretty Ficalora will with pleased collections And very right high. very model now the The indicated due. first on it low by for end are of the much results. core we By deferrals. November XX% But consistent. the delinquencies

pleased very with we're what So seeing now. we're right

Ebrahim Poonawala

I a the multi-family City And XX% helpful. around estate lot step taking stock's Obviously, Tom, year. next been There's down is guess out That real your York growing a about looking earnings. New market since economy July nervousness back and of your just book. you've

collections are to back I levels. think you mentioned, pre-pandemic rental yield

as level you people should NYB? us of And ties to to extending new forward kind you're move about what the we talk as credit it we as borrowers of York? and to months, concern -- from the as fast out New Just -- XX think the six Like maybe are of how for loans? next just around losses what's to seeing your

Thomas Cangemi

So We this the de adopted again, we year. losses will feel obviously be that minimis. CECL

not we'll real ever obviously, historically the for provisions charge-off So we typically put sizable historical company, up have our history. significant for but losses any

the confident continues backdrop assuming feel to provision improve to as the we highly we're seeing. clearly, be that macroeconomic continue lower So that will

Initially left first So on slightly possibly are and it's see as from trend loans quarter going and this collection the robust But amount longer been pretty we're we has magnitude hopefully amount risk down seeing now you the lower. and the of commercial expect portfolio, bit depending may that And about can look signed far November. where adoption the payment lot we full next continuing tremendous that that's people really And when right effort mean I at mixed-use then status. not some retail, the can had was the I you through little given where than each guarantee no forward as million a $XXX in see the of year our that that we collection a future. shifted sizable a a quarter deferral, up efforts. trend on of in write we how $XX the CECL in see recoveries October, back at clearly deferral should substantially sooner that's when of deferral on and will And on have is of has believe little month. what see, on million a we as as think at to mixed-use bit. And the continue risk work I reduction overall a we you mixed-use. the on retail dropped we're the if customers we what's look well. we for

in right work billion And million November. We in will have about deferral much pretty $XXX $X.X we which retail. have out on itself left now,

So a say slides office. those been may in shift into New not -- York has those there be obviously lot the noise in office office of City. And

on something I left with he we customer. family large customer office, we class. mean And he at that very the identification of had paying a have family $XXX we've LTV. have it's node. at office. buyers over approximately the his and do that difficulty contacted low million the had we paid end LTV, deferral that story may So Interesting day, And time asset ultimately, XX% for have and we generated a It's

for lining that to reason take up some event go the So asset. in to we the have path, people if we par had at

has little a City low shift did into that been in office, in New And bit but marketplace mixed-use. of lender there's better-than-expected we're as particular leverage So the retail performed Manhattan. in given a York

multi-family. very of our portfolio, outside with product core being we expect we're the So pleased

multifamily collection as on is very the far side. it's the concerned, been robust As

Ebrahim Poonawala

outlook. I Got on more it. And just one if the sneak in, can margin

You've given some and disclosures around the debt maturities. CDs

fourth one debt in it? coming looking on you terms the the new CDs and And out to margin talk on If us the you. what of could for And at? maybe are what's outlook Thank quarter further? new coming

Thomas Cangemi

clear, be I'm XXXX. into me to going let go So not

to we'll the XXXX. into in all Mr. believe of we funds just driven cost by have through double-digit borrowings. and our get see trends. the for expansion similar XXXX. quarter we expansion We fourth anticipated margin quarter said the throughout CDs Let's drop of have the along, to And continue continued encouraging which going Ficalora We'll in margin is XXXX, as the indicated fourth both double-digit substantial very year

between We due That level. points. have in funds, probably X.XX% coming XX in XX and roll marketplace billion approximately three somewhere at between basis $X.X months cost of that will

We have due CDS XX $XX.X coming billion X.XX%. months on at on outlook from an

to on basis we climate bring rates. XX be which depending a You reality going longer believe XX interest will down and overall go, points, rates rates in depending economic for where lower it between the interest lower,

the cost enjoy we will case continue that's if of lower overall their So, nontraditional the benefit. and that funds, banks to

that, In borrowings at we at X.XX%, is year quarter about you another of from in $XXX have today. we indicated, And fourth basis as we next addition XX have that refinance points, to anywhere $X billion if million to XX money coming X.XX%. the due

