Q4 2023 New York Community Bancorp Inc Earnings Call

January 31, 2024

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the New York Community Bancorp Inc. Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the New York Community Bancorp, Inc. Fourth quarter 2023 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer.

Operator: After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during that time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would now like to turn the conference over to Sal DiMartino, Chief of Staff and Vice President of Investor Relations. Please go ahead. Thank you, Regina, and good morning, everyone.

Speaker Change: Your session if you'd like to ask a question during that time simply press Star then the number one on your telephone keypad you do bite you withdraw your question Press Star.

Speaker Change: Star one again.

Speaker Change: I'd now like to turn the conference over to Sal Dimartino, Chief of staff and Vice President of Investor Relations. Please go ahead.

Salvatore J. DiMartino: Thank you Regina and good morning, everyone. Thank you all for joining the management team of New York Community Bancorp for today's conference call.

Salvatore J. DiMartino: Thank you all for joining the management team of New York Community Bancorp for today's conference call. Today's discussion of our fourth quarter and full year results will be led by President and CEO Thomas Cangemi, who will be joined by the company's Chief Financial Officer, John Pinto, along with our President of Banking, Reggie Davis, and the President of Mortgage, Lee Smith. Before the discussion begins, I'd like to remind you that certain comments made today by the management team of New York Community Bancorp may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements we may make are subject to the Safe Harbor Rule. Please review the forward-looking disclaimer and Safe Harbor language in today's press release and investor presentation for more information about risks and uncertainties which may affect us. Now, I would like to turn the call over to Mr. Cangemi. Thank you, Sal. Good morning, everyone, and thank you for joining us.

Salvatore J. DiMartino: Today's discussion of our fourth quarter and full year results will be led by President and CEO, Thomas and Jeremy will be joined by the company's Chief Financial Officer, Jonathan So along with our President of banking, Richard Davis, and the President of mortgage Lee Smith.

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

Salvatore J. DiMartino: Such forward looking statements. We may make are subject to the safe Harbor rules. Please review the forward looking disclaimer and Safe Harbor language in today's press release and Investor presentation for more information about risks and uncertainties, which may affect us.

Salvatore J. DiMartino: Now I would like to turn the call over to Mr. Ken Jimmy.

Ken Zerbe: Thank you Sal and good morning, everyone and thank you for joining us today.

Thomas Robert Cangemi: Before we go into the details of this year's results, I would like to provide some commentary to put the past year in perspective. When I was appointed president and CEO three years ago, I embarked upon transforming the legacy New York Community Bank business from a monolithic thrift to a dynamic, diversified, full-service bank. 2023 was an important year. We built on the momentum created by the Flagstaff Acquisition that closed in December of 2022 and continue to successfully execute our transformation strategy while establishing a clear path for future growth. We reported $2.3 billion in net income available to common stockholders, up from $617 million in 2012.

Ken Zerbe: Before we go into the details of this year's results I would like to provide some commentary to put the past year into perspective.

Ken Zerbe: When I was appointed President and CEO three years ago, we embarked upon transforming the legacy New York Community Bank business model from a monoline threats to our dynamic diversified full service commercial bank.

Ken Zerbe: 2023 was an important inflection point.

Ken Zerbe: He built on the momentum created by the Flagstone acquisition that closed in December 2022, and continue to successfully execute our transformation strategy, while establishing a clear path for future growth.

Ken Zerbe: We reported $2 2 billion net income available to common stockholders up from $617 million in 2022.

Thomas Robert Cangemi: We significantly diversified our balance. Commercial Loans Representing an Increasingly Greater Percentage of Total Loans, Similarly, the percentage of non-interest-bearing deposits, the total deposits, have nearly quadrupled since just before we closed the Flagler Act and began the flags of integration successfully, meeting every milestone throughout the year, with the systems conversion set for the mid-1970s. We also unveiled a rebranding campaign that will launch shortly after the system's conversion is completed, which has been well received both internally and externally. And we acquired select financial and strategically complementary assets and liabilities. David Chiaverini. David Chiaverini.

Ken Zerbe: We have significantly diversified our balance sheet with commercial loans, representing an increasingly greater percentage of total loans.

Ken Zerbe: Similarly, the percentage of noninterest bearing deposits to total deposits have nearly quadrupled since just before we close the flagstone acquisition.

Ken Zerbe: We began the sensor integration successfully meeting every milestone throughout the year with the systems conversion is set for mid February.

Ken Zerbe: We also unveiled a rebranding campaign that will launch shortly after the systems conversions completed which has been well received both internally and externally and we acquired select financially and strategically complementary assets and liabilities of signature bank, which strengthened our balance sheet by adding a significant amount of low cost deposits.

Thomas Robert Cangemi: Strengthening our balance sheet by adding a significant amount of low-cost deposits, and adding a middle-market business supported by over 130 private bank accounts. Importantly, the addition of Signature Bank catapulted us to over $100 billion in total assets, placing us firmly in the category for the large bank class of banking, between $100 billion and $250 billion in... The last three years were all a buildup to this moment, and since the closing of the five-star acquisition in particular, we have been preparing to cross this important threshold. When the opportunity to acquire a signature presented, we were honored to be selected as the winning bidder by the FBIC. The benefits were clear.

Ken Zerbe: And then as a middle market business supported by over 130 private banking teams.

Ken Zerbe: Importantly, the addition of signature bank catapulted us to over $100 billion in total assets, placing us firmly in the category for large bank classic banking institutions C 100 billion at $250 billion in total assets.

Ken Zerbe: The last three years were all a buildup of this moment and since the closing of the flagstone acquisition in particular, we have been preparing to cross this important thresholds.

Ken Zerbe: When the opportunity to acquire students you presented itself and we were honored to be selected as the winning bidder by the FDIC the benefits are clear.

Thomas Robert Cangemi: This acquisition allowed us to advance our strategy while strengthening and diversifying our balance. However, this acquisition also meant we would become a $100 billion plus bank sooner than we had anticipated, subjecting us to enhanced financial standards, including risk-based and leveraged capital requirements, liquidity standards, and requirements for overall risk management and stress, alongside the integration of three banks, NYCB, Signature, and Flagship.

Ken Zerbe: This acquisition allowed us to advance our strategy, while strengthening and diversifying our balance sheet.

However, this acquisition ultimately would become a $100 billion plus bank sooner than we had anticipated.

Ken Zerbe: <unk> us to enhanced Prudential standards, including risk base and leverage capital requirements liquidity standards and requirements for overall risk management and stress testing.

Ken Zerbe: Alongside the integration of three banks and why Stevie signature on Flagstar and as we prepare for our first capital plan submission in April of this year, we have pivoted quickly and accelerated some enhances that come with being a category four bank.

Thomas Robert Cangemi: And as we prepare for our first capital transfer mission in April of this year, we have pivoted quickly and accelerated some enhancers that come with being a category. Specifically, we are taking decisive actions to build capital. Strengthening our Balance Sheet and Risk Management Process, federal alliances with the relevant peers for banks of our largest five and complex. These actions include investing to strengthen our risk management capabilities to align with the enhanced credential standards applicable to Cat 4 banks as set forth under Reg YY. Building our reserve levels, which brings our ACL coverage more in line with peer banks, including Category 4 banks, and adding on balance sheet liquidity as we prep for regulation of YY. We believe these actions are another prudent step in enhancing our risk management.

Ken Zerbe: Specifically, we are taking decisive actions to build capital.

Ken Zerbe: And our balance sheet and risk management processes, which better aligns us with the relevant peers for bank of our largest size and complexity.

Ken Zerbe: These actions include investing to strengthen our risk management capabilities to align with the enhanced Prudential standards applicable to cat four banks.

Ken Zerbe: On the Reg YY.

Ken Zerbe: It was one of our reserve levels, which brings our ACL coverage more in line with peer banks, including category for banks and adding on balance sheet liquidity as we prep for regulation of YY compliance.

Ken Zerbe: We believe these actions are another prudence that enhancing our risk management infrastructure.

Ken Zerbe: So on to more detail in a moment and how these actions impacted our results in the fourth quarter.

Ken Zerbe: We are also accelerating our capital build by reducing our common stock dividend to <unk> <unk> per share.

Ken Zerbe: Understand the importance and the impact of this decision to our stockholders. This was not made lightly.

Thomas Robert Cangemi: Our NYCB remains well-capitalized under all applicable regulatory requirements. Setting our capital allocation priorities was a necessary step to accelerate the building of our capital. We are confident that the actions we took in the fourth quarter and the continued execution of our strategy will position the company to deliver enhanced value over the long term. We successfully grew into a $50 billion plus bank in 2018, and we believe the actions we are taking now are building the foundation to make our transition to a $100 billion plus bank even more successful. Moving now to the results.

Ken Zerbe: Well, then why city remains well capitalized under all applicable regulatory requirements resetting our capital allocation priorities was a necessary step to accelerate the building of our capital.

Ken Zerbe: We are confident that these actions we took in the fourth quarter and the continued execution of our strategy will position the company to deliver enhanced value over the long term.

Ken Zerbe: We successfully grew into a $50 billion plus back in 2018, and we believe the actions. We are taking now are building the foundation to make our transition to $100 million plus banks, even more successful.

Ken Zerbe: Moving now to the results.

Thomas Robert Cangemi: The company reported $2.3 billion in net income available for Common Spot culverts in 2023, or $3.24 per dilution. On an operating basis, which excludes merger-related charges, a $2.2 billion bargain purchase gain related to the signature transaction, and a one-time special FDIC assessment of $39 million, the company reported net income available to common stockholders of $609 million, or $0.80 per dilution. As I said earlier, the actions we undertook impacted several items during the fourth quarter. For example, in the fourth quarter of 2023, we reported a net loss of $252 million, or $0.36 per share, on an operating budget of $1.5 million. The company reported a net loss of $193 million, or $27. Our fourth quarter results were impacted by the actions we undertook, including a $552 million provision for credit. Let's begin with acid quality. Non-performing loans were stable in the fourth quarter.

Ken Zerbe: The company reported $2 3 billion net income available to common stockholders in 2023 or $3.24 per diluted share on an operating basis, which excludes merger related charges of $2 $2 billion bargain purchase gain related to signature transaction and a one time special FDIC assessment of $39 million reported net.

Ken Zerbe: Net income available to common stockholders of $609 million or <unk> 80 per diluted share.

Ken Zerbe: As I said earlier the actions we undertook impacted several items during the fourth quarter and the fourth quarter of 2023, we reported a net loss of $252 million or <unk> 36 per share on an operating basis. The company reported a net loss of $193 million, what 27 cents per share.

Our fourth quarter results were impacted by the actions, we undertook including a $552 million provision for credit losses.

Ken Zerbe: Let's begin with asset quality.

Ken Zerbe: Nonperforming loans was stable in the fourth quarter as compared to the third quarter of the year. Despite some continued weakness in the commercial real estate sector at.

Thomas Robert Cangemi: Compared to the third quarter of the year, despite some continued weakness in the commercial real estate sector, at December 31st, 2023, non-performing loans totaled $428 million and represented 37 basis points of total loans, compared to $435 million or 40 basis points in the previous quarter. During this fourth quarter, we significantly built our reserves to address office sector weakness and an expected increase in criticized due to repricing risk in a multi-family portfolio. Federal Alliance NYCB with our relevant peers, including categories. At December 31, 2023, the allowance for credit losses was $992 million, up $370 million compared to the previous year.

Ken Zerbe: At December 31, 2023, non performing loans totaled $428 million and represented 37 basis points of total loans compared to $435 million worth 40 basis points in the previous quarter.

Ken Zerbe: During the fourth quarter, we significantly built our reserves to address office sector weakness and an expected increase in criticized loans due to repricing risk in our multifamily portfolio, which better aligns <unk> with our relevance here, Greg including category for banks.

At December 31, 2023 of the allowance for credit losses was $992 million up $370 million compared to the previous quarter and represented 107% of total loans up from 74 basis points compared to the previous quarter.

