Q4 2021 New York Community Bancorp Inc Earnings Call

Good morning, everyone. This is south dimartino.

Thank you for joining the management team of New York community for today's call.

Today's discussion of the company's fourth quarter and full year 'twenty 'twenty. One results will be led by chairman President and CEO Thomas Kim Xiaomi joined by Chief Operating Officer, Robert Wann, and the company's Chief Financial Officer, John picked up.

Before the discussion begins I'd like to remind you that certain comments made today by the management team at New York Community May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Such forward looking statements we make.

Subject to the Safe Harbor rules. Please review the forward looking disclaimer and Safe Harbor language in today's press release and presentation for more information about risks and uncertainties, which may affect us with that I would now like to turn it over to Mr. Ken Jimmy Thank you Sir.

Good morning to everyone and thank you for joining us today to discuss our fourth quarter and full year 2021 performance.

Robert and John also joining on the line are sounded anello, president and CEO of Flagstar at least Smith president effect on mortgage.

Before we proceed with a discussion of our results.

I'd like to refer you to the announcement of our community pledge agreement. We made early this week.

You have to combine your community flagstar commitment to provide $28 billion over five years.

Loans investments and other financial supports communities and people of color low and moderate income families and communities.

Small businesses and the continuation of the expansion of our responsible multifamily lending practices.

The pledge agreement was developed in collaboration with NCR C and its members by locally we worked hand in hand with an H D.

He spent nine months working on this agreement and that wasn't really 80 member organizations across the country.

[noise] away very impressed by all they do for their communities each and every day.

This is a significant and far reaching agreement that both Sandro and I believe will provide greater economic opportunities for those communities and bridge. The racial wealth gap across the broader footprint about pending new company.

We would like to thank Jesse Vantol I'm, the CEO of Ncr's, he and his team for their leadership and guidance. During this process and to everyone at a N H D for their initiation in dialogue with the company.

We are cautiously optimistic that this integral agreement was test and paving the way to us receiving the remaining regulatory approvals necessary to closing the merger as early as practical in 2022.

Now I'd like to turn it over to our results.

Earlier. This morning, we announced fourth quarter 2021, operating diluted EPS of <unk> 31 cents, a share up 15% compared to the 27 cents a share in the fourth quarter of last year.

For the full year operating diluted earnings per share were $1 24 up 42%.

Operating diluted EPS of <unk> 87 cents in the full year 2020.

The dial in 'twenty four is the highest diluted EPS, we've reported since 2005.

While operating net income available to common stockholders of $585 million.

Our highest and now we have ever achieved as a public company.

This was a very strong quarter for the company capping off what was a solid year for us.

Aside from double digit growth in net interest income and earnings per share. Our fourth quarter results include a record loan growth a stable net interest margin lower operating expenses and continued stellar asset quality highlighted by a substantial improvement in delinquent loans.

Our full year results were highlighted by a high single digit loan growth number.

I'll give you an improvement in the net interest margin and a 17% increase in net interest income. Additionally.

Additionally, our expense discipline remain excellent.

Operating expenses rose $7 million or 1% on a year over year basis.

Turning now to the details of our performance still.

But the main high end of the quarter loan growth.

Total loans were $45 7 billion at year end up $2 9 billion or 7% compared to last year and ahead of expectations.

Most of this growth occurred during the fourth quarter as loans grew $2.1 billion compared to the third quarter of the year.

This was the strongest growth quarter for lending since the first quarter of 2006.

The majority of this growth was in the multifamily portfolio, which increased $2 4 billion, a 7% to $34 6 billion and $1 8 billion on a linked quarter basis.

This was driven by increased activity on the part of both existing and new borrowers prompted by the outlook for higher interest rates.

Significant uptick in property transactions and the company's proven ability to service and meet the needs of our borrowers.

And our specialty finance portfolio rebounded strongly during the fourth quarter as the economy continues to improve.

Especially finance loans increased 15% or $451 million on a year over year basis, and now total $3 5 billion.

Total commitments of $5 6 billion up 16% compared to last year.

Of the $5 $6 billion in commitment, 69% or $3.9 billion are structured as floating rate obligations. Additionally.

Additionally, given the amount of unused commitments, we believe that as the supply chain issues. He's borrowers will draw down on their unused lines setting. This segment up for a very strong loan growth anticipated for 2022 as well.

Originations were also very strong during the fourth quarter totaled fourth quarter originations of $4 $6 billion up 55% compared to the third quarter of the year originations.

Originations exceeded the prior quarters pipeline by $1 9 billion.

All of the fourth quarter originations, 54% was due to property transactions, 24% were refinances out of other banks portfolios and 22% what refunds from our existing portfolio.

Additionally, the pipeline heading into the first quarter of 2022, it was robust at $2.2 billion, which bodes well for first quarter originations and anticipated growth of this amount 61% of that portfolio is new money.

Switching over to the deposit side.

The tightest totaled $35 1 billion at year end up 226 billion or 8% compared to year end 2020.

We continue to make significant progress on several fronts without deposit strategy, including increasing the level of core deposits, bringing in additional deposits from our borrowers and growing our banking as a service initiatives.

Core deposits increased $4 $5 billion or 20% on a year over year basis at $26 6 billion box C. D's dropped 1.9 billion or 18% to $8 4 billion, representing 24% of total deposits compared to 32% a year ago.

Loan related deposits increased $475 million or 14% to $4 billion compared to year end 2020. In addition deposits growth was driven by banking as a service related deposits, which ended the year at $1 billion.

Long related deposits include business operating accounts, which increased 37% or $318 million on a year over year basis and represents 30% of the overall loan related deposits.

On the banking as a service side, we had a successful first year winning.

Winning several contracts in support of the U S. Treasuries cares act related to EAP programs and can contract in New Jersey, and Rhode Island, and so it's one of our technology partners prepaid card programs.

We've also developed an active and sizable pipeline of digital banking as a service clients. These programs along with what we have in our current pipeline are anticipated to yield significant deposit and fee income opportunities in 2022 and beyond.

Moving next to our income statement.

Fourth quarter net interest income increased 5% on a year over year basis, increasing 17% for the full year as we benefited from lower funding costs throughout 2021. Additionally, excluding merger related expenses fourth quarter pre provision net revenue rose, 11% on a year over year basis, and 28% for the full year.

In terms of our margin for the fourth quarter, it was 2.44% unchanged compared to the third quarter and 247% for the full year.

Excluding prepayment income the fourth quarter and full year margin was 2.32% for both periods unchanged on a linked quarter basis, However, up 19 basis points for the full year.

On the expense front, we are very pleased with our continued expense discipline.

Operating expenses for the fourth quarter declined compared to both the third quarter of a year and a year ago fourth quarter for the full year operating expenses totaled $518 million up only $7 million or near 1%.

This resulted in an efficiency ratio of about 38% for both the current quarter and the full year.

Before I continue further I'd like to update you on the New York City market as it pertains to our business.

The city residential rental market continues to be very strong with demand outpacing supply.

Manhattan market has rebounded and rents remain strong for residential units virtually across the board and in general rents are back to pre pandemic levels, while the non luxury rent regulated segment remains very robust.

Outside of residential the rest of the Manhattan real estate market is coming off its lows and we see encouraging signs as we head into the spring with many leasing concessions that were put in place in 2021 expiring in translating into increased cash flows for borrowers in 2022.

As far as our quality of credit trends are positive and continue to rank among the best in the industry nonperforming assets were $41 million or seven basis points of total assets and for the full year, we reported a net recovery of $2 million.

More importantly, our delinquency trends improved dramatically loans 30 to 89 days past due decreased $380 million or 85% on a linked quarter basis at $67 million to $67 million as the one relationship we've discussed last quarter returned to current status.

In addition, as of December 31, 2021 principal only loan deferrals declined to 479 million down 435 million a 47% on a linked quarter basis as of year end the company had zero full payment deferrals.

Based on our strong results and the positive outlook for credit quality. The board reinstated the company's share repurchase program, which had been suspended in 2020 due to the uncertainties regarding the COVID-19 outbreak.

Reinstating the repurchase program the board took into consideration enhanced earnings profile and capital levels as we reposition ourselves to partner with Flagstar and based on our pro forma capital position, we have more flexibility and return of capital to shareholders.

Also I'd Yesterdays meeting the board of directors declared a 17th dividend on our common shares.

Dividend will be paid on February 17th to common shareholders of record as of February seven.

On yesterday's closing price this translates to an annualized dividend yield of five 6%.

Finally, I would like to take a moment to thank all of our employees, whose hard work dedication and diligence last year was a matched our strong results would not have been possible without their commitment to our customers shareholders and our company. Our employees continue to be a key contributor to the ongoing success of this organization with that we would be happy to answer any questions you may have.

We'll do our very best to get to all of you within the time remaining but if we don't please feel free to call US later today or during the week operator. Please open the line for questions.

Yeah.

Thank you we will now be conducting a question and answer session.

I'd like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.

Yeah.

Our first questions come from the line of ever him Pune wallet with Bank of America. Please proceed with your questions.

I'm wondering hey, Ben.

Good morning, Jim how are you.

Sorry about that.

So the question first on the timing of the deal I think I heard you say you feel good about closing it in 2020 tool.

Just wondering if you can.

I wrote down that window given what.

Agreement that you achieved.

Other banks announced get fed approval on deals in Houston, we like it.

Who could we see approvals happening within the next few weeks or is that too optimistic.

We appreciate the the question. Obviously you know we were very specific about where we are I mean, obviously spending a lot of time on getting our communion pledge of claim and done that was a major milestone for the company and I think we're pretty clear that you know this will pave the way for the approval process. We're very confident that we'll get the deal closed as far as the timing it's in it's in there.

The regulators Abraham I wish I can give you more detail about that but I think it was pretty clear.

Understood and I guess.

And then Don.

Oh, he might've missed they don't just need sensitivity with the fed expected to hike maybe as early as March like how do we think about Standalone and why you see the margin in that backdrop and Oh.