So, markets. to as yield which our holding spreads expansion overall will far and going we’re the X% on enjoy in margin that of attributes still the getting quarter. that's fourth as these positive And north weighted up we the asset forward, the side, are of subject are think continuation to all other we obviously,

we're around the core for over on basis still So mix, getting side. XXX point product that asset treasuries spread five-year

Joseph Ficalora

that losses at there we that less high losses be an that There will look we've are paid losses be And I our difficult from those the portfolios on already losses, is ever that future losses that to reason performance. realized. market, prior That's CECL we which a and in realizes. when important the history substantially the our recognize probability actually standpoint and have suggest highly our to portfolio, realization those to look is continue booked for improbable. to recognize than every marketplace we us as of thing no that accounting period the of reserves existing is

We York And performed still, with over every we of performing have properties likelihood these consistently market, in high charges previous difference is the have. Yes, we've period New there of future to the would the some regard a realize there probability rather the with highly how that is yes, improbable. But amounts we in nuances. that cycle. of massive are

Ebrahim Poonawala

questions. my taking for Thanks it. Got

Joseph Ficalora

Thank you, Ebrahim

Operator

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

Joseph Ficalora

morning, Brock. Good

Brock Vandervliet

Good morning.

concern Act and when was back valuations lower there more loans to certainly refinancing. And that initially Rent would found now you lot with holding especially pencil on much to out think in? valuations I multi-family for a your it talk have the about building space for going make up How you of more difficult focused can that? came COVID core in you

Thomas Cangemi

it's guess So part I remaining would Brock, say the morning. Good the was that, rates I still year. what expected lower for Tom. the significantly most than beginning of at are cap

are holding are capitalization So the being regional rates still decline. subject on to in side. some obviously Values

So, with look apartment running when our retail and down houses office look scenarios, at to downside CECL peak-to-trough we're XX%, XX%. down we close you at obviously when model down XX%,

bar really that the in which So most debt able positive. request every the be here the were to is flow to positive. adequately. cash to we is for out at on relief we service customers they flow has X.XX%, do they're of And that pay flows. cash because work cash ones thankful them going doesn't able customers work their the the on excess cash we're refinance flow able at commercial additional And they're X.X% their for telling are see the results to the coming helped issue. own not they're relief. them balance especially that we'll but money do with when on have what's It we're they're receiving the And sheet their standard most to no now the of may important, them with bills, part, months that been cash that side. high customers real floor, ground out flows from were obviously coverage is maybe we're and of mean the through flow But X.X%, reality positive, we ratio cash loan that deferral, It event or these they be the you actually looking off deferral to get gave impact six coming that it at most very as at to

that XX% no So, a LTVs. that we given been I'd in and are the has, marketplace. Manhattan. say LTV obvious clean question has reason the there adjustment the These But LTV an the in low original XX% LTV company low have

can that. that, they come event they're on the we've comfortable back And and because bank the in origination very assets, obviously to flow, they So them. you refinancing we're short-term been which the by relatively will doing see

to quarter rate north retention portfolio. fourth loan number of have renewal get overall we been about because is to able as we growth billion be up Our refinance is to own particular may own these And portfolio. XX% are We keep believe XX%. believe of which for was that that we coming quarter, ability spot we goal shoot into on loans a $X portfolio. it improve the these the us at net for the The of that for our has within This that obviously, year to see to coming customers this have all all will from our lot year. X% the that in

So, we're confident very there.