Thomas Robert Cangemi: Represented 1.17% of total loans, up from 74 basis points compared to the previous year. Excluding loans with government guarantees and lower-risk mortgage warehouse loans, the ACO coverage was 1.26% in the fourth quarter, compared to 80 basis points in the previous. Since the third quarter of 2022, we have built our reserves by $774 million. Net charges for the quarter were 185 million, or 22 basis points of average loans driven by two loans.

Ken Zerbe: Excluding loans with government guarantees and lower risk mortgage warehouse loans. The ACL coverage was one 6% in the fourth quarter compared to 80 basis points in the previous quarter.

Ken Zerbe: Since the third quarter of 2022, we have built our reserves by $774 million.

Ken Zerbe: Net charges for the quarter were $185 million or 22 basis points of average loans driven by two loans.

Ken Zerbe: First we had one co op along with a unique feature for peace funded capital expenditures, although the bar is not in default we transferred alone to held for sale in the fourth quarter and expect it to be sold during the first quarter.

Thomas Robert Cangemi: [inaudible] Importantly, this loan is a one-off, and our review did not uncover any other co-op loans similar to this. Second, we had an additional charge-off of an office loan that became non-accrual in the third quarter based on an updated evaluation. This loan was more than we originally expected, and we responded by recalibrating our qualitative factors in the office portfolio to address the issue and increase the ACL coverage on the office. Collectively, these two loans accounted for the bulk of the charges we took.

Ken Zerbe: Importantly, this loan is a one off and I'll review did not uncover any other co op loans similar to this one.

Ken Zerbe: Second we had an additional charge off of an office loan that became non accrual in the third quarter based on an updated evaluation.

Ken Zerbe: This one was more than we originally expected and we responded by Recalibrating our qualitative factors in your office portfolio to address the issue and increase the ACL coverage on the office portfolio.

Ken Zerbe: Collectively these two loans accounted for the bulk of the charges we took during the fourth quarter.

Thomas Robert Cangemi: The other major action we took was regarding our on-balance sheet. During the fourth quarter, we began preparing to be Regulation YY compliant. However, this was earlier than we originally anticipated.

Ken Zerbe: The other major action, we took was regarding our on balance sheet liquidity.

Ken Zerbe: During the fourth quarter, we began preparing to be regulation of YY compliance well. This was earlier than we originally anticipated we thought it prudent to be ready to meet the enhanced liquidity requirements that apply to category four banks. Therefore, we had monetize some of our contingent liquidity sources and so I could build on balance sheet liquidity during the fourth quarter, which has continued.

Thomas Robert Cangemi: We thought it prudent to be ready to meet the Enhanced Liquidity Requirements that apply. Therefore, we have monetized some of our contingent-like liquidity sources and started to build our on-balance sheet liquidity during the fourth quarter, which has continued and secured. We realize that this will negatively impact our net interest margin in the short term, but it is essential that we, as a newly minted $100 billion bank, prudently manage our liquidity Moving next, and then it's just Marge.

Ken Zerbe: Into Q1.

Ken Zerbe: We realize that this will negatively impact our net interest margin in the short term, but it is essential that we as a newly minted $100 million bank prudently manage our liquidity.

Ken Zerbe: Moving next to net interest margin.

Thomas Robert Cangemi: Fourth quarter net interest margin came in at 282, down 45 basis points compared to the third quarter. This was 18 basis points lower than our guide of down 25. The 18 basis points variance to the guidance was largely due to actions related to increasing our on balance sheet liquidity and higher deposit costs. On the lending front, total loans held for investments were up $624 million, or 3% annualized, compared to the third quarter of 2023, to $84.3 million. Most of the growth occurred in the C&I portfolio, partially offset by a decline in multifamily loans while the rest of the C&I portfolio remained. At December 31, 2023, total commercial loans represented 46% of total loans, while multifamily loans represented 44%, representing significant diversification from Europe. Turning now to deposits.

Ken Zerbe: Fourth quarter net interest margin came in at $2 82 down 45 basis points compared to the third quarter. This was 18 basis points lower than our guide down 27 basis points.

Ken Zerbe: The 18 basis points variance. So the guidance was largely due to actions related to increase our on balance sheet liquidity and highest deposit costs.

Ken Zerbe: On the lending front total loans held for investment were up to $224 million or 3% annualized compared to the third quarter of 2023 to $84 6 billion.

Ken Zerbe: Most of the growth in the C&I portfolio, partially offset by a decline in multifamily while the rest of the CRE portfolio remain unchanged.

At December 31, 2023, total commercial loans represented 46% of total loans, while multifamily loans represented 44% of total loans, representing significant diversification from a year ago.

Ken Zerbe: Turning now to deposits.

Thomas Robert Cangemi: Total deposits at year-end were $81.4 billion, compared to $82.7 billion at the end of the third quarter. The decrease was primarily driven by an expected $1.8 billion decrease in custodial deposits related to the signature transaction. 457 million, or 2% annualized, compared to the third quarter, primarily driven by growth in CDs, partially offset by lower non-interest-bearing deposits. The shift to higher cost GDs was due to increased competition in customer behavior.

Ken Zerbe: Total deposits at year end were $81 $4 billion compared to $82 7 billion at the end of the third quarter. The decrease was primarily driven by an expected $1 8 billion decrease in custodial deposits related to the signature transactions.

Ken Zerbe: Excluding these deposits to total deposits increased $457 million or 2% annualized compared to the third quarter, primarily driven by growth in Cds, partially offset by lower noninterest bearing deposits.

Ken Zerbe: A shift to higher cost Cds was due to increased competition and customer behavior.

Ken Zerbe: The potash from legacy legacy signature teens, excluding deposits to the loan portfolio, we did not retain increased $1 $5 billion since the end of March.

Thomas Robert Cangemi: Deposits from legacy signature teams, excluding deposits to the loan portfolios we did not retain, increased $1.5 billion since the end of. Moving now to expenses. [inaudible] Non-court expenses, which this court included the FDIC special assessment of $39 million. Total OPEX for the three months ended December 31st, 2023 was $557 million, down $28 million compared to $585 million for the three months ended December 30th, 2020. The decrease was primarily driven by compensation and benefits expense due to low incentive compensation.

Ken Zerbe: Moving now to expenses.

Ken Zerbe: The floating noninterest expense.

Ken Zerbe: Non core expenses, which this quarter include the FDIC special assessment of $39 million total opex for the three months ended December 31, 2023, $557 million down 28 million compared to 585 million for the three months ended December 32023, the decrease was primarily driven by compensation and benefits.

Ken Zerbe: Expense due to lower incentive compensation expense, partially offset by higher professional fees.

Thomas Robert Cangemi: Possibly offset by higher professional fees. Turning now to our full year 2024 guide. In the past, we have typically provided just quarterly guidance. However, in order to provide more transparency and to be more in line with industry-tier practices, we are providing expanded, full-year guidance, which we have summarized in our investor presentation on slides 36 and 37. 2024, each SPAC.

Ken Zerbe: Turning now to our full year 2020 for guidance in the past we have typically provided quarterly guidance. However in order to provide more transparency and to be more in line with industry peers practices.

Ken Zerbe: Riding expanded full year guidance, which we have summarized in our investor presentation on slides 36, and <unk> 37.

Ken Zerbe: In 2024, we expect to hear at ending total loans to decline, 3% to 5% compared to December 31 2023.

Thomas Robert Cangemi: Period Ending Total Loans have declined 3-5% compared to December 31, 2023, here at any told any positive increase between three or five, Cash and Security Balances to increase $7.5 billion on a combined balance, and an interest margin of 2.4% to 2.5% for the full year, inclusive of actions, to increase on-balance sheet liquidity for Regulation YY. Non-interest income in the range of $570 million to $620 million, which includes mortgage-related income of $220 million to $260 million.

Ken Zerbe: Period end total deposits increased between 3% to 5%.

Ken Zerbe: Cash and securities balances to increase $7 5 million on a combined basis.

Ken Zerbe: The net interest margin to 42, 5% for the full year exclusive of <unk>.

Ken Zerbe: Lucid of actions to increase on balance sheet liquidity for regulation YY compliance.

Ken Zerbe: Noninterest income in the range of $570 million at $620 million, which includes mortgage related income of $220 million to $260 million.

Thomas Robert Cangemi: Operating expenses in the range of $2.3 to $2.4 billion due to a four-year impact from Signature Bank. Full Year Impact of 13 Private Banking Teams from the Former First Republic. Signature Bank Integration Deferral for 2025 in order to minimize customer impact and additional costs related to becoming a Category 4 bank. Normal compensation and benefits expense increase.

Ken Zerbe: Operating expenses in the range of $2 3 million to $2 4 billion due to a full year impact from signature bank. The full year impact of <unk> private banking teams from the former first Republic Bank signature bank integration deferrals to 2025 and in order to minimize customer impact and additional costs related to becoming a category four bank.

Ken Zerbe: Compensation and benefits expense increases.

Ken Zerbe: And approximately $60 million of conversion related savings from Flagstar, we expect our CET, one regulatory capital ratio for the holding company to be at 10% by year end, 2024, and 2000, and a 22% full year tax rate.

Thomas Robert Cangemi: Approximately $60 million of conversion-related savings from Flagstaff. We expect our CET1 regulatory capital ratio for the holding company to be at 10% by year-end 2024 and a 23% full-year tax, [inaudible] Common Category for... Importantly, the bank has a solid foundation in place and a proven track record across business. We believe we are positioned well to navigate our growth and development as an organization and deliver for customers, and we are confident that it will enable us to deliver long-term value for stockholders. Finally, I would like to say a special thank you to all of our teammates.

Ken Zerbe: We entered 2020 for having taken prudent balance sheet action as we become a category four bank importantly, the bank has a solid foundation in place and a proven track record across business cycles. We believe we are positioned well to navigate our growth and there is an element as an organization and deliver for customers and we are confident it will enable us to deliver long term.

Speaker Change: <unk> stockholders finally, I would like to say a special thank you for all of our teammates we have a fantastic team and as always we deeply appreciate the dedication and commitment to our clients customers and communities with that we will be happy to answer any questions. You may have operator, please open up the line for questions.

Thomas Robert Cangemi: We have a fantastic team, and as always, we deeply appreciate the dedication and commitment to our clients, customers, and communities. With that in mind, we'd be happy to answer any questions you may have. Operator, please open up the line for questions. At this time, I would like to remind everyone that in order to ask a question, press the star followed by the number one on your telephone keypad.

Speaker Change: At this time I would like to remind everyone that in order to ask a question process star followed by the number one on your telephone keypad.

Ebrahim H. Poonawala: We ask that you. Please limit your initial question to one and return to the queue for any additional questions that you might have our first question comes from the line of Ebrahim, Pune wallet with Bank of America. Please go ahead.

Ebrahim H. Poonawala: Good morning.

Operator: We ask that you please limit your initial question to one and return to the queue for any additional questions that you might have. Our first question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead. Good morning.

Ebrahim H. Poonawala: I guess, maybe if you can start on credit. So obviously you took a huge is available this quarter just talk to us in terms of.

Ebrahim H. Poonawala: Your expectations around.

Ebrahim: Losses going forward for one.

Thomas Robert Cangemi: I guess maybe we can start on credit. So obviously, you took a huge reserve bill this quarter. Just talk to us in terms of your expectations around losses going forward. So one, what's the reserve bill at the end of the fourth quarter cover and what that implies for future reserve bills through the course of 2024? And then give us a sense relative to the charge-off you took in the fourth quarter, 22 basis points.

Ebrahim: Yes.

Ebrahim: What's the reserve build at the end of the fourth quarter recovery and what that implies for future reserve builds through the course of 2024, and then give us a sense relative to the charge offs you took in the fourth quarter 22 basis points, where do you see credit losses, Mike anything next year, and if you expect any losses to come from the multifamily book.

Mike: Hey, guys I appreciate the question Robert Let me just give you a general view of the fourth quarter and in the process on where we came in at obviously, we looked at the marketplace. We looked at the office perspective, and the general office weaknesses throughout the country and we really did a deep dive in the office portfolio as well as thinking through payment shock in interest rate shock given the rise of inch.

Thomas Robert Cangemi: Where do you see credit losses migrating next year? And do you expect any losses to come from the multifamily book? Thanks.