Flagstar balance sheet does plenty of sensitivity.

We get but when he takes over the next year or two.

Great I'll start I'll start the question and answer the question I was afraid of job, but the big picture is that we see absent flagstar that continuation of margin expansion.

And as you know we have a sizable derivative that comes off this quarter that adds about 40 million plus.

Topline revenue to the company is that just expires. So we continue to see margin expansion in the short term for N Y C D ex flagstone and obviously.

Pro forma this both ways. So we're very comfortable with our position financials I'm going to defer to John as far as the guidance on rate increases and alike. So yeah.

Got it.

We are anticipating of course is that the fed has telegraphed rate increases on our stand alone forecasting and budgeting, but as Tom mentioned, we do see.

Margin expansion in the first quarter, primarily given the roll off of the of the interest rate swap that we have on our books and in the Middle of February we expect that'll be about three basis points in the first quarter from an from an expansion perspective.

And then you know when you look at on a consolidated basis with Flagstar Flagstar is substantially asset sensitive so that will dramatically moderate the liability sensitive nature on our books as well as we hope our you know our initiatives on the deposit on our banking as a service side right that that's the goal is to limit the reliance on home loan bank and on.

Standalone basis try to moderate our own interest rate risk sensitivity, but the flagstar transaction does that.

Pretty quickly once it's closed hey, Ryan I just wanted to just answer that point on funding we've culturally changes direction on how we look at lending we learn what the expectation that we received the operating accounts and as many compensating balances as possible as we push our technology service that we've that we can provide to a customer base that has been a significant shift.

For the company I believe it's around 38% increase year over year on operating activity, that's tied to the loan customers. If you remember when I have my first call as CEO . He talked about the low lying fruit now off our team our board our entire culture has focused on getting that relationship lending in place. So yeah. We're very pleased about our first year's results thus far.

Usable increase you know historically, if you know the company was a growth by acquisition company on the funding side. This year on a standalone basis, we've done a tremendous job on in 2021 on bringing in deposits and these are operating accounts user relationship deposits. If the focus of the change in the culture at the bank.

And just to follow up on John you mentioned three basis points impact in <unk>.

The first quarter impact as you think about that hedges rolled off our thinking about <unk> and then.

The banking as a service is I think you mentioned $1 billion and he didn't.

Deposits I know you've made a few hires over the last year.

How big can that will get it.

Can it go and what they need sensitivity of those deposits that come through the banking as a service channel.

So I'm gonna change the yours I'm Gonna just answered banking as a service and I'll throw them all of them back to John .

We're very excited what we're doing on D. I S and well also super excited about we're going to do with M. A S, which is mortgage debt to service, which I believe is gonna be a significant benefit the company when we combined the flagstar.

They have so much liquidity over at Flagstar, the fact that they're not truly taking advantage of that mortgage as a service business is because of the balance sheet concerns. They don't need the liquidity on a combined basis, we will embrace that so collectively absent a flash, though we see some very strong initiatives there are some significant.

Items in the pipeline that we can't speak to yet because they're not public but haven't been pretty big wins that we anticipate getting that will lead towards this very low stable cost of funds benefit for funding that could also drive fee income up possibility as they get approved and they've been officially become public rule that the the world would be aware of that but these are our unique.

Speaker 1: to officially become public. We'll let the world be aware of that, but these are a unique focus for the bank.

For the bank, it's that coupled with the fact that we also banking some of the smaller technology companies that as well as some of the smaller banks that are not going past the $10 billion urban threshold on a Cogs perspective. So we were looking for the excess liquidity to hover on our balance sheet as an alternative solution to fund our balance sheet, which has been working out very well on an average basis last year the number.

Speaker 1: going past the $10 billion urban threshold on a cards perspective. So we're looking for the excess liquidity to harbor on our balance sheet as an alternative solution to fund our balance sheet, which has been working out very well. On an average basis last year, the numbers were much more than a billion just because of the amount of activity that was orchestrated by the government. But we have further contract that we believe would be very fruitful for our 2022 horizon in short term. Now, this is going to be an ongoing build out of the business. We want to tie in some of our FinTech initiatives that we're working with, with our technology partners to also use banking as a service. So as you said, we have hired some people and we anticipate hiring more people as we build out the business. But again, this business was a zero deposits as of January 1, 2021. And now we're looking at a sizable opportunity. And when you ratchet on a mortgage as a service, that number could be significant. John , on the margin or good? I'm not sure if we touched the margin side, but maybe John .

We're much more than 1 billion just because of the amount of activity that was that orchestrated by the government, but we have further contracts that we believe would be very fruitful for our 2022 horizon in short term now this is going to be an ongoing build out of the business. We want to tie in some of our fintech initiatives that we're working with without technology.

Partners to also use our banking as a service. So as you said, we have hired some people and we anticipate hiring more people as we build out the business, but again this business was zero deposits as of January one 2021, and now we're looking at a sizeable opportunity and when you rack and when you watch it on a mortgage as a service that number could be significant.

Speaker 2: on the marginal.

The margin of that.

Speaker 3: I'm not sure if we touched the margin side, but maybe John wants to maybe can repeat the question to John on the margin. Yeah, John , one, the full quarter impact as we look into 2Q from the hedge roll off, I know you mentioned three basis points. And secondly, if the deal is not closed, let's say until June 30th, and we get a March fair day, do you still expect the margin to expand in the second quarter?

I'm not sure if we touch the margin side. So maybe John wants to maybe you can repeat the question to John on the margin Yeah John .

John one the full quarter impact as we look into two Q from the hedge it all off I know you mentioned two basis points and secondly, if the deal is not closed Oh, let's see until June 38.

Oh much Sanjay take do you still expect the margin to expand in the second quarter.

Speaker 1: Look, I want to be very clear. I know John's the CFO and John could specifically process, but I will be very clear. We've always never give that one day to guidance. You know the culture here, Abraham. So we gave out the short dated guidance. We're very confident....

Well I want to be very clear I know, yeah, John the CFO and John Kid, specifically talk to it but I would be very clear, we've always never give that one day the guidance and you know the culture here.

So we gave out the short dated guidance, we're very confident that we're positioned well and much better than today than we were in previous years, but when the revolver and flagstar. This company has a significant earnings power that we're anticipating absent flash. So we're very comfortable with a very strong profitability on a standalone basis. They gave out the first quarter, but I will tell you. It's a good strides.

Speaker 1: that were positioned well and much better than today than we were in previous years, but when we rolled in Flagstaff, this company has a significant earnings power that we're anticipating. Absent Flagstaff, we're very comfortable with a very strong profitability on a standalone basis. They gave out the first quarter, but I will tell you, it's a good try to get John to give out guidance beyond the Q1. Thank you for that. Q&A

China give out guidance.

If you want.

Right.

Alright, thanks for taking my questions.

Sure.

Thank you our next questions come from the line of Christopher Mcgratty with VW. Please proceed with your questions.

Speaker 4: Thank you. Our next questions come from the line of Christopher McGrady with KBW. Please proceed with your questions.

Speaker 5: Hey, good morning. I'm looking at the slide deck from this morning, and you referenced the 16 percent accretion from the deal, which was announced last year. Obviously, rate expectations have changed a bit, and the mortgage market is changing. So I'm interested if there's any change to that 16 percent, and also if you could provide some color, gain on sale margins at Flagstar. We're soft. I'm wondering if you can give a little bit of an outlook for the first quarter and the intermediate term outlook.

Hey, good morning.

At the slide deck from this morning, and you referenced the 16% accretion from the deal which was announced last year, obviously rate expectations have changed a bit and the mortgage market is changing so I'm interested if there's any any change to that 16% and also if you could provide some color on gain on sale.

That flagstar was soft wondering if you could give a little bit of an outlook for the for the first quarter are in the intermediate term outlook. Thanks.

Speaker 2: Chris, this is John . I'll start and then I'll hand it over to Lee.

Sure. Chris This is John I'll start and then I'll hand, it over to Lee.

Speaker 1: When we look at when we announced the deal at 16%, we're very comfortable with the economics that we laid out at the time of the deal announcement.

You know what when we look at when we announced the deal at 16%, we're very comfortable with the economics that we laid out at the time of the deal announcement there there's no doubt that the earnings for both institutions were stronger in 2021, and then that was originally forecasted in that deal.

Speaker 1: There's no doubt that the earnings from both institutions were stronger in 2021 than that was originally forecasted in that deal.

Speaker 2: And we believe 22 will probably be the same, but we'll see depending on the rate environment. So I would say we're very comfortable with the accretion percentages that we put out. And if anything, the capital is probably a little bit higher right now, given the earnings contribution from both organizations, but especially from the Flagstar organization.

And we believe 22 will probably be the same.

But you know we'll.

We will see depending on the rate environment. So I would say, we're very comfortable with the accretion percentages that we put out and if anything you know the capital is probably a little bit higher right now given the earnings contribution from from both organizations, but especially from from the Flagstar organization.

But do you want to jump in on mortgage banking, Yeah. I think the question was around margin. So thanks, John what I would say on margins in the fourth quarter.

Speaker 6: Lee, you want to jump in on mortgage banking? Yeah, and I think the question was around margins, so thanks John . What I would say on margins in the fourth quarter, there were some competitive factors and forces that came into play and then you had the rising rate environment and so people were trying to fill capacity and so that had an impact on margins.

There was some competitive factors and forces the timing supply and then you had the rising rate environment and so people were trying to fill capacity and so that had an impact on margins, but but also.

Speaker 6: But also from our point of view there was some RMBs related margin impact. We went to market with a couple of deals and the market was saturated. We didn't quite get the execution that we were expecting. And then we had a pricing adjustment on non-owner occupied loans.

From our point of view there was some RMB extra life she'd.

Margin impacts we went to market with a couple of deals on.

The market was saturated we didn't quite get the execution, but we were expecting and then we had a pricing adjustment on non owner occupied loans after the FHFA lifted or suspended that caps on such loans.

Speaker 6: after the FHFA lifted or suspended their caps on such loans.