Brock Vandervliet

of to competitive factor many I with in be loan types. X%? seems is at of the of somewhat heard different really loan holding lower successful X%. across that And in the a Okay. environment? are yields holding around your It drumbeat commentary yields you and on Why so north the yields How odds sector

Thomas Cangemi

an is agency competitive different if we're X%, do north say the competing. agency it the to there. slightly loan five-year a average, going portfolio in where we nuances and tack I'd treasuries XXX to approximately very at versus has would look around the a structure on very the Obviously, on Brock, seven-year major force are you So average, and on that well of loan here, putting but

that X.XX in hitting solid high do going which -- a to rate and not shave if we probably has all-in high to the to fabulous. it we the get doesn't environment. make trading retention can priced average let bogey, are looking -- short-term their The believe on which news a we'll have of So, good sense overall margin not lower been in are bank. will the run We're quarter the seeing rates, that X.XXX bank, of going midst market plus a point treasuries deposits financing, nontraditional highly is of our to model improve around to where X% institutions We're low well, spread. assets rates customers some well particular bank that, business, so. there's LTV. point marketplace. that for a interest if in inclined we're more the for when to is it too do bodes in especially are funding side fourth is confident leave bank in loan the the We we pandemic, the think that and you very Where coupons, feel expansion But a disconnect through the rate the our I

Brock Vandervliet

it. Got

Thomas Cangemi

the side. Yes. On funding

Operator

Riley And Moss Steve from with proceed Securities. is your question. Please with our question B. next

Joseph Ficalora

Good morning, Steve.

Steve Moss

Good morning.

borrowings on up following here. the Just

in ability the the Just wondering any either year? what fourth in borrowings is to quarter upcoming the restructure

Thomas Cangemi

that. that, there's that there's we opportunity So, capital Steve, I'd look for a always at. of say that obviously, cost Obviously,

have coming evaluate at forward year. X.XX% We billion profitability $X that on next due approximately curve depending depending on analysis. would we So do

from on forward to will probably But, so year. try have, back let's we one not because stuff given it's -- pain forward. basis going going look the In a opportunity economic to clearly, earnings in enhance to the end is that that say, that, always that restructure in expensive. in So in the to future time evaluate we core is But that sizable benefits we event monetize quarter, a due the significant, time. the

as more to on I and We with a some would painful around back. cost expensive XXXX of And be have that think capital going much that. far X% borrowings as the out XXXX, earn handle

to to quarterly we take charge. that back. basis. sense So make has earn do evaluate evaluate we It And that on a logical

Steve Moss

here, And appreciate then the of, fourth I Kind growth good growth quarter-over-quarter. specialty that. what are into loan the your XXXX? wondering upcoming Okay. about on for just, finance quarter of think portfolio expectations sort and

Thomas Cangemi

literally pandemic. say nationwide I'd QX, general. expected from the in being in in That in the we've for specialty epicenter finance, Well, was of a the drop really rebound given decline QX that

have we So recovery there. the

the On of is it's now. right which auto side, our portion a significant booming business,

So inventory. lot drawdowns shortage of now. a there's a of right good We see

So uncommitted surprising wouldn't of the $X.X drawn approximately the -- end outstanding recovery line the billion assuming $X.X continues. of with we you nice of have It down a committed at be economic billion. more if see lines being year

will they The to So say that I optimistic would We're grow. continue very of that group. credit pristine. is

and don't it's We We zero losses performing -- business that beautifully. loans deferral. in anticipate on have zero we

business. very Remember come we're has with funding. the supportive of this not So

and a choose shop credit up finance. what we're So we we buy want to

commitment in at as levels have that market that and to are the have it anticipate But book XXX% we pay CAGR. we we we should have customer that have right line. be the grow active substantial are fact also a from just far grow portfolio the that As we now, consistent great which to very a high

So, the the side, future City going real York given going New for slightly been multi-family to company. with growth, of along estate has I be the as the clearly relatively happening deals the as and economy transactions recovers marketplace on be hopefully eventually to right in but flat change has could with that the driver the would multi-family CRE down that continued specialty to lack say, the in finance property it's and now the marketplace,

Steve Moss

if And that. in sneak I Appreciate one here. Okay. one last could

the think, in branch said $X.X COVID expenses. release I and million reopenings press

curious, kind the Just to fourth expenses about think of quarter? for how

Thomas Cangemi

branches, conversion. bit as in had operations a the a there's the We as the operate some multiple costs reopening The the for PP&E additional had probably that So, QX. employees both look, little and we off we well headquarters, were involved. well there. expenses of testing out, for We as lot the as testing