Thomas Robert Cangemi: Appreciate the question, Ebrahim. Let me just give you a general view of the fourth quarter and the process of where we came in. Obviously, we looked at the marketplace, looked at the office perspective and the general office perspective throughout the country, and we really did a deep dive into the office portfolio as well as thinking through payment shock and interest rate shock given the rise of interest rates that we've experienced over the New York Community Bancorp Inc. We took into account that perspective and clearly had a significant addition to our reserve bill. A lot of that reserve bill went into the office, in particular. I believe the number one from 200 basis points reserved, going from Q3 to 800 basis points reserved, in particular for... Given that, you know, we gave out the statistics on the actual performance of the portfolio, there hasn't been a whole lot of change in that respect. NTAs and delinquencies

Mike: Just rates that we've experienced over the past few quarters in particular as the impact of our customers irrespective of pricing. We took into account that that perspective, and clearly had significant addition to our reserve build we have a lot of that reserve Bill went into the office in particular.

Mike: I believe the number went from 200 basis points reserve going from Q3 to 800 basis points reserve in particular for office. So given that we gave out the statistics on the actual performance of the portfolio. There hasnt been a whole lot of change in respect to the NPA and delinquencies. However, we had moved somewhat some of these loans into a status.

Mike: Criticized position because of the nature of looking thinking about the office sector and the reserve build that with the anticipation of office still having difficulties within the marketplace that being said and our 800 basis points I believe gets us very close to in line with our current peer group, which is a new peer group category for banks as I indicated in my previous remarks.

Thomas Robert Cangemi: However, we had moved some of these loans into a status of criticized position because of the nature of looking at and thinking about the office sector and the Reserve Bills Act with the anticipation of office still having, That being said, you know, 800 basis points, I believe, gets us very close to being in line with our current peer group, which is a new peer group, Category 4 Banks, as I indicated in my previous remarks. And we're confident that we continue to look at the portfolio in significant detail as we are now benchmarking ourselves against a marketplace that has changed. No question has changed, and we're focusing on payment shock, interest rate shock, and the developments in the commercial. If you want me, Jon, if you want to... Sure, Tom.

Mike: We're confident that we continue to look at the portfolio and significant detail as we are now a benchmarking yourselves into a marketplace that has changed no question has changed and really focusing on payment shock interest rate shock and the developments in the commercial or commercial space.

Mike: If you want to make John if you want to add some more comments after the ACL.

Mike: This application now as well I'm sure Tom and besides the office.

<unk> portion of the ACL Bill the other item that Tom mentioned earlier was around the multifamily loan portfolio and the repricing risk in that portfolio.

Mike: As we see our loans continue to hit their option date and reprice higher we wanted to make sure that that risk is captured in the qualitative factors as well this quarter. So we were able to do that and increase the reserve on multi as well. So we saw increases specifically in office in CRE and multi when you look at our coverage ratio for me.

Mike: Acs perspectives.

John J. Pinto: And besides the office portion of the ACL bill, the other item that Tom mentioned earlier is around the multifamily loan portfolio and the repricing risk in that portfolio. You know, as we see our loans continue to hit their option date and reprice higher, we want to make sure that that risk is captured in the qualitative factors as well this quarter. So we were able to do that and increase the reserve on multi as well. So we saw increases specifically in office and multi when you look at the coverage ratio from an ACL. Right, but do you expect the coverage and pressure on multifamily will translate into losses on that portfolio? On the multifamily portfolio, we have not seen significant losses in multifamily, with the exception, of course, of the one loan that Tom mentioned, the multifamily co-op loan, which rolls up to the multifamily category. And historically, if you look back at what we've had higher levels of substandard loans throughout the financial crisis, throughout the pandemic, you know, just the rise in substandard loans does not lead directly to specific losses. So, we're still very comfortable with the quality of the multifamily portfolio. We're not seeing anything on the early stage delinquency side yet either.

Speaker Change: Right, but do you expect that the coverage and.

Speaker Change: Pressure on multi.

Speaker Change: Translating into losses on that portfolio.

Speaker Change: On the multifamily portfolio, we have not seen significant losses in multifamily with the exception of course of the one loan that Tom mentioned, the multifamily co op lung, which rolls up to the multifamily category and historically if you look back at what we had higher levels of sub standard throughout the financial crisis throughout the pandemic.

Speaker Change: Those.

Speaker Change: The rise in substandard loans does not lead directly to specific losses. So we're still very comfortable in the quality of the multifamily portfolio, we're not seeing anything on the early stage delinquency side, yet either we did see a little pop in 30 to 89, but a lot of those loans, we had about $60 million that cleared right after $12 31 in the.

Speaker Change: First a couple of weeks of January so we're not seeing any significant trends in the multifamily portfolio. Besides the repricing risk that we spoke about this SEC comments I would add that when you think about how we looked at the forward curve that we looked at the interest rate environment as of the fourth quarter. We did not take into account changes in future interest rates when we shot cash flow both the payment.

John J. Pinto: We did see a little pop in 30 to 89, but a lot of those loans, we had about 60 million that cleared right after 1231 in the first couple of weeks of January. So, we're not seeing any significant trends in the multifamily portfolio besides the repricing risk that we spoke about. So, everybody, I mean, this is that comment that I would add that when you think about how we looked at the forward curve, we looked at the interest rate environment as of the fourth quarter. We did not take into account changes in the future.

Speaker Change: Shock in interest rates shot so we believe thats pretty punitive in the event of a potential fed pivot. So we're assuming that rates stay where they are in a roll that out for a year and what is the impact on future borrowers that have to go into your six and it will go into an Io and Io stretch into the advertising structure and we shocked that put a lot of those volumes closer to a one for one debt service coverage ratio in some cases.

Speaker Change: Slightly below on a pro forma basis and that will be a sub standard view of the asset. Although they are <unk> performance status and as you. All know last year, we had an abundance of customers take the sulfur option when snowfall is much lower and obviously they ran through that they are waiting on the sidelines. They feel very strongly that they're going to exercise their ability to lock in.

Thomas Robert Cangemi: ShopKish payment, So we believe that's, you know, pretty punitive in the event of a potential Fed pivot. So we're assuming that rates stay where they are, and we'll roll that out for a year. And what is the impact on future bars that have to go into year six, and it will go into an IL structure, into an amortizing structure, and we shock them.

Speaker Change: Longer term financing when rates move the other way so they're sitting on the sidelines paying the bank <unk> spread and will make the decisions. When there is a possibility of a rate change. So that's what we're hearing from our customer base.

Speaker Change: Got it and maybe John just on the net interest margin. So fourth quarter is at two 2% just given the trajectory of the $2 40 to two like what do you expect the NIM to reset in the first quarter.

Thomas Robert Cangemi: That puts a lot of those loans closer to a one-for-one debt service coverage ratio, in some cases, slightly below on a pro forma basis. And that will be a substandard view of the asset, although they are in performance status. As we all know, last year, we had an abundance of customers, you know, take the SOFR option when SOFR was much lower. And obviously, they ran through that. They're waiting on the side

John: And then what happen is that guidance still.

John: If we get 248 cuts during the year.

John: Yes, yes.

Operator: Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the New York Community Bank Corp., Inc. Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

John: On your second question, yes, the guidance would still hold the three rate cuts throughout the year and.

John: And if you look at the full year $2 40 to 50 margin, we're comfortable with that for the first quarter as well probably a little closer in the first quarter to the lower end of that spectrum, but we're comfortable with the guide both for the year and for the end to the first quarter.

Thomas Robert Cangemi: They feel very strongly that they're going to exercise their ability to lock in longer-term financing when rates move the other way. So they're sitting on the sidelines, paying the bank, SOFR pressure spreads, and they'll make their decisions when there's a possibility of a rate change. That's what we're hearing.

Speaker Change: Got it I'll hop out thank you.

Speaker Change: Your next question comes from the line of Steven Alexopoulos with Jpmorgan. Please go ahead.

John J. Pinto: And maybe, Jon, just on the net interest margin, so the fourth quarter is at 2.82%. Just give us the trajectory of the 240 to, like, what do you expect the NIM to reset in the first quarter? And then what happens, is that guidance still going to hold if we get three or four rate cuts during the year? Yes, yeah, on your second question, yes, the guidance would still hold with three rate cuts throughout the year. And if you look at the full year 240 to 50 margin, we're comfortable with that for the first quarter as well. Probably a little closer in the first quarter to the lower end of that spectrum, but we're comfortable with the guidance both for the year and for the first quarter. Got it. I'll hop out.

Steven Alexopoulos: Hey, good morning, everybody.

Steven Alexopoulos: So I wanted to follow up on net interest income. So you guys gave us most of the components for the 2024 guide without net interest income and you probably noticed your stock trading at seven Bucks pre market, which I think is a 20 or 25 year low and it's because all of us are running the math on earning asset levels applying the NIM guide and you get earnings that are delayed.

Salvatore J. DiMartino: Thank you all for joining the management team of New York Community Bank Corp. for today's conference call. Today's discussion of our fourth quarter and full year results will be led by President and CEO Thomas Cangemi, who will be joined by the company's Chief Financial Officer, John Finto, along with our President of Banking, Reggie Davis, and the President of Mortgage, Lee Smith. Before the discussion begins, I'd like to remind you that certain comments made today by the management team of New York Community Bancorp may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements we may make are subject to the Safe Harbor Rule. Please review the forward-looking disclaimer and Safe Harbor language in today's press release and investor presentation for more information about risks and uncertainties which may affect us. Now, I would like to turn the call over to Mr. Cangemi. Thank you, Sal. Good morning, everyone, and thank you for joining us.

Steven Alexopoulos: The percent if you do that is that what you guys are guiding to for 2024.

So the guide we gave when you look at net interest margin and you see where the loans come down and with deposits increasing.

Steven Alexopoulos: It is not exactly where the totals were seeing from down 40% I'm not quite sure exactly how you came up with that number but you got to look at some of the security builds as well.

Operator: Thank you. Your next question comes from the line of Stephen Alexopoulos with J.P. Morgan. Please go ahead.

Steven Alexopoulos: The cash on the balance sheet. So when you put all that together.

Steven Alexopoulos: From an earnings perspective, it sounds is much lower than what we would have anticipated that you'd be coming out with as Steven its Tom.

Operator: So I want to follow up on net interest income. So you guys gave us most of the components for the 2024 guide without Interest Income. You'll probably notice your stock trading pre-mark. Unknown Executive, Manan Gosalia, Casey Haire, Unknown Executive, Manan Gosalia, Unknown, If you do that, Is that what you guys are guiding? So the guide we gave, you know, when you look at net interest margin, you see where the loans come down, and with deposits increasing, you know, that is not exactly where, you know, the totals we're seeing from down 40%. I'm not quite sure exactly how you came up with that number.

Speaker Change: I would also add to John's commentary that we are solving for Reg YY. It's again, it's a.

<unk> cash build in one billions of dollars I think our guide has an additional seven 5 billion on top of 12 31 numbers for 2024, and that's going to really impact until that until that we rightsize our position on liquidity, where we need to be as a category four bank had a negative impact on the margin in the short term over the long term, we hope to normalize our cash positions as we rightsize our businesses.

Thomas Robert Cangemi: Before we go into the details of this year's results, I would like to provide some commentary to put the past year in perspective. When I was appointed president and CEO three years ago, I embarked upon transforming the legacy New York Community Bank business from a monolithic thrift to a dynamic, diversified, full-service... 2023 was an important year. We built on the momentum created by the Flagstaff Acquisition that closed in December of 2022 and continue to successfully execute our transformation strategy while establishing a clear path for future growth. We reported $2.3 billion in net income available to common stockholders, up from $617 million in 2012.

Speaker Change: And focus on relationship lending where deposit base comes from the relationship and looking at lines of businesses that are deposit rich not deposits thoughts. That's the journey as we go into this category for peer group and clearly this is impacting 'twenty four for sure and there will be pressure no doubt as we transitioned from loans due to lower yielding securities or cash so that app.

John J. Pinto: But you got to look at some of the security bills as well, and the cash on the balance sheet. So when you put all that together, from a earnings perspective, it sounds much lower than what we would have anticipated. You'd be coming out with Steven.