Speaker 6: As we look forward into Q1, we believe that gain on sale revenues will be similar or slightly better than what you saw in Q4.

We look forward into Q1, we believe the gain on sale revenues will be similar or slightly better than what you saw in Q4.

Okay.

Speaker 5: And then maybe this is section one, the borrowings you added in the quarter, what was the rate on those new borrowings?

And then maybe just a technical one the borrowings you added in the quarter what was the rate on those new borrowings.

Yeah. So we did a mixture of borrowings in the fourth quarter.

Speaker 7: Yeah, so we did a mixture of borrowings in the fourth quarter. The longer term borrowings we put on were three year at approximately 134%, 1.34%. And then we did have some short term borrowings that were overnight or weekly rate.

We the longer term borrowings we'd put on were three year at approximately a 134%, 1.34% and then we did have some short term borrowings.

You know that we're at the overnight or weekly right.

Great. Thank you.

Speaker 4: Thank you. Our next questions come from the line of Steve Moss with B Riley. Please proceed with your questions.

Thank you our next questions come from the line of Steve Moss with B Riley. Please proceed with your questions.

I wanted to say good morning.

Maybe just.

Speaker 8: Following up on one growth here, curious, you know, you sound pretty upbeat about loan growth expectations, Tom, and just wondering, you know, how you're thinking about 22 years.

Paul.

On loan growth here curious.

You sound pretty upbeat about loan growth expectations, Tom and just wondering how youre thinking about 'twenty two here.

Great Great question I mean, yes, we're very upbeat I will tell you that our people are really busy the fourth quarter was an active quarter and it continues in Q1. So if you look at the pipeline you know north of 2 billion 2.2 billion of which almost 70% of its new money new money pipeline.

Speaker 1: Great, great question. I mean, yes, we're very upbeat. I will tell you that our people are really busy. The fourth quarter was a

Speaker 1: an active quarter and it continues in Q1. So if you look at the pipeline, north of 2.2 billion, which is almost 70% of its new money pipeline, it's an active period. We're seeing significant activity on the anticipation of higher rates.

It's an active period, we're seeing significant activity on the anticipation of higher rates.

Speaker 1: We're hearing many property transactions that are in the market that face significant change. You didn't see that even pre-pandemic, so the fact that property transactions are occurring.

Many property transactions that are in the market that's a significant change.

That was going we didn't see that even pre pandemic. So the fact that property transactions are occurring there. That's a very good sign you talked a little bit about Manhattan, how the market has come back significantly.

Speaker 1: uh... there that that is a very good sign we talked a little bit about manhattan how the market has come back significantly

Speaker 1: We really haven't done much on the pure CRE side, so multifamily has been our focus as well as specialty finance.

Really haven't done much on the steel or the pure CRE sides of multifamily has been our focus as well as a specialty finance, but it feels like the market is seeing a lot more property transactions in our pipeline is very strong as far as growth for the year I mean normally around this time, you kind of target, 5% I'm I'm moving towards more upper single digits as we start the year.

Speaker 1: But it feels like the market is seeing a lot more property transactions, and our pipeline is very strong. As far as growth for the year, I mean, normally around this time we kind of target 5%. I'm moving towards more upper single digits as we start the year, given the significant Q1 pipeline, which is not typical for us. Typically, you know, we have a strong Q4, like we anticipated, in 21. And then we kind of have a little bit of a slowdown Q1, and we ramp up. But it's coming out of the gate very strong.

The significant Q1 pipeline, which is not typical for US typically you know we have a strong Q4 like we anticipated in 'twenty, one and it would be kind of have a little bit of a slowdown do you wanna be ramp up but it's it's coming out of the gate very strong.

Okay.

Speaker 1: Okay. And the rate environment is strong. The spreads are between 185 to 200 over the five year for shorter duration paper, which has been very, very, very good for us given the shape of the curve. Even though it's come down a little bit in the back end, it seems like the portfolio lenders will have an advantage here versus GSE is just given the shape of the curve.

The rate environment is strong the spreads between 185 to 200 over the five year for shorter duration paper, which has been a very very very good for us given the stay.

But the credit even though it's come down a little bit in the back end. It seems like the portfolio lenders will have an advantage here versus GSE is just given the shape of the curve.

Okay. That's that's helpful. I was doing my next question.

Speaker 8: Okay. That's helpful. That was going to be my next question. And then in terms of, you know, the pro forma combination with Flagstar, maybe just following up on the assumptions here since it's been a little bit delayed, you know, I hear you on the buyback given higher capital levels. Just kind of curious if there are any other changes in terms of thoughts around balance sheet restructuring or things you may do as you combine here.

And then in terms of you know the pro forma combination with flagstar, maybe just following up on on the assumptions here since it's been a little bit delayed I you know I hear you on the buyback given higher capital levels, just kind of curious if there any other changes in terms of thoughts around balance sheet restructuring or or things you may do as.

As you combine here.

Speaker 1: You know, look, we're very excited about the opportunity. We talked about, you know, reactivating the repurchase activity. That's just a function of capital training going forward.

Yeah look we were very excited about the opportunity you talked about you know reactivating the repurchase activity. That's just a function of capital planning going forward. If you look at the pro forma capitalization as John indicated we had more capital based on their higher earnings profile since we announced the transaction. They made more money to capital Carbos had built up I think on a pro forma basis at just south of <unk>.

Speaker 1: If you look at the pro forma capital position, as John indicated, we have more capital based on their higher earnings profiles since we announced the transaction. They made more money. That's what a conference had built up.

Speaker 1: I think on a pro forma basis, we're just south of 11% on CET-1, so that's a pretty big ratio that we're typically on a standalone basis not accustomed to, so that's going to give us a lot of capital maneuverability as we make choices and how we reallocate capital. So reactivating the buyback obviously was really a function of the marketplace.

7% of CET, one so that's a pretty big ratio that would typically on a standalone basis, not accustomed to but that's going to give us a lot of capital maneuverability as we make choices and how do we reallocate capital. So reactivating. The buyback obviously was it was really a function of the marketplace and our vision as we allocate capital on a combined basis back to.

Speaker 1: and our vision as we allocate capital on a combined basis back to shareholders.

Shareholders are we have a very strong dividend and that will continue but at the same time, it's companies that generate a lot of capital and as Mr. Derenzo indicated theres no adjustment towards the earnings profile on a combined basis. So if you think about what we talked about when we announced the deal. There's a lot of excess capital is going to come out of this company on a combined basis.

Speaker 1: We have a very strong dividend that will continue, but at the same time, this company is going to generate a lot of capital. As Mr. Pinto indicated, there's no adjustment towards the earnings profile on a combined basis. If you think about what we talked about when we announced the deal, there's a lot of excess capital that's going to come out of this company on a combined basis.

Okay as far as we have turnover.

Speaker 1: And just go back to the restructuring side, we're going to look at it opportunistically. When the companies come together, we have a lot of flexibility, depending on how large mortgage as a service could actually become. I think it could be a material number as we dive into their clientele and look at the excess liquidity that's in the marketplace that we can harbor on our combined balance sheets. That can give us a lot of flexibility to get away from some of the other dependencies of fundings that were typically utilized historically. So I think we can have a more stable funding position as we roll out mortgage as a service. How they do it now on a combined basis can be very material for the company and gives us lots of funding options as we combine.

And just to go back to the restructuring side that we're going to look at it opportunistically when the companies come together, we have a lot of flexibility depending on how large a mortgage as a service could actually become I think it's I think it could be a material number actually dive into their clientele and look at the excess liquidity. That's in the marketplace that we can hover on a combined balance sheets that can give us a lot of flexibility to get.

[noise] away from some of the other dependencies of fundings that we typically utilize historically, so I didn't have a more stable funding position as they rollout mortgage as a service how they do it now.

I'm blind basis can be very material for the company and gives us lots of funding options as we combine.

Okay, Great and then maybe just on the Flagstar side question for me just kind of as we think about.

Just what was the mix of purchase versus refi and just kind of curious as to direct lending I know, there's a pretty.

Healthy amount of volume and you know your highest gain on sale margins just kind of color on some of the market dynamics there.

Yeah, no problem at all I mean, if you look at the light Spammy, Freddie and MBA forecast there are forecasting a three trillion dollar mark hitting 2022, but the composition is flipping to being two thirds purchase.

Speaker 6: Yeah, no problem at all. I mean, if you look at the latest Fannie Freddie and NBA forecasts, they're forecasting a $3 trillion market in 2022. But the composition is flipping to being two thirds purchase.

Speaker 6: one third refi and it was the opposite in 2021 it was two thirds refi one third purchase.

One third refi and it was the opposite in 'twenty. One it was two thirds refi once the purchase I think look the big variable in this easy inflation and the fed has been very clear.

Speaker 6: I think, look, the big variable in this is inflation and the Fed has been very clear.

Speaker 6: this is their immediate priority, which could lead to additional interest rate hikes in 2022, and at some point that could start to impact affordability.

This is their immediate priority, which could lead to additional interest rate hikes in 2022 and at some point that could start to impact affordability.

Speaker 6: And again, a $3 trillion mortgage market, while very strong, it's still a 25% reduction on 2021, so there is still excess capacity in the system.

And again, you know three trillion dollar mortgage market, while very strong you know, it's still a 25% reduction on 2021, so the re still excess capacity in the system. We will continue to leverage our diversified mortgage business given we originate in all six channels, you mentioned direct lending where.

Speaker 6: You mentioned direct lending, we're investing in technology to enable us to originate more purchase business.

In fixed and in technology to enable us to originate more purchase business are in the direct lending channel, we're going to rely on our broad product offerings. The benefit we have of the execution of our optionality afforded to us by being a bank, having a balance sheet. The RMB X program as well as the <unk>.