I be maybe of get into there's quarter. year-end, million by the up couple that expenses to third say, going to So by level a and $XXX we're obviously went number would that probably million reopened around so year-end.

pandemic we So stay projection last was for our for the see year we're in uptick significantly lower around but, an to back we million at lower material saw we'll with about $XXX And of costs, it than and to in probably $XXX the Not QX. associated year level going but original little which million probably that there's million. QX. obviously, anticipated We'd XXXX, like see cost a going pandemic. $XXX clearly, bit never to

Steve Moss

you Thank much. right. All very

Thomas Cangemi

Sure.

Operator

is And Zerbe from Ken Stanley. question our Please your Morgan proceed questions. with with next

Thomas Cangemi

Good morning, Ken.

Joseph Ficalora

Ken. Hi,

Ken Zerbe

Good around yields, I currently basis XX either your or compression your portfolio expect mentioned that Tom, points more that that But yield the average average we were loan on morning, you X% right Is yields treasury. of five-year loan amount maybe -- guys X% over asset Tom. the should around think, time? over your X.XX%.

Thomas Cangemi

So got out when reported out just X.XX%, right? you X.XX%. I Ken, Well, -- prepay, you've it's we to but back back would prepay, like

due due, fourth and approximately. we quarter year where you end And what's of then of its $X about in coming X.XX% when billion, as are the about X.XX%. X.XX%, next that's So that's coming it's the think quarter the

market as the bad lower ago. few So, pain was, as is yes than years it's the But yields. a not it

there repricing liability offsets costs borrowing I it's the because manageable, we're given think deposit materially the down given coming costs sensitive. and and So the from still

X, And but spread, So versus average. we're around certainly to the the getting say XXX agency, deal, time, yeah that's the by the think the threes versus five depending customers, I'd depending we And low XX-year on or I on duration, compete. to that side. is the this on asset IO I'd stand non-IO. on -- also basis point quality fierce very important reflected At we our same the solid statement. all with Competition It's market. make want so

to customers journey these sure have COVID-XX, making we we very on accounts During pandemic we the accounts, this of the focused were whole sure deferrals we ensure worked paying that their with in with when control. making operating now dealing have, escrow

that the understand round here. when entered for second we It's that back potentially these is agreements. important, pattern how cash So deferral, deferral in no building, behavior flow. of really into is longer event very And because the they that's have JPMorgan a housed we the we come

rate, that a flows the lower-cost well, been the fact bit acquisitions flexible came for have shift right? about more we're from has always side. which on nice asset been for ability relationship, the enjoying So, change into the as Historically, deposit be we've bank. And little funds to we the cultural deposit a a

Ken Zerbe

I is no reserves, with Got obviously really And I credit it. know No, certainly. good. then the your really, understood

just you can driver But the zero provision? that. about quarter? given about what question just have no of was build talk the zero expected there's you the this reserve And So would NCOs

Thomas Cangemi

of pandemic. Look, we're in the midst a

CRE zero pretty on loss of the especially We history a have much side.

the I'll property the commercial we XX retail So, when say bit have real up, versus basis reallocate well add [Indiscernible] points so also about acknowledge basis we reserve. that and considered, qualitatively But, we our because say, City a a when what the this. we which space, the we probably quantitatively, would a it's more York office you of quantitative think price particular, into little on points qualitative book, probably towards estate our into is history reserve, region have tell region, CRE, New based history, I'd a in you the as losses. And XX declines you book. And it's no

that that today everyone's the probably full of be status, if actual back of status will going full that the on history of the took certain anticipation and loans the because shifts, fact adoption. of and payment see full in the for cash flows But an of Given have rating first a a second not these payment account, on the bucket, a seeing that loans, for we're adjustment in as likely into would to degree continues, the revaluation because back the that in and more looking favorable XX% bank, deferral. payment status, we reversal, future the probably been round results be you're you're at