Speaker Change: Totally youll see in that guide on the net interest margin.

Speaker Change: That's the transition that's going to happen in 'twenty four and then we'll see that start to change as we can continue to grow the portfolio in 'twenty five and beyond and I would also add Stephen is that clearly we havent seen any activity in multifamily creates so it's been about a 90% reduction in activity originations. There are no real property activities happening right now so we have a.

Thomas Robert Cangemi: I would also add to John's commentary that we are solving for red. Why? Why?

Thomas Robert Cangemi: It's again, it's a substantial cash build in the billions of dollars. I think our guy has an additional seven and a half billion on top of 1231 numbers, and that's going to really help. Until that rewrites, our position on liquidity, where we need to be as a Category 4 bank, will have a negative impact on the margin in the short term. Over the long term, we hope to normalize... And I would also add, Stephen, that clearly we haven't seen any activity in the multifamily mortgage sector. So there's been about a 90% reduction in activity originations. There are no real property activities happening right now.

Thomas Robert Cangemi: We significantly diversified our balance. Commercial Loans Representing an Increasingly Greater Percentage of Total Loans, Similarly, the percentage of non-interest-bearing deposits, the total deposits, have nearly quadrupled since just before we closed the Flagler Act and began the phase of integration successfully, meeting every milestone throughout the year with the systems conversion step for the mid-70s. We also unveiled a rebranding campaign that will launch shortly after the system's conversion is completed, which has been well-received both internally and externally, and we acquired select financial and strategically complementary assets and liabilities, and Elisha Banks.

Speaker Change: Relatively low coupon on the book and billions of dollars that have the possibility of moving either into a higher coupon and also our balance sheet has to be focused on relationships deposit.

Speaker Change: Lending and Thats clearly the focus as we as we focus our commercial bank efforts to focus on.

Speaker Change: Doing the commercial with commercial lending, but more importantly, reallocating our resources to businesses and lines of businesses that have a unique return perspective as a commercial bank full service commercial bank.

Thomas Robert Cangemi: So we have a relatively low coupon on the book and billions of dollars that have the possibility of moving either into a higher coupon and an off-wall balance sheet as we focus on relationships, project lending. And that's created the problem of focusing our commercial bank efforts to focus on doing commercial lending, but more importantly, reallocating our resources to businesses and lines of businesses that have a unique return perspective. Transcripts provided by Transcription Outsourcing, LLC, will end up gravitating off the balance sheet, probably to the government over time as rates reset themselves, and we have the ability to move on those low coupons off balance sheets as the right size outcomes. So if I put together everything you guys just said, why not just give us what you think Net Interest Income will be in 2024? So we're not all guessing, and maybe your stock won't trade down to $7. Like, John, why don't you just tell us what you might be wrong about?

Thomas Robert Cangemi: Strengthening our balance sheet by adding a significant amount of low-cost deposits, and adding a middle-market business supported by over 130 private bank accounts. Importantly, the addition of Signature Bank catapulted us to over $100 billion in total assets, placing us firmly in the Category 4 Large Bank Class of Banking, between $100 billion and $250 billion in... The last three years were all a buildup to this moment, and since the closing of the five-star acquisition in particular, we have been preparing to cross this important threshold. When the opportunity to acquire a signature presented, we were honored to be selected as the winning bidder by the FBIC. The benefits were clear.

Speaker Change: It's prudent to expect that a lot of these larger relationships that we have that are not depository relationships will and it will end up gravitating off the balance sheet, probably to the government over time as rates reset themselves and we have the ability to move on those low coupons off balance sheet as we rightsize our position as a full service commercial bank.

Speaker Change: So if I put together everything that you guys. Just said why not just give us what you think net interest income will be.

Speaker Change: In 2024, so we're not all guessing and maybe your stock would trade down to $7 like John Why don't you just tell us what you thought you might be wrong. Because you said basically we just took earning assets when we applied your margin and we said Okay. This is where NII is falling out with the other mid points and it's down substantially you are saying, it's not that but.

Thomas Robert Cangemi: This acquisition allowed us to advance our strategy while strengthening and diversifying our talent. However, this acquisition also meant we would become a $100 billion plus bank sooner than we had anticipated, subjecting us to enhanced financial standards, including risk-based and leveraged capital requirements, liquidity standards, and requirements for overall risk management and stress, alongside the integration of three banks, NYCB, Signature, and Flagship.

Speaker Change: You just cut the dividend maybe it to your shareholders a favour tell us what do you think and I will be in 2024.

Speaker Change: You know better than we do because you know what was impacted fully in the quarter. There are certain actions you took which didn't fully.

Steven A. Alexopoulos: Because you said basically, we did, we just took the earning assets, applied your margin, and we said, okay, this is where NII is falling out with the other midpoints, and it's not substantial. You're saying it's not that, You know, you just cut the dividend. Maybe do your shareholders a favor, tell us what you think NII will be in 2024. You know better than we do because you know what was fully impacted in the quarter. There are certain actions you took which didn't fully impact the quarter. So why not just give us the color?

Speaker Change: <unk> the quarter.

Speaker Change: That's correct the color.

Speaker Change: The number to make life easy.

Thomas Robert Cangemi: And as we prepare for our first capital transfer mission in April of this year, we have pivoted quickly and accelerated some enhancers that come with being a category. Specifically, we are taking decisive actions to build capital, strengthen our balance sheet and risk management process, and better align us with the relevant peers for Frank of our largest five and complex. These actions include investing to strengthen our risk management capabilities to align with the enhanced prudential standards applicable to Cat 4 banks as set forth under Reg YY. Building our reserve levels, which brings our ACL coverage more in line with peer banks, including Category 4 banks, and adding on balance sheet liquidity as we prepare for the regulation of YY. We believe these actions are another prudent step in enhancing our risk management.

Speaker Change: Yes.

Speaker Change: Absolutely.

Speaker Change: With your stock at a 25 year low I can't imagine you are happy with this so unless you want.

Speaker Change: I don't know why you wouldn't take this opportunity to <unk>.

Speaker Change: Level set expectations.

Speaker Change: Okay.

Speaker Change: Well, David we're very focused but that the market was truly understand the strategy going forward. We're in a category four bank strategy, we were well positioned.

Speaker Change: Closing of Flagstar at the end of last year, and an opportunity came up with a flyer standards of bank. We took advantage of that opportunity. We're very grateful to have the FDIC approve that transaction and we're in a different perspective, when it comes to our peer group.

Steven A. Alexopoulos: So why not just give us the number and make like... Yeah, absolutely. Your stock is at a 25-year low, I can't imagine you're happy. Unless you want, you know. I don't know why you wouldn't take this opportunity to level set expectations. Well, Stephen, we're very focused, but the market will truly understand the strategy going forward. We're in a Category 4 bank strategy. We were well positioned in the closing of Flagstar at the end of last year, and an opportunity came up. We took advantage of that opportunity. We're very grateful to have the FDIC approve that transaction. And we're in a different perspective when it comes to our peer group.

These necessary steps need to happen in respect to right sizing, our southern or new category peers, and clearly going forward. We are focusing on building the bank and the market will reset itself. When you understand the strategy. We appreciate your commentary on guide we wanted to be south of us.

Thomas Robert Cangemi: I will go on to more details in a moment on how these actions impacted our results in the fourth quarter. We are also accelerating our capital build by reducing our common stock dividend to five cents. I understand the importance and the impact of the decision on our Spock holders. This was not made. Our NYCB remains well capitalized under all applicable regulatory requirements, but setting our capital allocation priorities was a necessary step to accelerate the building of our capital.

Speaker Change: Prudent for us to give some guidance for the full year as you know Stephen you can covenants for a long time and always giving quarterly guidance, we want to expand that.

Speaker Change: John indicated a lot of this has significant cash balances at a slight negative carry that's impacting the drag on the margin and as we reset ourselves into the future. We believe that the market will truly understand the expectations of our category forced vacations, both the capital build which is driven off the dividend adjustment along with the guidance that we have which is we feel is something that we felt more.

Thomas Robert Cangemi: These necessary steps need to happen in respect to right-sizing ourselves in our new category of peers. [inaudible] We appreciate your commentary on this guide. We felt it was prudent for us to give some guidance for the full year. As you know, Stephen, you've been covering this for a long time, we've always given quarterly guidance. We wanted to expand that, but as Jon indicated, a lot of this is significant cash balances at a slight negative carry that's impacting the drag on the margin. And as we reset ourselves into the future, we believe that the market will truly understand the expectations of our Category 4 expectations, both the capital bills, which are driven off the dividend adjustment, along with the guidance that we have, which is, we feel, you know, something that we feel is more transparent. It's going out for a full year, not just a quarter, to show where our CET-1 expectations will be at the end of 2024. And more importantly Thank you. Your next question comes from the line of Dave Rochester with Compass Point. Please go ahead.

Thomas Robert Cangemi: We are confident that the actions we took in the fourth quarter and the continued execution of our strategy will position the company to deliver enhanced value over the long term. We successfully grew into a $50 billion plus bank in 2018, and we believe the actions we are taking now are building the foundation to make our transition to a $100 billion plus bank even more successful. Moving now to the results.

Speaker Change: Transparent, it's going out a full year not just the quarter to show, where our CET one expectations will be at the end of 2024 and more importantly, rightsize ourselves for the future as we build out a new category for expectation.

Speaker Change: Yes.

Speaker Change: Okay. Thanks for taking my questions.

Thomas Robert Cangemi: The company reported $2.3 billion in net income available for Common Spot culverts in 2023, or $3.24 per dilution. On an operating basis, which excludes merger-related charges, a $2.2 billion bargain purchase gain related to the signature transaction, and a one-time special FDIC assessment of $39 million, the company reported net income available to common stockholders of $609 million, or $0.80 per dilution. As I said earlier, the actions we undertook impacted several items during the fourth quarter. For example, in the fourth quarter of 2023, we reported a net loss of $252 million, or $0.36 per share, on an operating cost of $1.5 million. The company reported a net loss of $193 million or $27 million.

Speaker Change: Thank you Steven.

Speaker Change: Your next question comes from the line of Dave Rochester with Compass point. Please go ahead.

Dave Rochester: Good morning, Hey, good morning, guys.

Dave Rochester: One on the expense side, where do you guys anticipate finishing the year roughly this on a quarterly basis. I know you had talked about being elevated in the first part of the year as you go through your integrations and if you could talk about sorry, if I missed it but the updated timing on the signature integration would be great.

Speaker Change: Yes, so the updated timing we pushed this signature integration into 2025, just to ensure we have minimal customer impact.

Speaker Change: And.

Speaker Change: Make sure that we've gone through the flagstar integration process.

John J. Pinto: Hey, good morning, guys. Just one on the expense side: where do you guys anticipate finishing the year roughly on a quarterly basis? I know you talked about being elevated in the first part of the year as you go through your integrations, and if you could talk about that, sorry if I missed it, but the updated timing on the signature integration would be great. Yeah, so the updated timing, we've pushed the signature integration into 2025, just to ensure we have minimal customer impact.

Speaker Change: We're still on track for here in February get through that integration. So thats why youll see a little bit less of a cost save in 2024. So your run rate at the end of 2024 will be a little bit higher yes, we have guided that the first quarter is typically a higher quarter for us.

Thomas Robert Cangemi: Our fourth quarter results were impacted by the actions we undertook, including a $552 million provision for credit. Let's begin with acid quality. Non-performing loans were stable in the fourth quarter, compared to the third quarter of the year, despite some continued weakness in the commercial real estate sector. At December 31st, 2023, non-performing loans totaled $428 million and represented 37 basis points of total loans, compared to $435 million or 40 basis points in the previous quarter. During this fourth quarter, we've significantly built our reserves to address office sector weakness and an expected increase in criticized... due to repricing risk in a multi-family portfolio. Federal Alliance, NYCB, with our relevant peers.

Speaker Change: Especially in compensation and benefits and as well as the systems conversion will happen in February. So you will see the first quarter beat the higher quarter.