Speaker 6: uh... in the direct lending channel uh... we're gonna rely on our broad product offerings the benefit we have of the execution of uh... optionality afforded to us by being a bank having a balance sheet, the RMBS program as well as the sale program

<unk> program, we've built a variable cost structure, 70% to 75% of our costs are variable or semi variable I mean coming back to what Tom said, you then got all the benefits of merging with them, while I see a bigger balance sheet additional capital on a broader footprint. So we feel we feel.

Speaker 6: We've built a variable cost structure, 70 to 75% of our costs are variable or semi-variable. And then coming back to what Tom...

Speaker 6: you've been got all the benefits of merging with n y c p bigger balance sheet additional capital on a broader footprint so uh... you know we feel we feel pretty good uh... about twenty twenty-two albeit

Pretty good about 2022 , albeit you know we've got a I think we're all sort of looking at inflation and how the fed is going to react to counteract that.

Speaker 6: You know, we've got to, I think we're all sort of looking at inflation and how the Fed is going to react to counteract that.

Alright, Thank you very much I appreciate all the color.

Sure.

Thank you. Our next question is come from the line of Brock Vandervliet with UBS. Please proceed with your question.

Speaker 4: Thank you. Our next question has come from the line of Brock Vander Vliet with UBS. Please proceed with your question.

Speaker 9: Morning, Brock. Thank you. Hey, good morning. Good morning.

Morning, Brock well, thank you hey, good morning, good morning.

<unk>.

Speaker 9: You mentioned cost-based on the Flagstar side, variable or semi-variable. I noticed mortgage expenses dropped just $4 million. You know, gain on sales under pretty heavy pressure here. Is there?

You mentioned the cost base on the flagstar side.

Variable or semi variable I noticed mortgage expenses drop just $4 million gain.

Gain on sales under pretty heavy pressure here is there.

Speaker 9: There are some offsetting expenses that we would expect to come out in Q1.

Is there some offsetting expenses that we would expect to come out in.

In Q1.

Yeah. He is.

Yeah, Yeah, you're talking about on the mortgage side for all specific like yeah, Yes, yeah, yes, yeah look here's what I'd say as it relates to costs on the mortgage side, we will be proactive in adjusting capacity as necessary. We built these flexible capacity model to scale up or down with volume that leverage is third.

Speaker 6: Yeah, are you talking about on the mortgage side, Brock, specifically? Yeah, yes, specifically, yes. Yeah, here's what I'd say. As it relates to costs on the mortgage side, we will be proactive in adjusting capacity as necessary. We built this flexible capacity model to scale up and down with volume that leverages third party vendors, we've cross-trained our existing staff.

Holly vendors, we've cross trained our existing staff, 70% to 75% of variable or semi variable.

Speaker 6: and 70 to 75 percent are variable or semi-variable.

Speaker 6: And then we've got scale, right, and the beauty of our platform is that helps a lot, and we've proven our ability historically to manage costs depending on where volumes and revenues are. What I would say to you, though, is in Q1, you don't want to react too quickly as you're going into spring buying season. And so we do want to sort of see how things play out in February and March going into April to see if that bump is there, because as I mentioned earlier, we're still looking at a $3 trillion market here, and it's pivoting to purchase.

And then we've got the scale Roy and the beauty of our platform is that helps a lot and we've proven our ability historically to manage cost depending on where volumes and revenues are what I would say to you. Though in Q1, you don't want to react too quickly because you're going into spring Boeing so.

And so we do want to sort of see.

How things play out in February or March going into April to see fat bump piece, there because as I mentioned earlier, we're still looking at a three trillion dollar market.

And it's pivoting to purchase so we want to watch that but at the same time, we've got these variable cost.

Cost structure in place and we will manage costs, accordingly, and depending on what's happening to revenues.

And if I could jump in here on this this is sandro.

Page 14 of our deck has a has a chart there that shows the mortgage expense and you can see it's relatively stable as a percentage of closings quarter over quarter. The thing I would remind you.

Speaker 10: Page 14 of our deck has a chart there that shows the mortgage expense, and you can see it's relatively stable as a percentage of closings quarter over quarter. The thing I would remind you of is that

Is that.

Gain on sale is.

Speaker 10: Gain on sale is based on the lock date.

Based on the lock date.

Speaker 10: Expenses come in when we close so there so there's a little bit of an imbalance sometimes there But but overall when you look at it from a 12-month perspective Typically the expenses are going to be in that 1% to 1.15 percent range of Closings and that as Leah said that's been very very stable historically and so we will manage to that kind of expense level

Expenses come in when we close so there so there's a little bit of an imbalance, sometimes there, but but overall when you look at it from a 12 month perspective, typically the expenses are going to be in that 1% to 1.15%.

Range of closings and that as Leah said, that's been very very stable historically, and so we will manage to that kind of expense levels.

Got it and I don't mean to beat up on Flagstar expenses, because it's you know the mortgage trends, we're seeing across the sector I just I.

Speaker 9: I got it, and I don't mean to beat up on Flagstar expenses because it's, you know, these mortgage trends we're seeing across the sector. I just, I guess I'm struggling with the accretion.

I guess I'm struggling with the accretion.

Speaker 11: assumptions in the transaction in the merger given

Assumptions in the transaction and the merger given.

Speaker 1: you know, this diminished earnings power we're seeing into, you know, into, well, Q4, but probably into 2022. Let me follow up on that point. I mean, remember when we came together with our joint press release when we announced the deal, we assumed 2022 forecast down 40% on our model. And they had a tremendous 2021 year. If you forecast that into the run rate, you know, we're very comfortable that our guidance out there is solid.

This diminished earnings power or seeing into sorry into Q4, but probably ended and people.

Let me follow ups first let me follow up on that point you remember when we came together with a joint press release, when we announced the deal we assume 2022 forecasts down 40% on a model and they had a tremendous 2020 or 21 year.

If you forecast that into the run rate.

Very comfortable that our guidance out there is solid.

Speaker 10: Okay. All right. Yeah, I would add that. I would add that. I mean, if you look at overall Flack Star results, while there is certainly some disappointment with the mortgage results for Q4.

Okay Alright.

Alright, yes, I would add that I would add that I mean, if you look at overall flagstar results, while while there's certainly some disappointment with the mortgage results for Q4.

<unk>.

Speaker 10: The numbers overall are strong, right? We didn't miss on earnings, despite the level of revenue in the mortgage business. Return on equity was strong. Now we're not, sometimes we're viewed as a mortgage company. We're not, you know, we really are a bank and the returns that we've produced.

The the numbers overall are strong right, we didn't we didn't miss on earnings.

The level of revenue in the mortgage business return on equity was strong.

Sometimes we're viewed as a mortgage company. We're not you know we're really are a bank and the returns that we produce in times, where mortgage is challenging I would ask you to look back to 2018 in 2019 when the revenue in the mortgage business was more like what you saw in <unk>.

Speaker 10: In times where mortgage is challenging, I would ask you to look back to 2018 and 2019 when the revenue in the mortgage business was more like what you saw in Q4, and we still had strong returns on equity, and we still have that in Q4. And if you look in between when the mortgage market was

Q4, and we still had strong returns on equity and and and we still have that in Q4, and if you look in between when the mortgage market was extremely robust and we have.

Speaker 10: extremely robust, and we had returns that were double our peers.

Returns over double our peers. So I don't think you should view that.

Speaker 10: So I don't think you should view the current situation in the mortgage.

Current situation in the mortgage business is one that that causes flagstar subito flagstar is returns to be.

Speaker 10: as one that causes Flagstar's returns to be less than what you would be satisfied with. We're completely confident that

Less than what you would be satisfied with where we're completely confident that.

Speaker 10: the company's performance is going to continue to be at the top end of the mid-sized bank range as a stand-alone company.

The company's performance is going to continue to be at the top end of the midsize bank ranges as a Standalone company.

Speaker 1: That's right. I would also add to Sancho's commentary that obviously in a rising rate environment, we will look to utilize our balance sheets for growth. I mean, obviously the 400 locations.

Yeah, that's right.

I would also have to sign Joe's commentary that obviously in a rising rate environment, we will look to utilize our balance sheet for growth I mean, obviously, the 400 locations on retail plus the 87 locations on origination that we expand upon in our product mix, we will start looking at portfolio and some of these higher yielding type loans on the balance sheet as well.

Speaker 1: on retail, plus the 87 locations on origination that we expand upon in our product mix, we will start looking at portfolioing some of these higher yielding type loans on the balance sheet as well. And I think when you think about growth, going back to our original forecast, the growth was de minimis when we performed this transaction back in April , as we get to know each other here throughout.

And I think when you think about growth going back to our original forecast, but both were de Minimis suddenly pro forma this transaction back in April as they get to know each other he has to ops.

Speaker 1: a merger integration process, we believe we have significant potential to go together to build out this business.

Merger integration process, we believe we have significant potential together as they build out this business.

Okay. Thank you.

Thank you our next questions come from the line of David Rochester with Compass point. Please proceed with your questions.

Speaker 4: Thank you. Our next questions come from the line of David Rochester with CompassPoint. Please proceed with your questions.

Hey, good morning, guys.

Speaker 12: Just a quick question for Sandro and Lee. I know you guys had mentioned a normalized mortgage add per quarter of $150 million. It's maybe more of a target or something you thought you could do. Just given the gain on sale hit that we've had this quarter to $91 million in your guide for something similar, maybe a little bit better, it sounds like, in one cue. Are you thinking that $150 million might actually end up coming in a little bit lower? And then part two, just given your outlook on rates.

Just a quick question for Sandro and Lee I know you guys had mentioned a normalized mortgage add per quarter of $150 million, maybe more of a target or something you thought you could do.

Just given the given the gain on sale hit that we've had this quarter to $91 million in your guide for something similar maybe a little bit better. It sounds like in <unk> are you thinking about $150 million might actually end up coming in a little bit lower.

And then part two just given your outlook on rates and your knowledge of the seasonality of the business and what not are you expecting some kind of a pickup in that gain on sale in Q2 or is it too soon to tell at this point.

Speaker 12: and your knowledge and seasonality of the business and whatnot. Are you expecting some kind of a pickup in that gain on sale in 2Q or is it too soon to tell at this point?