Ken Zerbe

one on we that, the that gave fourth unusual Yeah. think grow And as or just about quarter we for in is million the base anything quick sort new there level of $XXX on, should XXXX? expenses, is you that

Thomas Cangemi

that, we confident not give guidance, I'll XXXX come But we street that I'm when out January. the give feel conversion getting I Yeah. is highly in yet. mean, guidance, some the complete.

very the We to our company And efficient. has have in at beat XXXX the quarter. been the look know, We as We're carefully very going fourth and opportunity that historically, obviously bank. you in within expectations always overall XXXX.

So as million, we $XXX budgeted million. $XXX million. at We $XXX in came anticipated

that be the efficient, in million, goal the our is the end But be tightening. is hit Hopefully carnage marketplace. conservative. going to the $XXX at we given to very magnitude Assuming always the number of belt of We're quarter.

the get for our to that, in the million, next be And all guidance through systems a that expenses. for up after platform. that $XXX year-end going for our go and for expense. I forecast. some think benefit of had at we're budget And be clearly, the some some have had post the conversion we're us expense to at where But since pleased below of reevaluated. -- very forward, see, pushing $XXX process and year, process potential quarter. like we clearly pandemic on million. consequences should of -- It's but occur could and we'll us And to savings lots we'll We and be you one the So will guys a now

Ken Zerbe

right. you. Thank All

Thomas Cangemi

Sure.

Operator

proceed And Duong our Markets. Steven next from is with RBC question Capital Please your question. with

Thomas Cangemi

morning, Good Steve.

Steven Duong

explain you morning, quarter. little going Can guys. that? CETX just was your it Tom, on a ratio, with bit Hi. Good dipped this just what

Thomas Cangemi

plans. model, from EPS continue grow, is And for right? going growth, it's We're earnings a for quarterly We XX% that. at I on growth. which internal We're Yeah, our mostly which our to Well, capital year XXXX We comfortable growing again, forecasted this were Tom. growth, are basis. capital our higher, we from mean with is on solely the versus XXXX. driven target great. very

trajectory So build we're the the now. very of capital pleased with growth

positive levels. towards overall that's capital So

growing. are We

Steven Duong

Got it.

have Okay. just exposure, you And say the office by Manhattan? your the on exposure boroughs, then, different do

Thomas Cangemi

Yeah.

$XXX in of Right million. area we're we probably to that's $XXX Manhattan. a area So the reevaluating has deferral in now a where this the if have that ratings retail few highest mixed-use down, end retail quarter. percentage the going the update Multi-family of on, at down categories of And is and – that our deferral. well commercial to it's the is as end the which we're that, We're lot to we're pandemic. flow, think in Manhattan, $XXX work how plays is weeks the at We the that now investor – I dollar to quarter given break mixed-use. $X and over Manhattan. on I'll million much October in bar, tell going you to spending in back the is the go time pay reevaluation. the it look, the gave The I'll Manhattan better down had phenomenal, high right at as is these that's Manhattan. in million of $XXX in amount in Office we cash you total anticipated, previous actually million, hard $XX all see credits, million is we XX, than of which but XX% the We're that's to as next million deck, right out now and

office boroughs the Brooklyn for borough the $XXX five the towards The would issue multi-family. multi-family. about across deferral clearly deal side, be the blended energy in with. that we reshift at that's I the will to next that it's But level million on So area have

Steven Duong

just it. one ask I Appreciate If it. could Got more.

ratio? office was exposure, what pre-pandemic your on Just coverage your

Thomas Cangemi

So, second I one under service had – on we about coverage XXX XXX, have here. anticipate with I'd just we bear Office – ratio, debt just LTV me at XX%. say,

Steven Duong

Perfect.