John J. Pinto: And, you know, make sure that we've gone through the Flagstar integration process that we're still on track for here in February, completing that integration. So that's why you'll see a little bit less of a cost save in 2024. So your run rate at the end of 2024 will be a little bit higher. Yes, we've guided that the first quarter is typically a higher quarter for us, especially in compensation and benefits, and as well as the systems conversion will happen in February. So you will see the first quarter be the higher quarter. But from a trend perspective, the fourth quarter, when you're going into 2025, will be in that lower end of the range that we gave on an annualized basis, with the start of the year at the higher end of the range. Okay, thanks.

Speaker Change: But from a trend perspective.

Speaker Change: The fourth quarter, when you're going into 2025 will be in that lower end of the range that we gave on an annualized basis with the start of the year at the higher end of the range.

Speaker Change: Okay. Thanks.

Speaker Change: And then just on the credit analysis that you've done for this quarter.

Speaker Change: It sounds like Youre, assuming stable rates through year end and I'm, assuming that that incorporates all of the repricing that you're expecting in the multifamily book through year end. So it's kind of a catch all for everything that you are looking at.

Thomas Robert Cangemi: At December 31st, 2023, the allowance for credit losses was $992 million, up $370 million compared to the previous year, and represented 1.17% of total loans, up from 74 basis points compared to the previous. Accruing loans with government guarantees and lower-risk mortgage warehouse loans, the ACO coverage was 1.26% in the fourth quarter, compared to 80 basis points in the previous three years. Since the third quarter of 2022, we have built up our reserves by $774 million. Net charges for the quarter were 185 million, or 22 basis points of average loans driven by two loans.

Through 2024 is that right David.

Speaker Change: Dave I wanted to be clear on that we did a deep dive in in Q4, and we assumed rates that are at the current level. In Q4, we did not anticipate a slower curve adjustment downward. So we took that into account when we looked at the ACL to establish the risks with respect to repricing.

John J. Pinto: And then just on the credit analysis that you've done for this quarter, it sounds like you're assuming stable rates through year end, and I'm assuming that that incorporates all the repricing you're expecting in and the multifamily book through year end. So it's kind of a catch-all for everything that you're looking at through 2024. Is that right?

Speaker Change: And believe we have about $3 billion, Jonathan for $2 billion coming due to reprice in 2020, hopefully family of three four so when you take that into account and as far as what that impacts. Some of these loans are going from a very low coupon to the market.

John J. Pinto: David, I want to be clear on that. We did a deep dive in Q4, and we assumed rates that are at the current level in Q4. We did not anticipate the flow curve adjusting downward, so we took that into account when we, I believe we have about $3 billion, Jon, so $3 billion coming due to reprice in 2024. Hopefully, the family, 3.4.

Thomas Robert Cangemi: First, we had one co-op loan with a unique feature for peace-funded capital expenditures. Although the borrower is not in default, we transferred the loan to help for sale in the fourth quarter and expect it to be sold during the first quarter. Importantly, this loan is a one-off, and our review did not uncover any other co-op loans similar to this.

Speaker Change: Our customers decide to lock in a fixed rates versus keep the floating rate as they made the decision last year, 80% with maybe more like 90% were taken sulfur option.

Speaker Change: At the beginning of uptick towards the tail end of 2003, it was more like 75% and some of them are grabbing the fixed rate options. So it's working it's more compelling for them to take the fixed rate option now, but the rate is so high compared to the current coupon at that coming out of I will tell you with specificity customers are waiting on the sidelines that there is a not a lot of activity I indicated that 90.

Thomas Robert Cangemi: Second, we had an additional charge-off of an office loan that became non-accrual in the third quarter. Based on an updated evaluation... This phone was more than we originally expected, and we responded by recalibrating our qualitative factors in the office portfolio to address the issue and increase the ACL coverage on the office. Collectively, these two loans accounted for the bulk of the charges we took. The other major action we took was regarding our on-balance sheet... During the fourth quarter, we began preparing to be Regulation YY compliant. However, this was earlier than we originally anticipated.

Thomas Robert Cangemi: So when you take that into account as far as what that impacts, these loans are going from a very low coupon to the market, where customers decide to lock in a fixed rate versus keep the floating rate as they make the decision. Last year, 80% or maybe more like 90% were taking fill-for-options. At the beginning of the tail end of 23, it was more like 75%, and some of them were grabbing the fixed-rate option. So it's more compelling for them to take a fixed-rate option now, but the rate is still the Current Coupon that they're coming out of. I will tell you with specificity that customers are waiting on the sidelines. There's not a lot of activity. I indicated a 90% reduction in the business. People are on the sidelines.

Speaker Change: The percent reduction in the business.

Speaker Change: People, who are on the sidelines theyre expecting that rates will move in the back half of 'twenty, four and they'll make their long term decisions on our next round of refinancings and as I indicated very clearly we anticipate to focus on relationship deposit lending. So in the event, we have a non relationship loans coming at a 3% coupon coming off the books, they will probably end up having a government unless they.

Speaker Change: One of the a full service commercial bank line with the bank's battles will gravitate a concentration of multifamily down significantly assuming that they're not going to be a full service relationship with the with the company that is the strategy going forward, it's going to be relationship lending and clearly we have an opportunity to take a very low coupon of the portfolio assuming there is a shift.

Thomas Robert Cangemi: We thought it prudent to be ready to meet the enhanced liquidity requirements that apply to Category 4. Therefore, we monetized some of our contingent-like liquidity sources and started to build our on-balance sheet liquidity during the fourth quarter, which has continued and is secured. We realize that this will negatively impact our net interest margin in the short term, but it is essential that we, as a newly minted $100 billion bank, prudently manage our liquidity. Moving next, and then it's just Marge.

Thomas Robert Cangemi: They're expecting that rates will move in the back half of 24, and they'll make their long-term decisions in the next round of refinancing. And as I indicated very clearly, we expect to focus on the relationship, the positive, the positive. So in the event we have a non-relationship loan coming at a 3% coupon coming off the book, they'll probably end up in the government unless they want to be a full-service commercial bank client with the bank. That will pull our concentration of multifamily down significantly.

Speaker Change: And customer sentiment to lock in their next round of financing, which many of our customers are focusing on the second half of 'twenty four.

Speaker Change: So with your bumped up.

Speaker Change: <unk> loan balance that assumes all of the repricing that you're expecting for this year and where do you see this debt service coverage ratios going based on the rates that youre seeing today. So right. Yes, yes, that's not on the forward curve Thats, a captive that fourth quarter.

Speaker Change: Two options the fixed option is still $2 50 over five and then the.

Speaker Change: So first 250 over so far is that right. There's two repricing options here just to be clear we assume they all went into the sulfur options. So the more punitive option because of an air of conservatism in there we did not take their fixed rate option as an option. So we went more conservative and looked at some everyone's had arrived itself occurred.

Thomas Robert Cangemi: Most of the growth occurred in the C&I portfolio, partially offset by a decline in multifamily while the rest of the C&I portfolio remained open. At December 31, 2023, total commercial loans represented 46% of total loans, while multifamily loans represented 44% of total loans, representing significant diversification from a European point of view. Turning now to deposits.

Speaker Change: <unk> decided to lock in the next round of refinancing, which also stress that the debt service coverage ratio for sulfur versus the fixed rate option is more intuitive and more recently they've been going into the fixed rate option right because.

Speaker Change: The lease period of option.

Speaker Change: The activity has been very very slow than what we've indicated probably towards the back end of the fourth quarter of last year, we were like 25% of them are locking in some fixed rate terms, although it's still a high percentage of them willing to roll a sofa with expectation rates theyre going to be projected to go low and 24.

Thomas Robert Cangemi: Total deposits at year-end were $81.4 billion compared to $82.7 billion at the end of the third quarter. The decrease was primarily driven by an expected $1.8 billion decrease in custodial deposits related to the signature transaction. Truly means deposits, the total deposits in... 457 million, or 2% annualized, compared to the third quarter, primarily driven by growth in CDs, partially offset by lower non-interest-bearing deposits. The shift to higher-cost TDs was due to increased competition and customer behavior. Deposits from legacy signature teams, excluding deposits to the loan portfolios we did not retain, increased $1.5 billion since the end of 2017. Moving now to expenses. Fully natural express, We, non-court expenses, which this court included the FDIC special assessment of $39 million. Total OPEX for the three months ended December 31st, 2023 was $557 million, down $28 million compared to $585 million for the three months ended December 30th, 2020. The decrease was primarily driven by compensation and benefits expense due to low incentive compensation, partially authored by Hayek Professionals.

John J. Pinto: And those two options, the fixed option is still 250 over 5, and then the SOFR is 250 over SOFR, is that right? Those two repricing options? Just to be clear, we assume they all went into the SOFR option, so the more punitive option because there was an error of conservatism there; we did not take the... Transcripts provided by Transcription Outsourcing, LLC. And more recently, they've been going into the fixed rate option, right? Because that's the least punitive option.

Speaker Change: Got it Where's the multifamily reserve now how much of that provision went into the multifamily book versus the office closures.

Speaker Change: Yes.

Speaker Change: Great.

Speaker Change: Yes, when you look at.

Speaker Change: The allowance coverage ratio quarter over quarter is up 95%. So we went from 42 basis points to 82 basis points.

Speaker Change: Historical losses.

Got it perfect lifetime losses of 13.

John J. Pinto: The activity has been very, very slow, but what we indicated probably towards the back end of the fourth quarter of last year, more like 25% of them are locking in some fixed rate terms, but there's still a high percentage of them willing to roll SOFR with the expectation that rates are going to be projected to go lower. And where's the multifamily reserve now? How much of that provision went into the multifamily book versus the office book? You already gave the office to you.

Speaker Change: Okay, great. Thanks, guys I'll step back.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Casey Haire with Jefferies. Please go ahead.

Casey Haire: Good morning case, yes, thanks, good morning, everyone.

Casey Haire: So question on the 10% CET one target.

Casey Haire: I kind of reiterate what Steve was talking about with the people in our guide relative to consensus.

Casey Haire: And.

Casey Haire: Coming out of like 875 for next year, which.

Casey Haire: I know you guys are talking about the balance sheet loans down so you get some deleveraging.

John J. Pinto: Yeah, when you look at the allowance coverage ratio, quarter over quarter, it is up 95%. So we went from 42 basis points to 82 basis points.

Thomas Robert Cangemi: Turning now to our full year 2024 guide. In the past, we have typically provided just quarterly guidance. However, in order to provide more transparency and to be more in line with industry-tier practices, we are providing expanded, full-year guidance, which we have summarized in our investor presentation on slides 36 and 37. 2024, each spec. Period-ending total loans have declined 3-5% compared to December 31, 2023, here at any told any positive increase between three or five, cash and security balances to increase $7.5 billion on a combined basis, an interest margin of 2.4% to 2.5% for the full year, inclusive of actions, to increase on-balance sheet liquidity for Regulation YY2. Non-interest income in the range of $570 million to $620 million, which includes mortgage-related income of $220 million to $260 million.

Casey Haire: On the risk weighted asset front, but.

Casey Haire: It's basically to get to that 10% to 90 bps of CET, one build credit provision is going to have to be de minimis by my math.

John J. Pinto: Perfect. Okay, great. Thanks, guys. I'll step back. Your next question comes from the line of Casey Haire with Jeffries. Please go ahead. Good morning, everyone.

Speaker Change: So kind of.

Speaker Change: Again, I want to address what are you guys baking in for provision to get to that 10% level.

Casey Haire: So question on the 10% CT1 target. You know, I kind of reiterate what Steve was talking about with the PPNR guide relative to consensus. And, you know, I'm coming out at like 875 for next year, which, you know, I know you guys are talking about the balance sheet, loans down, so you get some deleveraging on the risk weighted asset front. But it's basically, to get to that 10% to 90 bps of CT1 build, credit's going to provision is going to have to be de minimis by my math. So I kind of, again, want to address, you know, what are you guys baking in for provision to get to that 10% level? And is that just too aggressive?

Speaker Change: Is that aggressive.

Speaker Change: Yes, I mean, if you look at the provision that we took in the fourth quarter, we're not we're expecting that that covers the.