So let me, let me start and Lee can add if he'd.

Speaker 10: So let me start, and Lee can add if he'd like. Certainly, 150 is the target. And when you annualize that to get to 600, that's really where we would love to see it. But we believe that if it's less than that.

Mike.

Certainly $1 50 is the target and.

And when you annualize that.

To get to 600, that's really where we would love to see it but we believe that if it's less than that and then as I said in a.

Speaker 10: then, as I said in response to the previous call, that if that's what's going on in mortgage, then there's other things that are compensating for that in the other parts of the business.

In response to the previous call that if that's what's going on in mortgage and Theres. Other things that are compensating for that in the other parts of the business, where we're we're very confident about the growth of our banking business lifetime.

Speaker 10: about the growth of our banking business. Like Tom indicated with NYCB, our commitments are growing at a very strong level. Our pipeline is very, very robust.

Indicated with N Y C. B are our commitments are growing at a very strong level. Our pipeline is very very robust. So as we look forward, we think that given the high quality of credit that we have the control that we're maintaining over expenses overall as a percentage of our revenues are.

Speaker 10: So, as we look forward, we think that given the high quality of credit that we have, the control that we're maintaining over expenses overall and the percentage of our revenues are going to allow Flagstar, regardless of whether mortgage or gain on sale is 100 or 150 average per quarter.

Then allow flagstar, regardless of whether mortgage.

Gain on sale is 100 or 150 average per quarter.

Speaker 10: put us in a position, as I said previously, to continue the level of earnings that we reported previously. Because while all of this has been going on over the last two years, with mortgage being extremely strong, we've been quietly building everything else.

Put us in a position as I said previously to continue the level of earnings that we report.

Previously because while all of this has been going on over the last two years with mortgage being extremely strong we've been quietly building everything else in the company. So now we're positioned where we can still be very very profitable.

Speaker 10: So now we're positioned where we can still be very, very profitable in a quarter like Q4, where gas was precious.

In a quarter like Q4, where gas was was pressure.

Yeah.

Speaker 12: Okay, and then in terms of how you're thinking about 2Q and maybe a pickup there?

Okay, and then in terms of how you're thinking about <unk>, maybe a pick up there.

Speaker 10: Yeah, yeah, actually, let me, yeah, we won't go to to Q, we can give you a little little feeling about one cue.

Yeah, Yeah, absolutely let me.

That said, we won't go to <unk>, we can give you a little little feeling about <unk>.

Speaker 6: Yeah, no, I was going to just piggyback off of Sandra's comments. I agree with that. I think the target that we put out, you can break it down to the 150, but it's really more of an annualized target if we can get to 550, 600.

Yeah, No I was gonna always just kind of I was going to just piggyback off of <unk> comments I'll agree with that I think the target that we put out you can break it down to the 150, but it's really more of an annual always talk if we can get to 550 600.

But as we said we've got a variable cost structure and so we see decent there we will manage the cost side appropriately I think to Sandro <unk> point.

We've always had it when we built these diversified bank our flagstar that has enabled us to produce strong earnings whatever's going on with mortgage and where mortgages hawk than average returns are out so we're going to be even more diversified when we come together with New York Community Bank.

Speaker 6: strong earnings, whatever's going on with mortgage, and when mortgage is hot, then our returns are outsized, we're going to be even more diversified when we come together with New York Community Bank. And I think that is the power of this transaction. This franchise together can be successful in any interest rate environment.

And I think that used the power of these transaction. This franchise together can be successfully in any interest rate environment I don't want to look into Q2, because again right now there's just a lot going on from a macroeconomic point of view we've inflation.

Speaker 6: I don't want to look into Q2 because, again, right now, there's just a lot going on from a macroeconomic point of view with inflation and what the Fed is going to do to react to that. So we're just guiding to Q1 being similar or slightly better than Q4 from a gain-on-sale point of view.

The fed is going to do to react to that so we're just going into Q1 being similar or slightly better than Q4 from a gain on sale point of view.

Hum.

Great appreciate the color guys and then Tom.

Speaker 12: Great, appreciate the color guys. And then Tom, what's the outlook on on one, two expenses at this point? And I know you've occasionally talked about your full year view on expenses in the past. If you have any thoughts on a standalone basis as to what that expense base to look like.

What's the outlook on O&M expenses at this point and I know you've occasionally talk about your full year view on expenses in the past if you have any thoughts just on a standalone basis.

As to what that expense base to look like.

Speaker 1: Sure Dave, obviously 2021 we came in better than we expected for the year.

There are obviously 2021, and we came in better than we expected for the year I don't see it on a standalone basis any significant uptick in expenses I mean for the year will probably got around 540 for the year that range. What she is probably conservative but again, we were very hopeful that C code flagstar. This will be a moot point, because we're gonna be.

Speaker 1: I don't see on a standalone basis any significant uptick in expenses. I mean for the year we'll probably guide around $540 for the year, that range.

Much larger company, but on a standalone basis $5 40 is probably a good guide I would say for the first quarter expenses are usually the high quarter of the year, given FICA and payroll taxes of 135 guide for Q1, and then coming down in Q2, and you can kind of tie out to $5 40 for the year.

Perfect.

And then if you just give an update on what.

What you're seeing on our new loan yield basis multifamily.

Specs in that sort of thing and then maybe securities reinvestment rates I know, you're not growing the portfolio, but as you sort of maybe stabilizing at year was just curious where you're buying securities.

I'll give some color on alongside another photo Jonathan on the security side I will tell you that we've been not really buying any securities at all but we've been keeping the powder dry for years. So there will be potentially an opportunity depending on market conditions, but we've been reluctant to take on duration risk given the current environment I will tell you in the fourth quarter.

Speaker 1: to take on duration risk given the current environment.

Speaker 1: I will tell you, in the fourth quarter, the gyration of the yield curve really, I think, woke up a lot of our customers, so spreads have held in very nicely. We've had rates as high as $350-ish in the five-year and down to as low as $308, so it's been a range, but that $185 to $200 basis point spread on our core model has been holding very well. So, obviously, you know, we watch the Treasury curve every day. That's our business model when we tie out as a portfolio lender. What's been interesting, David, is that when you think about the back end of the curve and you look at the choice of a portfolio loan versus an agency loan, it looks like agency has been struggling, just given the dynamics of the cost of coupon. So we've been winning a lot of good business.

The the gyrations of the yield curve really are I think woke up a lot of our customers. So spreads have held in very nicely. We've had rates as high as 350 ish in the five year and down to as low as three and eight so it's been a range right at 185 to 200 basis points spread on our core model has been holding very well.

So obviously, we watch the treasury curve every day, that's our business model and we won't be tie out that's a portfolio lender what's been interesting David is that when you think about the back end of the curve and you look at the choice of a portfolio alone versus an agency loan and it looks like aliens. The agency has been struggling just given the dynamics of the cost of coupons. So we've been winning a lot of good business.

That continues so spreads are holding up very nicely, we talked about the anticipation of a probably more growth than we anticipated from the previous year going into 2022, you know post.

Post Covid. This has been a very robust property transaction environment talk to the brokers in the market. There is stuff. That's that's transacting that a significant a lot of transactions that are in place right. Now we're seeing some great opportunities our customers have been very proactive leveraging their operating.

Spence space to look at other markets. So we're choosing to work with our best customers outside of the New York market that has all kinds of saturating and looking at other opportunistic markets and we're following them. So it's good to see some good transactions as he talked about on a cash flow perspective, you know cap rates are relatively stable and and and and the spreads are holding up very nicely.

Speaker 1: So it's good to see some good transactions. As we talked about on the cash flow perspective, you know, cap rates are relatively stable and the spreads are holding up very nicely. So we're very ambitious about seeing some good multifamily growth. We've been a little bit hesitant on the commercial real estate. We haven't seen a whole lot of CRE business.

Speaker 1: You know, cap rates are relatively stable and the spreads are holding up very nicely. So we're very ambitious about seeing some good multifamily growth. We've been a little bit hesitant on the commercial real estate. We haven't seen a whole lot of CRE business. But you know, from time to time while we finance our current customer base, on the specialty side, we think we have tremendous pent-up demand. I know in my opening comments, we talked about the outstanding commitment in totality with just under six billion. That business started from zero a few years ago and it's been a great business model. I think there's opportunity there on potentially on the funding side that we hope to deal with over time. But we're really a credit buy up shop there, but ultimately as we merge with Flagspell.

They are very ambitious about seeing some good multifamily growth, we'd been a little bit hesitant on the commercial real estate, we havent seen a whole lot of CRE business, but you know from time to time, we'll refinance our current customer base on the specialty side. We think we have tremendous pent up demand I know in my opening comments he talked about the outstanding commitment commitments in totality with just under 6 billion that business.

Speaker 1: But, you know, from time to time, while we finance our current customer base, on the specialty side, we think we have tremendous pent-up demand. I know in my opening comments, we talked about the outstanding commitment in totality, which is under $6 billion. That business started from zero a few years ago, and it's been a great business model. I think there's opportunity there, potentially on the funding side, that we hope to deal with over time. But we're really a credit buy-up shop there. But ultimately, as we merge with Flagstaff and we take their syndicate division collectively, we should be winning our own deals.

Got it from zero, a few years ago, and it's been a great business model I think there's opportunity that on potentially on the funding side that we hope to to deal with over time, but we're really a credit buy up shop, there, but ultimately as we merge with flagstone, we take their syndicate.

Division collectively we should be winning our own deals and maybe being being a leader in putting deals together and controlling some of those deposit relationships, but we're excited about especially I think specialty had a year of 15% I think we went into the into the fourth quarter at 10. So that's been a big bump above the jump there I think a lot of it has to do with the pent up demand and the supply.

Speaker 1: and maybe being a leader and putting the deals together and controlling some of those deposit relations.