Thomas Cangemi

very we this was I on confident that had is them wealthy flagship at in LTV We it as an to a paid was guess, that and par. building office October. was used in area this work XX%. the it's flagship we sure a and difficulties, – with sell the get one. people we to I going has make out owner an building location. we in example office had we the it customer due office a through And felt have go – event to highly now willing the And

for classes. some property asset they're created has of long-term coveted family wealth owners just walk over real This exchanges that is and are years, at these them wealth going So many away. not to XXXX

we six great. credit we it's which that fact this fairly a relief, approach. lot large up is ended cash that's and our large getting relief, the a six credit gave them And So a was flow months balance of and and sheet paid, months

pay. any deferral the cash the when feel presented analysis going through program round we relief bar to to that high. have rigorous very very and not Our be approach is it's We We're if at the is going justified. the into second they go not out to has ability a flow give

Steven Duong

Right. Right.

– and minimum you And pre-pandemic that correct? XXX% were is so at you your XXX% is

Thomas Cangemi

Yes. Yes on the commercial side correct. that's

Steven Duong

guys. Thank Okay. Appreciate Great. color, the you.

Thomas Cangemi

Sure

Operator

with question from Breese proceed with is next Matthew question. Stephens Our Inc. Please your

Matthew Breese

Good morning.

Thomas Cangemi

Good morning, Matt.

Matthew Breese

uptick that the Hey, COVID expenses. versus The the to of was and and in is conversion subject due just touching systems on permanent G&A fluctuation? therefore to much how

Thomas Cangemi

probably split it's say, the I'd uptick. evenly from

were we if branches back million associated the Remember, various $X.X we probably PP&E I dealing think the and and with the was conversion there million to off guided getting locations running. was for lot expense going more John, say and have once a rest guided XXX a an that's I'd testing. it each with I that people by bucks. the couple is up of

up all some running branches being clearly So the on the with the depending and for the pandemic for time there. are most expense part but

conversion So say, and I'd split between it's PP&E.

Matthew Breese

I – then And Okay. sorry. I'm you, interrupted

Thomas Cangemi

as expense the employees. to on our to we safety testing don't for have have staff ensure well. people do that. In There's hire an doctors so We to

Matthew Breese

it – be? update of strategy the at yields And are are could want and us there? What kind what securities? around looking new investments do just it. you Where then what to are on Got you you

Thomas Cangemi

come So yields I in my the anticipate for down. security to guide double-digit the up quarter.

assuming double-digit, so I the the for guide security. points reasonable up yields XX be the up, on significant again, again on current our basis based down assuming is our are We're So drop which securities. once modeling. coming in see quarter in is another wouldn't surprised we'll quarter, fourth

the type we're very quarter. XXX So given probably to level in And marketplace. we're at cautious being the XXX looking the somewhere fourth in

much Is sheet been billion which a billion of lowest percentage it's John? level. a X.XX%. it's probably balance a I low. as assets right, on book $XX – portfolio that X.XX%, securities our Yes the at like So is $X.X – think it's been It's pretty about like

loan don't So obviously, to market very want want now cautious we given that be are. given have the we where significant reasonable investment and to jump we securities demand into with yields

Just moment interest rates. can't a control we and wait see and

be So that we low. think in relatively to are going general yields

to You're how on grow time looking opportune decide, liquidity it's be to the clearly, in that ALCO as But We we it's portfolio. book. an additional process. And yields that decision at reinvestment we not business put not opportune our time manage a the to probably will time ones. the that low from time may grow

Matthew Breese

Understood.

the Curious then quarter-over-quarter And you migration? this were Okay. deferral have happened what I the guys know risk-grade criticized classified very assets? What last? And balances to front. quarter versus you on feel comfortable seen and any

Thomas Cangemi

you information when in we you you go special from through went on say portfolio mention I'd the pandemic, solely the even much that was going deferrals. that bars and focused you are as before Yes. little bit can this a obviously, because to get analysis the up

a in we've these regulatory shifted that for should we be loans of special mention. we've done work a doing what of to and lot That's lot reasons. So

Matthew Breese

Okay.

Thomas Cangemi

they news of go All levels next to them the going north and of mention special cash of be status But out we're didn't roll right. benefit payment to and that. that that again, back continue pay to phase they're flowing we is will the they expect, good a full that as the

of So an conservatism and we do it as as caution we abundance should.