Speaker Change: The emerging risks in the portfolio that we have currently.

Speaker Change: As you know through seats, all external factors changes in the portfolio macroeconomic changes is going to impact what our provision is going forward. So historically, if you look at where our provisions have been.

Speaker Change: We've not been as big as of course, we took in the fourth quarter. We are very comfortable with the the early delinquencies that were seeing in those trends have not dramatically jumped up. So when you look at that the concept of the provision can be will flow through of course, our CTO models and go through that process.

Thomas Robert Cangemi: Operating expenses in the range of $2.3 to $2.4 billion due to a four-year impact from Signature Bank. The full year impact of 13 private banking teams from the former First Republic Signature Bank Integration Deferral for 2025 in order to minimize customer impact and additional costs related to becoming a Category 4 beneficiary. Normal compensation and benefits expense increase, and approximately 60 million in conversion related savings from Flagstaff. We expect our CET1 regulatory capital ratio for the holding company to be at 10% by year-end 2024, and a 23% full-year tax, Leander 2024 having taken prudent balance sheet action, common category for Importantly, the Bank has a solid foundation in place and a proven track record across business. We believe we are positioned well to navigate our growth and development as an organization and deliver for customers, and we are confident that it will enable us to Finally, I would like to say a special thank you to all of our teammates.

Speaker Change: But yes, there is not a.

John J. Pinto: Yeah, I mean, if you look at the provision that we took in the fourth quarter, we're not, we're expecting that that covers the emerging risks in the portfolio that we have currently. As you know, through Cecil external factors changing the portfolio macroeconomic changes are going to impact what our provision is going forward. So historically, if you look at where our provisions have been, you know, they've not been as big as, of course, we took in the fourth quarter. We are very comfortable with the early delinquencies that we're seeing, and those trends have not dramatically jumped up.

Speaker Change: Anywhere near as significant a provision as we saw in the third and the fourth quarter combined in 2024 that we're expecting right now given what we're seeing in the portfolio and the portfolio dynamics. We do appreciate that sub standard and criticized loans of course could still increase from here and thats something that we will manage through as we go forward, but we're not looking at that potential.

Speaker Change: <unk>.

Speaker Change: That's what we've tried to capture in our seasonal modeling with the facts that we know right now.

Speaker Change: This is Tom just obviously the dividend adjustment, adding back to accretive of capital is also forecasted in our 10% CET one for the year, that's right as well as the shrinking <unk> is where we're taking loans down and we're growing it with cash and zero percent securities to a lesser extent of course, 20% securities in our Fannie and Freddie space.

John J. Pinto: So you know, when you look at that concept of where the provision can be, we'll flow it through, of course, our Cecil models and go through that process. But yeah, there's not a, you know, anywhere near as significant a provision, as we saw in the third and fourth quarters, combined in 2024, that we're expecting right now, given what we're seeing in the portfolio and in the portfolio dynamics. We do appreciate that substandard and criticized loans, of course, could still increase from here. And that's something that we will manage through as we go forward.

Operator: We have a fantastic team, and as always, we deeply appreciate their dedication and commitment to our clients, customers, and communities. With that, we'd be happy to answer any questions you may have. Operator, please open up the line for questions. At this time, I would like to remind everyone that in order to ask a question, press the star followed by the number one on your telephone keypad.

Okay.

Speaker Change: So.

Speaker Change: The criticized asset.

Speaker Change: Office and multifamily.

It looks <unk>.

Speaker Change: Collectively you're looking at about $4 billion.

Speaker Change: How much of that is coming due.

And 'twenty four.

Speaker Change: Yes.

Speaker Change: From a maturity perspective.

Speaker Change: Very very low number from an option perspective.

Speaker Change: A very manageable amount because when you look kind of through why it would be sub standard is.

Coming through in that year bucket that Tom mentioned, so when we're looking at repricing risk a lot of the substandard category would be the stuff thats coming through in the next 12 months from a repricing perspective, so when we looked at the especially on the multi side those would be coming up to their option dates a large portion of that number.

John J. Pinto: But when we're looking at that potential, you know, that's what we've tried to capture in our Cecil modeling with the facts that we know right now. Okay, so just so in addition to that, obviously, the dividend adjustment adding back to creative capital is also, That's right. As well as the shrink in RWA as we're taking loans down, and we're growing it with cash and 0% securities. To a lesser extent, of course, 20% securities in Fannie and Freddie. Okay, so of the criticized assets in office and in multifamily, it looks collectively like about $4 billion. How much of that is coming due in 2024? From a maturity perspective, it's a very, very low number from an option perspective.

Speaker Change: And thats due to the fact that that's how we're capturing that repricing risk is thats getting to that 101, just over just under one <unk> coverage ratio.

Thomas Robert Cangemi: Where do you see credit losses migrating next year? And if you expect any losses to come from the multifamily book? Thanks.

Speaker Change: Got you thanks.

Speaker Change: Your next question comes from the line of Chris Mcgratty with VW. Please go ahead.

Thomas Robert Cangemi: I appreciate the question, Ebrahim. Let me just give you a general view of the fourth quarter and the process of where we came in. Obviously, we looked at the marketplace, we looked at the office perspective and the general office market throughout the country, and we really did a deep dive into the office portfolio as well as thinking through payment shock and interest rate shock given the rise of interest rates that we've experienced over the last few years. We took into account that perspective and clearly had a significant addition to our reserve bill. A lot of that reserve bill went into the office in particular. I believe the number one from 200 basis points reserved, going from Q3 to 800 basis points reserved, in particular for off. Given that, you know, we gave out the statistics on the actual performance of the portfolio, there hasn't been a whole lot of change in that respect. MTAs and delinquencies

Chris Mcgratty: Good morning, Chris Hey, Good morning, Tom and John.

Chris Mcgratty: The slides mentioned the goodwill impairment test.

Chris Mcgratty: And I know in the past when banks have had to write off goodwill. It's led to the dividend I assume this is a little bit reverse order, where you cut the dividend first and May impair.

John J. Pinto: It's a very manageable amount because when you look kind of through why it would be substandard, it's coming through in that year bucket that Tom mentioned. So, when we're looking at repricing risk, a lot of the substandard category would be the stuff that's coming through in the next twelve months from a repricing perspective. So, when we look at the, especially on the multi-side, you know, those would be coming up to their option dates a large portion of that number. And that's due to the fact that that's how we're capturing that repricing risk, which is getting to that one. Oh, or one just over or just under one coverage ratio.

Intangibles.

Chris Mcgratty: Goodwill going forward is that is that kind of arena.

Well, we're in the middle of evaluating the goodwill on our balance sheet and going through the process to see and evaluate if there is any impairment of goodwill.

Chris Mcgratty: As you know that goodwill stems from transactions back.

Chris Mcgratty: 2003.

Chris Mcgratty: We will evaluate that based on the facts and the fourth quarter.

Chris Mcgratty: And what we're looking at now as part of our impairment analysis, and we'll make that decision.

Christopher Edward McGratty: Gotcha, thanks. Your next question comes from the line of Chris McGratty with KBW. Please go ahead. Good morning, Chris.

Chris Mcgratty: Okay.

Thomas Robert Cangemi: However, we had moved some of these loans into a status of criticized position because of the nature of looking at the office sector and the Reserve Bills Act with the anticipation of office still having, That being said, you know, 800 basis points, I believe, gets us very close to being in line with our current peer group, which is a new peer group, Category 4 Bank, as I indicated in my previous remarks. And we're confident that we continue to look at the portfolio in significant detail as we are now benchmarking ourselves against a marketplace that has changed. No question has changed, and we're focusing on payment shock, interest rate shock, and the developments in the commercial. If you want me, Jon, if you want to... Sure, Tom.

Speaker Change: If you were to impair it would there be any subsequent action you think would need to happen I guess, that's my question.

Thomas Robert Cangemi: Oh, good. Hey, good morning, Tom and Jon. The slides mentioned the goodwill impairment test. And I know in the past, when banks have had to write off goodwill, it's led to a dividend. I assume this is a little bit in reverse order, right?

Speaker Change: Now from a capital from a regulatory capital ratio of the goodwill impairment wouldn't impact regulatory capital ratios. So there's not anything else that I would expect.

Speaker Change: Okay, Great and then maybe Tom for you.

Tom: Whether it's a 50% or 40% cut to numbers I think we can work through our numbers.

John J. Pinto: You cut the dividend first and may impair intangible goodwill going forward. Is that kind of the right way to do it? Well, we're in the middle of evaluating the goodwill in our balance sheet and going through the process to see and evaluate if there is any impairment of goodwill. As you know, that goodwill stems from transactions back to, you know, 2003. But we will evaluate that based on the facts in the fourth quarter. And what we're looking at now as part of our impairment analysis, and we'll make that decision. Okay, but if you were to impair it, would there be any subsequent action you think would need to happen?

Tom: But the ROE is going to be by my math kind of mid to upper single digits. How do we think about just the <unk>.

Tom: <unk> constructed this company now that you are through the 100 understanding you've got some near term headwinds how do you.

Tom: How do you think about ROE.

Speaker Change: Great question I mean, obviously 24 is going to be the year the category four.

Speaker Change: It's imperative for US we have some heavy lifting to focus on regarding balance sheet metrics.

Thomas Robert Cangemi: And besides the office portion of the ACL bill, the other item that Tom mentioned earlier is around the multifamily loan portfolio and the repricing risk in that portfolio. You know, as we see our loans continue to hit their option date and reprice higher, we want to make sure that that risk is captured in the qualitative factors as well this quarter. So we were able to do that and increase the reserve on multi as well. So we saw increases specifically in office and multi when you look at the coverage ratio from an ACL. Right, but do you expect the coverage and the pressure on multifamily will translate into losses on that portfolio? On the multifamily portfolio, we have not seen significant losses in multifamily, with the exception, of course, of the one loan that Tom mentioned, the multifamily co-op loan, which rolls up to the multifamily category.

Speaker Change: Which we built up significantly the dividend adjustment is equal CET, one, but going forward. When you think about the long term prospects of the business model. The company is in a unique position to compete we're focused on being within the median peer group over time, and we will gravitate toward a significant enhanced liquidity position as a result of Reg YY, that's really driving the <unk>.

John J. Pinto: I guess that's my question. Now from a capital from a regulatory capital ratio, the goodwill impairment wouldn't impact the regulatory capital ratio. So there's not anything else that I would, Okay, great. And then maybe, Tom, for you.

Speaker Change: Margins are under pressure in 'twenty four as we reset the cost structure as we integrate the systems the processes and build out the businesses and we focus on businesses that have higher returns to the company. We focus on relationship banking, we would like to be in the medium favorable over time, it's not going to happen in 'twenty four but that's the strategy over the longer term.

Thomas Robert Cangemi: Whether it's a 50% or 40% cut to numbers, we can work through our numbers. But the ROE is going to be, by my math, kind of mid to upper single digits. How do we think about the ROE of this company now that you're through 100, understanding you've got some near-term headwinds? How do you think about ROE?

Speaker Change: As the market understands our longer term strategy to be a category four bank as our peer group has changed dramatically.

Speaker Change: Going from 90 billion prior to the acquisition of signature in March and into the right catapulted into a $100 billion clubs, we have some balance sheet items that we need to focus on them and we believe we were focused in the Q4 to address some of those items the capital Dolby talked about now it's going to be about operating effectively as as as institution on <unk>.

Thomas Robert Cangemi: question. I mean, obviously, you know, 24 is going to be the year of the category. Unknown Executive, Manan Gosalia, Lee Smith, Unknown Executive, Manan Gosalia, Unknown, Now it's going to be about, you know, operating effectively as an institution on enhanced financial standards and a risk governance framework that's necessary as we roll out this category 4 bank. And over time, you know, if you think about the median peer group, over time, that's what we'll strive for. It's not going to be a 24-hour story, it's going to be a long-term story, and hopefully, the market will truly understand the long-term story as we reset ourselves as a category. Okay, thanks, Tom. Your next question comes from the line of Christopher Marinac with Janie Montgomery Scott. Please go ahead. Please go ahead. Thanks. Good morning.