Speaker 1: But we're excited about specialty. I think specialty had a year of 15%. I think we went into the fourth quarter at 10. So that's been a big bump, a jump there. I think a lot of it has to do with pent-up demand on the supply chain. That's going to be big for us in 2022. So there's a lot of money that's out there, that's outstanding, that hasn't been drawn down yet. That can also bode well for additional growth within specialty. So excited about the spreads there. Again, mostly floating-rate type instruments. So in a rising-rate environment, we'll benefit from that. I think it's around 60%, 70%.

Chain, that's gonna be big for Us in 2022, so there's a lot of money that's out there that's outstanding that hasnt been drawn up hasn't been drawn down yet or that can also bode well for additional growth within specialty so excited about the spreads there.

Mostly floating rate type of instruments from a rising rate environment will benefit from that I think it's around 60, 70% of the <unk>.

Speaker 1: of the entire portfolio that reprices with rising rates. So the bank is somewhat differently positioned now than historically it's been as a traditional growth model. So we hope that as we get more towards neutrality with Flagstar, we see asset sensitivity, which would be a nice mix in a rising rate environment.

Hi portfolio that'd be prices.

With the with rising rates. So the bank is somewhat differently position now than historically, it's been as a traditional thrift model. So we hope that as we get more towards neutrality with flagstar, we see asset sensitivity, which would be a nice mix in a rising rate environment.

Alright sounds good thanks, guys.

And just on the security side stays instead of just to go back to that.

Speaker 1: I just thought on the security side, Dave, just to go back to that, yields are all that they are. I mean, when they start getting closer to 3 percent, we'll probably wake up, but we've been very quiet on the security side.

Yes.

They are I mean, when they start getting close to the three per sample will probably wake up but we've been very quiet on the security side.

Yep, Okay great.

Thanks.

Thank you. Our next question is coming from the line of Peter Winter with Wedbush Securities. Please proceed with your questions.

Speaker 10: Thank you. Our next questions come from the line of Peter Winter with Wedbush Securities. Please proceed with your questions. Morning, Pete. Morning. Morning, Tom. I wanted to ask about credit quality, which obviously is always a great story for you guys. You had another nice decline in the principal deferral loans. I'm just curious what happens with the remaining $480 million of deferrals with the CARES Act getting exhausted in the next few months.

Good morning, Pete Good morning, Good morning, Tom.

I wanted to ask about credit quality, which obviously is always a great story for you guys. You had another nice decline in the principal deferral loans.

I'm just curious what happens with the remaining.

$480 million of deferrals with the cares act are getting exhausted in the next few months.

Speaker 1: Great question. We looked at this rolling into COVID-19. We had about 8.7 billion. We were very generous.

Yeah, Hey, Great question, you know we looked at this one went into COVID-19, you had about $8 7 billion and we were very generous when we looked at all Kids program Cashback program. We gave six months deferral right out of the gate you know full deferrals. Many customers came back within a quarter and so we don't need a cluster there was no change in the non luxury market people want exiting their.

Speaker 1: When we looked at our CARES program, CARES Act program, we gave.

Speaker 1: six months deferral, right out of the gate, you know, full deferrals. Many customers came back within a quarter and said, we don't need it. Cause there's been no change in the non-luxury market. People weren't exiting their apartments for the non-luxury market. So we went through a very interesting journey during COVID. And where we stand today, come July , we should have close to zero. And because obviously the CARES Act runs out. When you think about that, it's been a very positive experience of working through the other side for our customers.

<unk> put a non Muslim market. So we went through a very interesting journey during Covid, let me stay.

And today it come July we should have close to zero.

Because obviously the cares act runs out when you think about that it's been a very positive experience of working through the other side for our customers I know in my opening commentary, we talked about lease up as you know what we're seeing right now in the cares Act that's remaining I'd say.

Speaker 1: I know in my open commentary, you know, we talked about lease-ups, you know, what we're seeing right now in the CARES Act.

Speaker 1: That's remaining, I'd say, of the percentage of Manhattan, it's probably 90 percent. Is that right, John ? Close to 90 percent of what's in deferral is Manhattan. So outside of Manhattan, it's been a very strong recovery there on utilizing the CARES Act relief program.

[noise] of Manhattan, It's probably 90% is that right John at close to 90% of the whats in deferral as Manhattan. So outside of Manhattan, It's been a very strong recovery there.

Utilizing the cares act relief programs.

Speaker 1: I envision that we'll have zero loans on deferral come July , maybe June or July of this year. At the same time, when you think about what's going to happen as far as the pandemic, what does it mean for the overall asset quality of the bank, we have more than adequate reserves based on CECL. And we think we're going to probably deal with maybe $100 million a year.

I envision that that will have zero loans on deferral come July maybe June or July of this year at the same time, when you think about what what's going to happen as far as the pandemic what does it mean for the overall asset quality of the bank and we have more than adequate reserves based on seasonal and we think we're gonna probably deal with maybe you know.

$100 million of stuff at the end of the day, which is pretty good for 60 billion dollar bank and we got $40 million of MTA. So we're very pleased with the asset quality. You know, we had a little snafu last quarter with a customer and they've worked itself out.

Speaker 1: at the end of the day, which is pretty good for a $60 billion bank, and we have $40 million of NPAs. So we're very pleased with the asset quality. You know, we had a little snafu last quarter with a customer, and it worked itself out, like we were very confident. We're very confident of collateral. We are a low-leverage lender. You know, as you know, the LTVs historically are.

Very confident we're very confident in our collateral.

Low leverage lender you know as you know the Ltvs historically are typically lower than the marketplace, where our in place cash flow lender most of our businesses.

Speaker 1: typically lower than the marketplace. We're an in-place cash flow lender. Most of our businesses, you know, we'll call it a rent-stabilized and non-luxury-type market in the five boroughs. And we're very confident that in the event there is a hiccup, we have very good collateral to cover ourselves. And believe me, we tested that in Q4, and we came out very strong, given our positioning. As you can see, that relationship became current.

We'll call it.

It's been stabilized in a non luxury type market and in the five boroughs and we're very confident that in the event. There is a hiccup we have very good collateral to cover ourselves and believe me we tested that in Q4 and it came out very strong given our positioning as you as you can see that relationship became content. So we're very bullish about where we go on asset quality.

Speaker 1: So we're very bullish about where we are in asset quality. And part of my discussion points or my opening remarks is that that's part of the rationale on coming out of COVID-19, this portfolio is very strong.

Part of my my discussion points on my opening remarks is that that's part of the rationale on coming out of COVID-19. This portfolio is very strong.

Got it that's helpful. And then just as a follow up question can.

Speaker 10: Got it, that's helpful. And then just as a follow-up question, can you just give an update on the strategic partner with FIGURE?

Can you just give an update on the strategic partner with figure.

Speaker 9: Does the real benefit really kick in when you close the merger with Flagstar and just

Or does the real benefit really kick in when you closed the merger with Flagstar and just how you're thinking about it in terms of maybe potential deposit growth.

Speaker 1: How are you thinking about it in terms of maybe a potential deposit growth as well? Let me just be specific. I don't know. I don't know. I don't know.

So let me just be specific we're not going to be explicit exactly what we're doing with things. We're doing at all I was thinking that we were working on a daily projects. We have a lot of interesting things happening as you saw recently I'm sure you saw the U S. D. F consortium has been formed efficiently I believe we have five member banks now that are the founding members we happen to be.

Speaker 1: Explicit exactly what we're doing with FIGS, we're doing a lot with FIGS, we're working on a daily project, we have a lot of interesting things happening. As you saw recently, I'm sure you saw the USDF consortium has been formed officially. I believe we have five member banks now that are the founding members, we happen to be the lead there. That's going to be a very interesting view on digital markets via stablecoin, USDF.

The lead there that's going to be a very interesting view on digital market is the stable coin no U S. D F. A fiat currency. So we believe that that that working group is very powerful as we continue to add more members. Its an ongoing daily function. Both at compliance audit legal our entire operating team is spending a good good good.

Speaker 1: fiat currency, so we believe that that working group is very powerful as we continue to add more members.

Speaker 1: It's an ongoing daily function both at compliance, audit, legal, our entire operating team is spending good efforts on making sure that we work with our regulators to come up with a solution to deal with this opportunity on PRC

Afterwards on making sure that we work with our regulators to come up with a solution to deal with this.

This opportunity on Fiat currency.

Speaker 1: We've data tested multiple occasions on live transactions. It's been working out very well. We just did interoperability between multiple banks at the same time. That's a big plus. That's the first time it's ever happened in the banking industry. Although it's not a material transaction, but we did test interoperability amongst banks to move from mint and burn amongst each other banks. That's a big.

Data tested multiple occasions on live transactions, it's been working out very well, we just had our interoperability between multiple banks at the same time, that's a big.

Plus it's the first time, it's ever happened in the banking industry, although it's not a material transaction that we did test it.

Operability amongst banks to move up to mention Brian amongst each other banks, that's a big step towards solving for the U S. D F and at the same time, you know we deal directly with the principle that figure on business users and we haven't been public specifically I went out of business case used to be we have a number of initiatives as you mentioned the mortgage.

Speaker 1: step towards filing for the USDF. At the same time, we deal directly with the principal and figure on business use. We haven't been public specifically on what our business case use will be. We have a number of initiatives, as you mentioned, mortgage. We believe just on the financial transaction side, as Lee indicated, they do a lot of...

We believe on that on just on the financial transaction side as I've indicated they do a lot of secondary market activity, putting that on the blockchain is logical right.

Speaker 1: Secondary market activity putting that on a blockchain is with logical

Speaker 1: It's not on the agency side, but it's on the private label side. That's a very simplistic use of the Providence blockchain via through a relationship with Sigur Technologies. That's one of many things that we're working on. We believe it's going to be an opportunity to deal with potentially our customers, where they can look at a more efficient way to make bill pay to rental payments to our borrowers. This is all part of our long-term plans. We haven't specifically set out a business case use yet. This is an ongoing process, but it's also a focus. The most important focus is to ensure on a regulatory standpoint that we utilize the KYC, the bank secrecy view that we know our customers. And that's the most important aspect of what we have to accomplish here, and we've made tremendous progress there, Pete. I'm not going to give you specific numbers or guidance here. I can tell you every day we come up with new best use case ideas. It's evolving. It's a technology collaboration with a very strong business in figure, and others, by the way. It's not just figures. Others that we're talking to on technology initiatives. We talked about my strategic plan when I became CEO is that we want to digitize the bank.