Matthew Breese

better mentioned rates Where Could are ago? cap last expected. one have us? a might holding today that little the cap one then multi-family you for office year better just retail are is frame up a than bit rates you versus And

Thomas Cangemi

regulatory I depending I had to came the year were rate write higher do in changes that Bronx cap last in consistent. was movement the versus say Manhattan. all. mean, any we than don't we rent we I'd basis the a in a see view our initially when – adjustment on much XX the We point at Bronx XX borrow. initially

always were rates cap Manhattan general. lower So in

of as LTV an a So we much lot. abundance a lower whole moved caution. have But haven't they

say a I'd some in XX low XX to You're versus look to a other months, you unusual. the past space XXX% not the you rent on you change use still that of throw and streams, revenue X% the I'd that mid-Xs, -- the is building depending mid-Xs. on But at rent-regulated non-rent commercial in done regulatory for law, handle into in say start deals when we've rent when regulatory. since in getting

So consistent. been it's

regulatory rent But analyze marketplace, dive but in on stress lower, surprisingly, a deep do a at we testing. the and on the we statistically it stress every we going to with what's been So when conservatively an year And we twice cap look what rates find the portfolio. were going uptick it's resilient.

Matthew Breese

That's Great. taking all I Thanks for questions. my had.

Thomas Cangemi

You're welcome.

Operator

with Marinac is Please question your Partners. with FIG next from question. our Christopher proceed And

Christopher Marinac

finance. you and strong very rated. on specialty looks about Thanks. earlier the the had Tom Joe, is like or credit more pass quality maybe mentioned It XX% Hey.

the just do level, higher given quarters? at kind prior pandemic, have allocate similar reserve So to at or of you to would a reserve still the look the you allocation

Thomas Cangemi

by This secured very inventory We're is super difficulties, allocation. a minimis goes through we're De credits. credit when equipment. secured senior Even all comfortable.

we're that content. comfortable So this has zero loss again, very portfolio

Christopher Marinac

a information for Thanks this Tom. Great. much solid morning.

Thomas Cangemi

You bet, Chris.

Operator

proceed Your Ebrahim next with question. from Securities. of is Bank with question your Poonawala Please America

Thomas Cangemi

back. are you Ebrahim,

Ebrahim Poonawala

that of just given two the quick upon can follow-up see the questions. how the touch high you do on Just running One Tom? markets, if debt you loan-to-deposit that ratio, attractiveness

Thomas Cangemi

loan-to-deposit the as would high say a as I that had XXX. company ratio historically, So

in the So bank on there, historical executed M&A And driven has our has It's obviously, since improvement. time been through M&A. a we've transaction. an not we're long been growth but deposit some had

we'll and I on goal side the you're in as businesses growth on going continue run and to focus here that includes which our still putting funding So it absent we getting call the that, to we'll see a always that's is probably through nominal up model, together eventually that But business possibility. deposit think we'll the CD and long you more could offered consolidation short call lower put market. cost best what's money, Clearly, than what's markets attractive on money as out wholesale hot the far can on now, right it on than the attractive. X-year CD choose and you based there the duration. deposits of And shareholders market. as They're for are very

between you basis your depending funds, XX go type looking short, risk that on you If duration at take. to to XX of want you're cost points

there So net our decision growth targeting reasonable. your type business for you it's still reduction. X% deposits this asset multi-family shooting we're to comes driven have by growth, CRE it loan XX% not and specialty the to manageable, again, and growth And that finance, growth is by loan for offset aggressively number repricing is make, growth. when We're

aggressively a and can I from reasonable internal unique growth well our So growth side, than in benefit wholesale with on which a this on deposit as of between the the opportunity that portion think retail funds on lower deposit analysis, repricing is we small a current cheaper as grow environment.

side event in where With the that's the funding mechanism. we're dramatically the a have something to change proviso side combination that model fortunate be well that different able this on to to this put together business acquisition can