Thomas Robert Cangemi: And historically, if you look back at what we've had, higher levels of substandard loans throughout the financial crisis, throughout the pandemic, you know, just the rise in substandard loans does not lead directly to specific losses. So we're still very comfortable in the quality of the multifamily portfolio. We're not seeing anything on the early stage delinquency side yet, either.

Speaker Change: <unk> financial standards and risk governance framework, that's necessary as we rolled out this category for a bank and over time, if you think about the meeting and peer group over time, that's what we will strive for it's not going to be a 24 story, it's going to be a long term story and hopefully the rockwell truly understand the long term story as we reset ourselves as a category four bank.

Thomas Robert Cangemi: We did see a little pop in 30 to 89, but a lot of those loans, we had about 60 million that cleared right after 1231 in the first couple of weeks of January. So we're not seeing any significant trends in the multifamily portfolio besides the repricing risk that we spoke about. So everybody, I mean, just that comment. I would add that when you think about how we looked at the forward curve, we looked at the interest rate environment as of the fourth quarter. We did not take into account changes in the future. Shot

Okay. Thanks, Tom.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Christopher <unk> with Janney Montgomery Scott. Please go ahead.

John J. Pinto: John, I know you talked a little bit about the migration of criticized assets. What are your thoughts? What has to happen with those? And again, what didn't you recognize that could go wrong from here? So, yeah, when you look at the migration, a lot of it will be due partially to interest rates. So, depending on what happens to the five-year part of the curve, that can dramatically change the trajectory of, especially the multifamily book. You know, we're seeing loans that hit their option date take that floating rate option. That is not the typical spot that these borrowers want to be.

Christopher: Thanks, Good morning.

Christopher: John I know you talked a little bit about the migration of criticized assets. What are your thoughts what has to happen on those again, what did you recognize that that could go wrong from here.

Thomas Robert Cangemi: Payment Shock. So we believe that's pretty punitive in the event of a potential Fed pivot. So we're assuming that rates stay where they are and we'll roll that out for a year. And what is the impact on future bars that have to go into year six, and it will go into an IO structure, into an amortizing structure, and we shock them.

So when you look yes, when you look at the migration a lot of it'll due partially to interest rates. So depending on what happens to the five year part of the curve that can change dramatically the trajectory of especially the multifamily book we are seeing.

Thomas Robert Cangemi: That put a lot of those loans closer to a one-for-one debt service coverage ratio, in some cases, slightly below on a pro forma basis. And that will be a substandard view of the asset, although they are in performance status. And as we all know, last year, we had an abundance of customers take the SOFR option when SOFR was much lower. And obviously, they ran through that. They're waiting on the sidelines.

Christopher: The loans are at their option date take that floating rate option that is not the typical spot. These borrowers want to be so depending on what happens with rates. We can see some movement pretty quickly in that portfolio from a paying off perspective, or just a re rating of that portfolio as you know as rates start to drop in.

John J. Pinto: So, depending on what happens with rates, we could see some movement pretty quickly in that portfolio from a pay-off perspective or just the re-rating of that portfolio. As, you know, as rates start to drop and the payment shock gets less and less, we start to see more and more information on 23 financials and how the cash flows and the net operating income are coming on. That'll start the trend of, you know, getting these closer and closer to out of the criticized buckets. You know, that's kind of the thought process we're looking at, it's dependent on interest rates and where they're headed.

Christopher: Payment shock gets less and less and we started to see more and more information on 23 financials and how the cash flows in the.

Christopher: Net operating income that's coming on that'll start the trend of getting these closer and closer to out of the criticized bucket.

Christopher: That's kind of the thought process. We're looking at is its dependent on.

Thomas Robert Cangemi: And maybe, Jon, just on the net interest margin, so the fourth quarter is at 2.82%. Just give us the trajectory of the 240 to, like, what do you expect the NIM to reset in the first quarter? And then what happens, is that guidance still going to hold if we get three or four rate cuts during the year? Yes, yeah, on your second question, yes, the guidance would still hold with three rate cuts throughout the year. And if you look at the full year 240 to 250 margin, we're comfortable with that for the first quarter as well, probably a little closer in the first quarter to the lower end of that spectrum, but we're comfortable with the guidance both for the year and for the first quarter. Got it. I'll hop out.

On interest rates and where they're headed given the trend we are starting to see now we're hoping that that's abated and we.

Thomas Robert Cangemi: Given the trend we're starting to see now, we're hoping that it's abated, and we could see less of that repricing risk on the customer. I just want to reiterate the magnitude of what we've seen historically with the customers, that running in place, we were doing $8 billion a year in Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, or Netteridge, And we ran in place. The growth was in mid-single digits, which meant it was long growth. And when we were a standalone franchise.

Christopher: See less of that repricing risk around the customers.

Christopher: Just wanted to know the magnitude of what we've seen historically with the customers that running in place we were doing $8 million a year in net originations of the company.

We ran in place of growth was in the mid single digit net loan growth and when we were Standalone MRI UCB franchise, focusing on multifamily lending.

Christopher: Last year, our originations were actually indicated down 90%, we did about $100 million versus related with very small number 800 $900 million. So that's a significant drop of activity.

Thomas Robert Cangemi: Lending. Last year, our originations, like I indicated, were down 90%. We did about $100 million. Transcripts provided by Transcription Outsourcing, LLC.

Christopher: If things were to really focus on the next round of refinancing and locking in longer term funding scenario as a client.

Christopher: They are on the sidelines and theyre going to focus on what's the next five to 10 year financing vehicle. They also tend to look at and we feel very strongly that many customers are focusing on back half of 'twenty four to make that longer term decision with the expectation that the fed is in a position to pivot, which will have a position on our customers to take advantage of long term financing.

Operator: Thank you. Your next question comes from the line of Steven Alexopoulos with J.P. Morgan. Please go ahead.

Thomas Robert Cangemi: And we feel very strongly that many customers are focusing on the back half of 24 to make that longer-term decision with the expectation that the Fed is in a position, which will have a position on our customers to take advantage of long-term financing. Right now, they lock in a fixed-rate coupon. It's more attractive than a...

Thomas Robert Cangemi: So I want to follow up on net interest income. So you guys gave us most of the components for the 2024 guide without interest income. You'll probably notice your stock trading pre-marked. All of us are running the math on the earnings asset levels, applying the NIM guide, and you get earnings that are down. And if you do that... Is that what you guys are guiding?

Christopher: Right now they lock in a fixed rate coupon, it's more attractive NFL for option for many customers will choose the sulfur option as a looking to make those decisions as we go into the back half of 'twenty four.

Thomas Robert Cangemi: Many customers still choose the SOFR option as they're looking to make those decisions as we go into the back half of 2024. Last year, most of those loans were SOFR. We see a little bit of a shift to fixed rates. At the same time, there's a significant appetite by the agencies to take these types of loans, and we're going to be very focused on right-sizing our position. We want to make sure that relationship lending stays on the books, and non-relationship lending will move outside of the portfolio as we reduce our exposure to this area and put our cash flows into businesses that have higher returns as a firm. Tom, thanks, that's helpful background.

Thomas Robert Cangemi: So, the guide we gave, you know, when you look at net interest margin, you see where the loans come down, and with deposits increasing, you know, that is not exactly where the totals we're seeing from down 40%. I'm not quite sure exactly how you came up with that number, but you got to look at some of the security bills as well and the cash on the balance sheet. So, when you put all that together, from an earnings perspective, you know, that sounds much lower than what we would have anticipated that you'd be coming out with. Steven, I would also add to Jon's commentary that we are solving for red YY. It's significant.

Christopher: Talked about the $3 billion coming due last year most of those loans yourself, where we see a little bit of a shift to fixed rate at the same time. There is a significant appetite by the agencies to take these types of loans and we are going to be very focuses to rightsize our position to ensure that relationship lending stays on the book and non relationship lending will move outside of the portfolio as we reduce.

Christopher: So our exposure to this area and put our cash flows into businesses that have higher returned as a firm.

Christopher: Tom Thanks, that's helpful background, and just a follow up I guess as you do any of your borrowers have alternatives outside of the banking initiatives could they go to alternative funds or is that interest rates simply too great for them to consider.

Thomas Robert Cangemi: And just to follow up, I guess, is do any of your borrowers have alternatives outside of the banking industry? You know, could they go to alternative funds? Or is that interest rate simply too great for them to consider? Great point. I mean, look, if the government is open for business, they're a huge appetite for this product. The agency is always one of our largest competitors.

Thomas Robert Cangemi: It's a substantial cash build in billions of dollars. I think our guide has an additional 7.5 billion on top of the 1231 number for watching until that rewrites our position on liquidity, where we need to be as a Category 4 bank, and has a negative impact on the margin in the short term. Over the long term, we hope to normalize, the right sides are businesses, and focus on relationship lending with the positive base coming from the relationship and looking at lines of businesses that are deposit-rich, deposit stars. That is a journey as we go into this category for Peer Group, and clearly, this is impacting 24 for sure.

Speaker Change: Great point, I mean look the government is open for business there are a huge appetite for this product mix.

The agency is always one of our largest competitors as other banking competition as well as some of the largest banks in the country.

Thomas Robert Cangemi: There's other banking competition as well as some of the largest banks in the country. We're pricing our risk accordingly. We feel very strongly that it's going to be a relationship-driven model that will focus on true customer relationships. And ultimately, our largest competitor is Fannie and Freddie. And they probably have, you know, probably close to collectively, two of them, $200 billion of an appetite on an annual basis. But there hasn't been any

Speaker Change: We're pricing our risk accordingly, we feel very strongly that it's going to be a relationship driven model that we'll focus on true customer relationships and ultimately our largest competitor is fannie and Freddie and they have.

Speaker Change: Probably close to a collectively to them $200 billion of an appetite on an annual basis. There hasnt been any activity last year was the lowest activity we've seen.

Thomas Robert Cangemi: Last year was the lowest activity we've seen, actually lower than during the pandemic. So we're in a unique position given the fact that there's no activity, but when activity does pick up, and rates do tend to move, customers will find the best vehicle, and the government is very accommodating. Great, thank you both for taking my question. Your next question comes from the line of Steve Moss with Raymond James. Please go ahead. Good morning, Steve.

Speaker Change: Lowering even during the pandemic so unique position given the fact that there's no activity, but when activity does pick up in rates do tend to move customers will find the best vehicle and the government is very accommodated there.

Thomas Robert Cangemi: Yeah, and there will be pressure, no doubt as we transition from loans to lower yielding securities or cash. So, you know that absolutely you will see in that guide on the net interest margin that that is the transition that is going to happen in 24, and then we will see that start to change as we can continue to grow the portfolio in 25 and beyond. And I would also add, Stephen, that clearly we have not seen any activity among multi-family creeds.

Speaker Change: Great. Thank you both for taking my questions.

Speaker Change: Your next question comes from the line of Steve Moss with Raymond James. Please go ahead.

Steve Moss: Good morning, Steve Good morning.

Steve Moss: Can you just.

Thomas Robert Cangemi: Good morning. Just, you know, kind of on the loan side here, just given the change in the growth outlook, curious, you know, how are you guys thinking about commercial real estate concentrations relative to capital? You know, and how are we thinking about, you know, the loan portfolio remixing here going forward? Yeah, great question, Steve.

Steve Moss: Kind of on the loan the loan side here just given the change in the growth outlook curious how are you guys thinking about commercial real estate concentrations relative to capital.

Thomas Robert Cangemi: So, it has been about a 90% reduction in activity originations. There are no real property activities happening right now, so we have a relatively low coupon on the book and billions of dollars that have the possibility of moving either into a higher coupon and an off-wall balance sheet as we focus on relationships. , , , , , , , Lending. And that's created the problem, focus our commercial bank efforts to focus doing commercial lending, but more importantly, reallocating our resources to businesses and lines of businesses that have a unique return perspective. Bank, Full Service Commercial Bank.

Steve Moss: <unk>.

Steve Moss: And how we're thinking about the loan portfolio Remixing here going forward, yes.

Speaker Change: Yes, Great question, Steve and obviously that we're targeting down growth Thats really driven offer.