It's not on the agency side, but it's on the private label side, that's a very simplistic.

All of the provenance blockchain via through our relationship with figure technologies. That's one of many things that we're working on we believe it's going to be an opportunity to deal with potentially are our customers where they can look at a more efficient way to make bill pay to rental rental payments to our borrowers. This is all part.

Our long term plans, we haven't specifically set on a business case you. She had this is an ongoing process, but it's also a focus the most important focus is to ensure on a regulatory standpoint that we utilize the KFC. The bank secrecy view that we know our customers and I think that's the most important aspect of what we have to accomplish here.

We've made tremendous progress that Pete I'm, not going to give you specific numbers or guidance here I can tell you every day, we come up with new use case ideas. It's evolving it's a technology collaboration with a very strong business in figure and others by the way. It's not just there's others that we're talking to on our technology initiatives, we talked about my strategic plan when I became.

C E O S that'd be wanted to digitize. The bank. This bank has a long way to go on Digitization. So we're spending a lot of time with our partner on five serve they've been great as far as a true partnership we're doing some good business relationships with them at the same time. We're also rolling out a tremendous amount of digitalization. We believe that you know my bank interact is going to be another catalyst for further.

Speaker 1: This bank has a long way to go on digitization, so we're spending a lot of time with our partner on Fiserv. They've been great as far as a true partnership. We're doing some good business relationships with them. At the same time, we're also rolling out a tremendous amount of digitalization. We believe that, you know, MyBankingDirect is going to be another catalyst for the company for another use case of bringing in funding at the consumer side, so that could tie into figure technologies as well. So a lot of positive things to talk about. I'm not going to be specific until we actually have something that's live to talk about, but I will tell you, the energy level is very strong, and it's fluid.

Company for another use case of bringing in funding at the consumer side, so that could tie into an end to end it figured technologies as well so a lot of positive things to talk about I'm not going to be specific until we actually have something that's live to talk about but I will tell you. The energy level is very strong and it's fluid.

Got it.

Speaker 13: Thanks for all that color time.

Thanks for all that color Tom.

Sure.

Thank you. Our next question is come from the line of Matthew Breese with Stephens. Please proceed with your questions. Good.

Speaker 4: Thank you. Our next questions come from the line of Matthew Brees with Stevens.

Speaker 14: Good morning. Good morning, Matt. Hey, good morning. Hey, on the Flagstar deal, you mentioned that the community pledge agreement with the NCRC paves the way for the approval process. I guess I want to better understand that comment. Was there an issue on the CRA front, or was there regulatory pressure in this area? And are there any other roadblocks we should be aware of?

Good morning, Matt Hey, Good morning, Hey on the on the Flagstar deal you mentioned that the community pledge agreement with NCR. She paves the way for the approval process I guess I'd better I want to better understand that comment was there an issue on the CRA front or was there a regulatory pressure in this area and are there any other roadblocks, we should be aware of.

Speaker 1: Matt, without getting specific, I want to be very clear about this. This is not unusual for large transactions to embark upon a global pledge agreement. We took this, Sandra and I, with open arms. We hit the ground floor running, going back to the day after we signed the deal. It took a while to get to finalization, but no question, deals of this nature tend to be tied to some very large community group pledge arrangements. I will tell you, the importance of it is historic.

Now without getting specific I want to be very clear about that.

It's not unusual for large transactions to embark upon a global credit agreements. We took this sandro and I with open arms.

Hit the ground for running going back in the day. After we signed the deal struck a while to get to Finalization, but no question deals of this nature tend to be tied to some very large community could pressure arrangements I will tell you the importance of it is it's the worst correct.

We are a major force on multifamily lending and multifamily lending business model will also expand into the market and flagstar. So we've done a lot of great work with A&H D over the years to be irresponsible multifamily lender a player here and because we have the largest portfolio lenders. So the importance of this agreement is significant as far as.

Going forward it is important as far as getting our approvals because this is something that we worked with our community groups without opposition. There was no opposition about us coming together. This was a joint after what Sandro and I personally we spent hours on understanding the needs of our community I think what's exciting about it is that we look at this as have.

Speaker 1: opposition. There was no opposition about us coming together. This was a joint effort with Sandra and I personally. We spent hours on understanding the needs of our community. I think what's exciting about it is that we look at this as having the power of Flagstar's mortgage origination process to actually work with the agency to come up with solutions to better bank communities in need. We think we have some really good initiatives that ultimately we can take this pledge arrangement into a very powerful industry standard that other banks can utilize to do good for America. We truly believe that.

Speaker 1: We spent hours on understanding the needs of our community. I think what's exciting about it is that we look at this as having the power of Flagstar's mortgage origination process, to actually work with the agency to come up with solutions to better...

The power of Flagstar is mortgage origination process to actually work with the agency to come up with solutions to better bank.

And eat and we think we have some really good initiatives that ultimately we can take this pledge arrangement into a very powerful industry standard that other banks can utilize to do good for America and we truly believe that this is an exciting time and I will tell you that it was a very fluid process, but ultimately they got to the finish line and I truly believe in Sanya.

Speaker 1: And we think we have some really good initiatives that ultimately we can take this pledge arrangement into a very powerful industry standard that other banks can utilize to do good for America. And we truly believe that. This is an exciting time. And I will tell you that it was a very fluid process, but ultimately we got to the finish line. And I truly believe, and Sanjo, I don't want to speak to Sanjo, he's on the call, I truly believe this will pave the way for where we have to go to get our transactions moving towards the closing. As we all know, M&A has had somewhat of an extended time period given the Biden executive order that came out in July . And it is what it is. And we work with our regulators. And we really can't get much into any more than that, other than we're excited to come together and we'll work side by side together as a partner with Flagstar to get our deal closed.

Joe I don't Wanna Street, Cassandra 800 call I truly believe this will create blanka, where we have to go to get our transaction moving towards the closing and we all know.

M&A has had somewhat of an extended time period, but given the by an executive order that came out in July and it is what it is and we work with our regulators and we really can't get much into any more than that other than that other than we're excited to come together and we will work on our side by side together as a as a partner with flagstar two to get a deal closed.

Speaker 10: Yeah, just to answer your specific comment regarding CRA, Blackstar just had an outstanding CRA rating. So there is no CRA issue, but certainly getting an agreement of this nature done is an important part of the regulatory approval.

Yeah.

The answer to your specific comment regarding CRA Blackstone just an.

An outstanding CRA ratings. So there is no CRA issues, but we're certainly getting a agreement of this nature done is an important part of the regulatory approval process.

Speaker 14: The other one, just on the regulatory approval process, in the deal filings, there's several other approvals necessary for the deal, including Fannie, Freddie, Ginnie, the Department of Veterans Affairs, State of Texas, and the State of Vermont. I don't know if that I've ever come across a deal requiring those institutions having a say. Can you just discuss the approval process for these other institutions and how do they compare to the standard kind of Fed and FDIC state approvals?

Okay.

The other one just on the on the regulatory approval process and the deal filings there are several other approvals necessary for the deal.

<unk> Fannie Freddie Ginnie the Department of Veterans Affairs State of Texas, and the state of Vermont, I don't know if that I've ever come across the deal requiring dose institutions, having a shay can.

Can you just discuss your premium process for these other institutions and how do they compare to the standard kind of fed and FDIC state approvals.

I think maybe Lee can I believe we have retained those until we can maybe Lee if you want to expand the way we all heard the tools.

Speaker 1: I mean, maybe Lee can, I believe we have retained those approvals, so maybe Lee, if you want to expand on where we are with those approvals.

Yeah, no absolutely so on the mortgage side as it relates to Fannie Freddie G&A FHA U S V I.

Speaker 6: Yeah, no, absolutely, Tom. On the mortgage side, as it relates to Fannie, Freddie, Ginnie, FHA, USDA, VA, we're in good standing. There isn't an issue, and the reason we need those is NYCB is the acquiring entity, because all those licenses are in Flagstar's name at the moment, and they're obviously going to move over to New York Community Bank,

We're in good standing there isn't an issue on the reason we need those he is and what we see but use the acquiring entity.

Because all of those licensees are in flagstar as nine months.

And they're obviously going to move over to New York Community Bank, Okay Theyre all good.

Speaker 6: they're all good uh... we they're just waiting on the regulatory approval but there's no issues and that's the reason why we're having to take that step with each transaction because they're all in five thousand nine at the moment and uh... and what he beat the acquiring

They just weigh in on the regulatory approval, but there's no issues and that's the reason why we're having to take that step with this transaction because they're rolling Flagstar is name at the moment.

And while I see be used the quality names.

Okay. So to be clear those are more it sounds like rubber stamp and does not have the same kind of rigor as the others.

Speaker 14: Okay, so to be clear, those are more, sounds like rubber stamp and, you know, does not have the same kind of rigor as the others.

Speaker 6: Yeah, I would say that's mostly right, but it's not, you know, it's not just a rubber stamp. I mean, there was a lot of work questions that we needed to answer and there was a lot of work that the teams did behind the scenes. So it's a little bit more than a rubber stamp, but probably not as onerous as the regulatory approval.

Yeah pretty much I would say, that's mostly ROI, but it's it's not you know it's not a just a rubber stamp I mean, there were so there was a lot of work questions that we need to and so there was a lot of work that the teams need to be on scenes. So it's a little bit more than a rubber stamp but.

Probably not as onerous as the regulatory approvals.

Speaker 14: Okay, understood. The last one for me, just going back to the, you know, figure partnership, you know, earlier this month, you did a bank to banks, you know, digital market transaction. And I would assume over time, there's more and more of these, you know, both kind of customer to customer within the bank and then across depository institutions as well.