Ebrahim Poonawala

there differently loans so using remaining because what believe far? reason they be it. there's $X that the any around deferrals, could billion by why risk is Got just portfolio. reason to you've seen no believe in higher And behave in while When the deferred have the about would experience to we book, there there some is I think than pushback remaining you

Thomas Cangemi

later. are the the Well, that look right? I filed would later, It's one have that these ones say for month deferral

that other bank waited come back to XX days what to offered. one the The

continue. We're over area it. broke -- I that the all we optimistic this we out look very the dynamic So risk. these And of understand customers, we're will of

shifted think that deal and office as the originally XX%. thing these a generate are we versus towards But we'll which mixed-use, is it, office along. I LTV credits was more good average -- and we've with goes that it retail

the up office our high. conservative the surprisingly $X customers reshift potential extraordinarily have strong. better And that. retail ratios risk on and effort stepped the The The mixed-use low. feel it's better did when that's about retail in service LTV, And debt LTVs were I'd underwriting is than not focus outperform. right as owners good And it's was obviously can lowest are we status. The So here. payment than we are million the we -- pretty the that customers coverage now, but now Manhattan in These say fact the retail. retail. the large At very are generated that property and sitting

Ebrahim Poonawala

everyone. Got you it. Thank

Thomas Cangemi

You bet.

Operator

KBW. question next Collyn with Gilbert is question. our And proceed Please for your from

Thomas Cangemi

morning. good Collyn,

Collyn Gilbert

morning, Good I good to sure want Tom, make morning, I Tom, morning, just Joe. understand. good

what So we elevation the saw so and on the attributable expense this well specifics, need make? without coming good color. that expenses I or so expect side in and you're should you've next given to quarter fourth obviously you're as the But generally, -- that down going quarter the other COVID mean, going in to are year, costs there costs there be conversion are those as to to -- obviously investments

Thomas Cangemi

No.

conversion this done. all the the work It's the we It get spent through needs It and a offering yes, systems the past We say and conversion lot over time adjusted went efforts I'd think, was conversion. what together years. made I the were through. bank's top we collaborated together. of largest over the We We bank investments energy multiple partnership. on to years a Fiserv. and them with were, their worked ever was

most So absorbed. has expense we of been feel that

But end forward profitability think also year. for again, XXXX. goal the not it by ratio We was shift. driving -- efficient we're get an and hit going I'm to of to pattern want to we're up. the We company. down XXXX have Going that we'll give XX% that efficiency the to going And we're

expansion. versus you significant at up was growth look if XXXX EPS should So XXXX, where we CAGR with EPS margin our around XX% be

came I John, XXX I at was too people I it think of being said XXX, was gave margin. when margin. aggressive at guide, margin felt that XXX way we in I first low off my a

points reasonable. So we felt is basis between XX-some-odd

depends we that fourth So quarter. into guys hopefully, to it I'm the happens XX is. and number. where forward the on of And going you gave cost here next of into to bps XXX I And get QX conservative. curve all I with shape funds year coming what think the going you are

that bit. people a was business We're the property in high, going customers So in healthy the the flowing our news times the to is are spreads there going spreads we're good a comfortable think it nervous little crisis. are XXX cash these competition working little have uncertain doing has XXX, I good bad model. see and good on bit lending times. or If have we're not we it's with New do And healthy the and XXX financial business York like I in and waned these that for be that business into to and for open with us in very New been assets collections our York. in these owners historical times are it's and

Collyn Gilbert

Okay. Great. much. so good coverage. Everything is else Thanks

Thomas Cangemi

Collyn. Thanks,

Operator

And have to now we turn for end question-and-answer the over reached closing And session. I'll remarks. of call management the

Joseph Ficalora

again your for will you XXXX. of interest the us when NYCB. with the you and we chatting end for for three months look you. performance to at to our in join discuss morning again We January, Thank ended time taking forward December Thank XX, this the

Operator

participation. Thank This and your you your concludes this disconnect for conference lines may time. at you today's

Flagstar Financial (FLG) 28 Oct 202020 Q3 Earnings call transcript