Okay understood and the last one for me just going back to the figure partnership you know earlier. This month you you did a bank to banks you know digital market transaction.

And I would assume over time, there's more and more of these you know both kind of customer to customer within the bank and then across depository institutions as well.

Are there any fee income benefits as these transactions take place if so could you outline that and then you know to date have you seen any encouraging signs on the deposit front from this technology.

Speaker 14: you know are there any fee income benefits as these transactions take place uh... you know if so could you outline that and then you know to date have you seen any encouraging signs on the deposit front from this technology

Yeah. So we haven't yet put out a business a public business case use of the fee income that we would generate as part of the consortium and as the bank will be housing hopefully a substantial amount of deposits are tied to the activity, but clearly that's part of our business plan as we develop it it's not a public plan yet you know again, it's in beta testing you mentioned that we did in <unk>.

Speaker 1: Yes, so we haven't yet put out a business, a public business case use of the fee income that we would generate as part of the consortium and as the bank that will be housing hopefully a substantial amount of deposits that are tied to the activity, but clearly that's part of our business plan as we develop it. It's not a public plan yet, you know, again, it's in beta testing.

Speaker 1: You mentioned that we did an operability. Operability, that's going to continue with the other banks as well. They all have to make sure that they join the consortium, are doing the same type of technical awareness on how they could mint and burn collectively within each other's platform, and then have that position in place. So yes, we've done one. We intend to do more testing as we move forward here. But I believe that ultimately, as this takes on more energy and other banks' enthusiasm towards joining the consortium, we feel there'll be a lot more banks looking to be part of this as a solution.

Operability Operability, that's going to continue with the other banks as well they all have to make sure that they know that join the consortium are doing the same type of technical awareness on how they could maintain burn collectively within each other's platform and then have that position in place. So yes. We've done one we intend to do more testing as we move forward here, but I believe.

Ultimately as this takes on more energy than other banks enthusiasm towards joining the consortium, we feel there'll be a lot more banks looking to be part of this as a solution for what we're dealing with with the system, which is a substantial amount of activity. That's not currently house in the banking system right. So it got going.

Back to cable I see it's going to go through our system.

One the cable I see behind knowing the customers and in our transactions on T. A currency that is where I believe real value will be disseminated through the U S. D S and at the same time each bank will have its own business case used to how they look at their provenance blockchain, depending on their business model. So it's evolving that I I apologize trapping specific but as you.

You know we have a lot of excitement. This is you know a technology build out with a substantial amount of our regulatory dialogue that has to be done right.

Yeah.

Speaker 14: I appreciate it. That's all I had. Thank you.

Understood I appreciate it that's all I had thank you.

But.

Thank you. Our next question is coming from the line of Chris <unk> with Janney. Please proceed with your questions.

Speaker 4: Thank you. Our next questions come from the line of Chris Marinak with JANI. Please proceed.

Speaker 1: with Janny, please proceed with your questions. Hey, thanks. Good morning. Tom, could you or Sandra just update us on how quickly you can integrate the back office once you get approval? Has that time sort of narrowed at all just because of this interim time since the announcement? You know, Chris, it's a great point and I'm glad we have Sandra Lee on the call because we've been, it feels like we've been working together for years now, but we are separate companies and it's a lot to get to know each other. I think the most important aspect of a deal of this nature is culture, right? So my job is to ensure that the culture is aligned. At the same time, we're working with our teams independently because we're not one company yet to truly understand.

Speaker 8: Hey, thanks. Good morning. Tom, could you or Sandro just update us on how quickly you can integrate the back office once you get approval? Has that time sort of narrowed at all just because of this interim time since the announcement?

Thanks.

Tom could you just update us on how quickly you can integrate the back office once you get approval, how does that sort of narrowed at all just because of this interim time since the announcement.

Speaker 1: You know, Chris, it's a great point, and I'm glad we have Sandra Lee on the call, because it feels like we've been working together for years now. But we are separate companies, and it's a lot to get to know each other. I think the most important aspect of a deal of this nature is culture, right? So my job is to ensure that the culture is aligned. At the same time, we're working with our teams independently, because we're not one company yet, to truly understand the opportunity of putting these cultures together.

No Chris that's a great point and I'm glad we have signs of late on the call because he then it feels like we've been working together for years now, but we are separate companies and it's a it's a lot to get to know each other I think the most important aspect of a deal of this nature is culture right from my job is to ensure that the culture is a line at the same time, we're working with our teams are independent.

Because we're not one company yet to truly understand the opportunity of putting two cultures together. So much culture is going to be key and that's my number one priority for the bank is to ensure that our culture is aligned properly sanjana ambassadors culture lifestyle. He's done an amazing job under his leadership.

Speaker 1: But culture is going to be key and that's my number one priority for the bank is to ensure that the culture is aligned properly. Sanjo is the ambassador for culture at Flagstar. He's done an amazing job under his leadership and I'm spending lots of time with Sanjo and I believe that the teams together are doing a phenomenal job. Unfortunately, we haven't closed yet. So our focus was the third quarter of last year and now we're in the first quarter and we're very optimistic. But that's not in our control. We work real hard to get this deal done as soon as we possibly can, but at the same time, a day doesn't go by where we're not working on culture.

Shifting and I'm spending lots of time with Concho and I believe that the teams together are doing a phenomenal job. Unfortunately, we haven't covered yet so you know our focus once the third quarter of last year and now we're in the first quarter.

Optimistic but.

Yeah, that's not in our control we work real hard to get this deal done as soon as we practically can but at the same time. It doesn't go with data doesn't go by where we're not working on culture.

Speaker 1: So we've assigned leadership at Flagstar and leadership at NYCB to manage the long-term integration stream. We're working with third-party consultants to help bridge the gap there, and we're geared up for a cultural integration. That's the most important aspect, because this is going to be a very large mortgage concern as well, that we have to ensure that we can cross the products and initiatives and make sure that people are aligned in the culture. So I don't know if maybe Sandra wants to add some color to that, but I think that's the focus of this campaign. Thank you.

Signed leadership at Flagstar and leadership in N Y C V to manage the long term integration stream or working with third party consultants to help bridge the gap and we're geared up for a cultural integration. That's the most important aspect of this is going to be a very large mortgage concern as well that we have to ensure that we can cross sell products and initiatives and make sure that.

People on the line and the culture.

I don't know if maybe stronger wants to add some color to that but I think that's that's the focus that is right.

Speaker 10: Yeah, first let me say that with respect to legal day one, we're ready for legal day one. So once the final regulatory approval

Yeah, Chris Let me say that with respect to legal day, one we're ready for legal day, one so once the final regulatory approval.

Speaker 10: comes forth, we'll be ready to go pretty quickly with the closing and be able to operate as a combined company pretty quickly. Now, in terms of taking advantage of complete integration and conversion, obviously, as you suggested, that takes time. And a lot of that you can't quite get ready for until you get to legal day one. So, I don't think when you look at the conversion of the systems that the time necessarily narrows.

<unk> for us it will be ready to go pretty quickly with the closing and be able to operate as a combined company pretty quickly now in terms of taking advantage of complete integration and conversion. Obviously as you suggested that takes time and a lot of it you can't quite get ready for it until you get to legal day, one so I do.

I think when you look at the conversion of the systems that the time necessarily narrows.

Speaker 10: because of the length of time it takes to get a regulatory approval. However, I will say, as relates to being ready with, let's say, marketing,

Because of the length of time it takes to get regulatory approval. However, I will say as it relates to being ready with let's say marketing.

Speaker 10: plans or for bringing new products into the New York Community Bank.

Our plans or for <unk>.

Bringing new products into the New York Community Bank.

Speaker 10: branch offices. I think it does give us the ability to be a little bit better prepared for that and hit the ground running. But in terms of totally narrowing the integration timeline between legal day one and complete conversion, I'm not sure there's a great amount of narrowing that takes place because of the timeframe related to the regulatory approval. And then with respect to

<unk> offices, I think I think it does gives us gives us give us the ability to be a little bit better prepared for that and hit the ground running but in terms of totally narrowing the integration timeline between legal day, one and complete conversion I'm not sure. There's a great amount of narrowing that takes place because of the.

The timeframe related to the regulatory approval and then with respect to to culture.

Speaker 10: to culture, Tom's absolutely right. We're two different companies, but we're trying to bring our people together, getting them to know each other.

Tom's absolutely right you know with two different companies, but we're trying to bring our people together getting to know each other and that's.

Speaker 10: That's maybe more important than a lot of people realize relative to the success.

That's maybe more important than people realize relative to.

Relative to the success of our company because the more than your people care about the company that better performance.

Speaker 10: of a company, because the more that your people care about the company, the better performance they will be, and therefore, the better results your company will get.

We'll be in there therefore, the better results of your company will have and.

Speaker 10: And we are, through our diversity, equity, and inclusion program at Flagstar, bringing New York Community Bank people into those places.

And we are through our diversity equity and inclusion program at Flagstar, bringing New York community Bank people into those those events whenever we can and.

Speaker 10: those events whenever we can and the way that they have embraced it has really been fantastic.

The the way that they have embraced it has really been fantastic.

Great. Thank you both for that background, that's really helpful enough. Thanks for all the information this morning.

Speaker 15: Great. Thank you both for that background. That's really helpful. And thanks for all the information this morning.

Sure.

Speaker 4: Thank you. There are no further questions at this time. I would like to turn the call back over to management for any closing

Thank you there are no further questions at this time I would like to turn the call back over to management for any closing comments.

Thank you again for taking the time to join US This morning and for your interest in N Y C. D. We look forward to chatting with you again at the end of April when we will discuss our performance for the first quarter of 2022.

Speaker 1: Thank you again for taking the time to join us this morning and for your interest in NYCB. We look forward to chatting with you again at the end of April when we will discuss our performance for the first quarter of 2021.

Okay.

Speaker 4: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time and enjoy the rest of your day.

Yeah.