Thomas Robert Cangemi: And obviously, that we're targeting, you know, down growth that's really driven off. My dialogue is talking about customers going to the government versus staying in our portfolio, not in a relationship. We are moving towards a relationship lending bank focus, and clearly, a lot of the lines of business, which are higher return businesses, will have the ability to build up our C&I book over time. We have Reggie Davis here who can talk specifically about some of those issues. We have a focus on moving out of a high degree of concentration, which you indicated, and focused on relationship learning and moving the cash flows into higher returns. Yeah, sure. I mean, I think Tom's right.

Speaker Change: Dialogue with talking about customers going through the government are staying in our portfolio at non relationship. We are moving towards a relationship lending bank focus and clearly our longer lines of business, which are high returning businesses will have the ability to build up our C&I book over time.

Reggie Davis here can talk specifically about some of our.

Speaker Change: Specific titles as well as Lee Smith on the warehouse, but clearly we have a.

Thomas Robert Cangemi: So it's prudent to expect that a lot of these larger relationships that we have that are not depository relationships will end up gravitating off the balance sheet, probably to the government, over time as rates reset themselves, and we have the ability to move on those low coupons off the balance sheets as the right-sized outcomes. So if I put together everything you guys just said, why not just give us what you think the net interest income will be? 2024. So we're not all guessing, and maybe your stock won't trade down to $7. Like Jon, why don't you just tell us what you might be wrong about?

Speaker Change: Focus on moving out of a high degree of concentration, which you indicated and focus on relationship lending and moving the cash flows into higher return businesses.

Speaker Change: Yes sure.

Thompson from yes from a warehouse lending point of view as you know with the second largest warehouse Linda if.

Lee Matthew Smith: From a warehouse lending point of view, as you know, we're the second largest warehouse lender. If you look at the mortgage market in Q4, it was down 12%, but our warehouse and MSR outstandings were flat.

Thompson: If you look at the mortgage market in Q4, it was down 12%, but our warehouse and.

Speaker Change: <unk> Outstandings were flat.

Lee Matthew Smith: And I think, you know, we've benefited from the dislocation in the market, and we've grown market share from a mortgage finance point of view. And we're also leveraging those relationships from a deposit point of view. As I've mentioned before, we picked up a cash and treasury management team as part of the signature acquisition. And they're working very closely with our warehouse team and our mortgage team to leverage deposits from our TPOs, warehouse borrowers, MSR borrowers, and the MSR owners we subserve for. And right now, we're probably generating anywhere from 9 to 11 billion deposits from that mortgage ecosystem that we touched on. Maybe just put it this way, is there a commercial real estate to total capital ratio you guys are targeting longer term that we should think about going forward here? Now, I mean, look. If you call that multifamily, I think our CRE ratio is probably in the mid-low hundreds. Is that right, Jon?

We benefited from dislocation in the market and we've grown market share from our mortgage finance point of view and we're also leveraging those relationships from a deposit point of view. So as I've mentioned before we picked up our cash and Treasury management team as part of the Cigna acquisition and Theyre working very.

Thomas Robert Cangemi: Because you said basically, we did, we just took earning assets, applied your margin, we said, okay, this is where NII is, fall it out with the other midpoints, and it's not substantial. You're saying it's not that, You know, you just cut the dividend. Maybe you could do your shareholders a favor and tell us what you think NII will be in 2024. You know better than we do because you know what was fully impacted in the quarter. There's certain actions you took which didn't fully impact the quarter, so why not just give us the color? That's right.

Speaker Change: Closely with our warehouses and our mortgage team to leverage the policy from our <unk> warehouse borrowers MSR borrow was on the MSR owners, we sub service for an ROIC now, we're probably generating anywhere from $9 billion to $11 billion of the policy.

Thomas Robert Cangemi: So why not just give us the number and make like... Yeah, absolutely. Your stock is at a 25-year low, I can't imagine you're happy. Unless you want, you know. I don't know why you wouldn't take this opportunity to level set expectations. Well, Steven, we're very focused, but the market will truly understand the strategy going forward. We're in a Category 4 bank strategy. We were well positioned in the closing of Flagstar at the end of last year, and an opportunity came up. We took advantage of that opportunity, we're very grateful to have the FDIC approve that transaction, and we're in a different perspective when it comes to our peer group. These necessary steps need to happen in respect to right-sizing ourselves with our new category peers.

From that mortgage ecosystem that we touch.

Speaker Change: Maybe just put it this way is there a commercial real estate to total capital ratio you guys are targeting longer term that we should think about going forward here.

No I mean, it's easy carve out multifamily I think our <unk> ratio is probably in the low hundreds is that right John about hundreds, but when you look at <unk>.

Thomas Robert Cangemi: Low hundreds? So when you look at our legacy multifamily portfolio, which we've been doing for multiple decades, and we have a long track record of success there, we're going to look at, like I indicated very specifically, relationship deposit lending. So as we look at the marketplace, we have the lowest interest rates we've had in our public life, and that's going to have to make a decision in the out-quarters and out-years

Speaker Change: The legacy multifamily portfolio, which is enduring for multiple decades, and we have a long track record of success there.

Speaker Change: We're going to look at like I indicated very specifically relationship deposit lending. So as we look at the marketplace. We have the lowest interest rates interest rates. We've had in our public life, that's going to have to make a decision in the out quarters and years ahead, and you are going to be very prudent to manage that risk and manage the creek concentrations and moving into higher yielding <unk>.

John J. Pinto: We are going to be very prudent to manage that risk and manage the CRE concentrations and move them into higher-yielding businesses. Assuming these customers are not depositors, it's going to be deposit-driven. That's going to be a significant shift in our concentration by the business strategist becoming a full-service promotion. Okay, and maybe just one in the office here.

Thomas Robert Cangemi: Clearly, going forward, we're focusing on building the bank, and the market will reset itself. We appreciate your commentary on the guide; we felt it was prudent for us to give some guidance for the full year. As you know, Steven, you've been covering this for a long time. We've always given quarterly guidance; we wanted to expand that.

Speaker Change: <unk>, assuming these customers are not depositors, it's going to be deposit driven that's going to be a significant shift on our concentration by that business strategy has been becoming a full service commercial bank.

Thomas Robert Cangemi: But as Jon indicated, a lot of this is significant cash balances at a slight negative carry that's impacting the drag on the margin. And as we reset ourselves into the future, we believe that the market will truly understand the expectations of our category 4 expectations, both the capital bills, which are driven off the dividend adjustment, along with the guidance that we have, which is, we feel, you know, it's something that we feel more transparent; it's going out a full year, not just a quarter, to show where our CET1 expectations will be at the end of 2024. And more importantly, right-size ourselves for the future as we build out our new category 4 expectations in our new kit. OK. Thank you. Your next question comes from the line of Dave Rochester with Compass Point. Please go ahead.

Speaker Change: Okay.

Speaker Change: Just one on office here I mean, obviously, a big driver of the reserve build.

John J. Pinto: I mean, obviously, a big driver of the reserve build. As you guys stress test that portfolio, does this is this a true indicator of the office reserve allocation? Or, you know, what should we expect for the reserve build off this level? So, you know, we did a really deep dive on the office portfolio and really took into account some of the more recent appraisals we're seeing and what we're seeing in that sector and really tried to capture that risk in that portfolio. So, the 800% coverage, the 800 basis points of coverage that we have there, we're comfortable with right now. We still have two loans that are the same loans we talked about in the third quarter. That are sitting in non-accrual status. We haven't seen any other significant trends from a, you know, from a delinquency perspective yet in that portfolio. So, we're comfortable with where we are now, but we'll continue to revisit it, of course, as we get additional appraisals in for properties that have been rated that have been criticized.

Speaker Change: As you guys stress test our portfolio does this is this can we think about this as a trophy office reserve allocation or.

Speaker Change: Should we expect full reserve goes off this level.

Speaker Change: So we did a really as Tom mentioned earlier really deep dive on the office portfolio and really took into account some of the more recent appraisals were seeing and what we're seeing in that in that sector.

And really tried to capture that risk in that portfolio. So the 800% coverage the 800 basis points of coverage that we have there we're comfortable with right now.

Speaker Change: We still have to two loans that are the same loans, we talked about in the third quarter that are sitting in non accrual we haven't seen any other significant trends from a from a delinquency perspective, yet in that portfolio. So we're comfortable with where we are now we will continue to revisit it of course as we get additional appraisals in for properties.

Thomas Robert Cangemi: Hey, good morning, guys. Just one on the expense side, where do you guys anticipate finishing the year roughly on a quarterly basis? I know you had talked about being elevated in the first part of the year as you go through your integrations. And if you could talk about that, sorry if I missed it, but the updated timing on the signature integration would be great.

Speaker Change: That had been rated that had been criticized.

John J. Pinto: But, but as of now, we're comfortable with where that is and at an 8% coverage ratio. I think we've captured a lot of the risk in that portfolio that we've seen so far. Okay, thank you. Your next question comes from the line of Manan Gosalia with Morgan Stanley. Please go ahead. Morning. Hey, good morning.

Speaker Change: But as of now we're comfortable with where that is.

Thomas Robert Cangemi: Yeah, so the updated timing, we've pushed the signature integration into 2025 just to ensure that we have minimal customer impact and, you know, make sure that we've gone through the Flagstar integration process. We're still on track for here in February to get through that integration. So that's why you'll see a little bit less of a cost save in 2024.

Speaker Change: 8% coverage ratio I think we've captured a lot of the risk in that portfolio that we've seen so far.

Speaker Change: Okay. Thank you.

Speaker Change: Your next question comes from the line of Manan <unk> with Morgan Stanley. Please go ahead.

Thomas Robert Cangemi: So your run rate at the end of 2024 will be a little bit higher. Yes, we've guided that the first quarter is typically a higher quarter for us, especially in compensation and benefits, and as well as the systems conversion will happen in February. So you will see the first quarter be the higher quarter, but from a trend perspective, the fourth quarter, when you're going into 2025, will be in that lower end of the range that we gave on an annualized basis, with the start of the year at the higher end of the range. Okay, thanks.

Manan: Good morning.

Manan: Hey, good morning.

Manan Gosalia: On the capital side, can you talk a little bit more about how we should think about RWA migration from here? So, you know, I know you're bringing your loans down as we move through 2024. But at the same time, as some of these criticized assets move into NPLs, is there another, you know, push on RWAs? Is there another denominator effect for capital that we should be thinking about next year?

Manan: On on the capital side.

Manan: Can you talk a little bit more about how we should think about our WAM migration from here. So.

Manan: I know youre, bringing your.

Manan: <unk> is down as we move through 2024, but at the same time as some of these criticized assets move into Npls is there another push on our WNS as there are no that denominator effect for capital that we should be thinking about next year.

John J. Pinto: Yeah, I mean, if not accruals do increase, then yeah, we will go to 150% from an RWA perspective. But the, you know, the big benefit that we're seeing from an RWA reduction is the actual loan portfolio reduction because the additions on the asset side and cash and securities, as we mentioned earlier, are at 0%. When we're looking at cash, of course, GINI securities at zero, and to a much lesser extent, Cincinnati and Freddie's at 20. So those are the major items in the RWA walk, as you mentioned. It's the offset between any changes that we're estimating in non-accrual compared to that more significant loan decline and RWA decline from the loan portfolio since there's no pickup on the security side. I got it.

Manan: Yes.

Manan: If non accruals do increase then yes, we will go to a 150% from an <unk> perspective, but the big benefit that we're seeing it from an <unk> reduction is the actual loan portfolio, reducing because the additions on the asset side in cash and securities as we mentioned earlier are at zero percent.

Thomas Robert Cangemi: And then just on the credit analysis that you've done for this quarter, it sounds like you're assuming stable rates through year end, and I'm assuming that that incorporates all the repricing you're expecting in and the multifamily book through year end. So it's kind of a catch-all for everything that you're looking at through 2024. Is that right?

Manan: We're looking at cash of course, Ginnie securities at zero and to a much lesser extent, some Fannie and Freddie at 20. So that's the that's the are the major items in the <unk> walk as you mentioned.

Thomas Robert Cangemi: Dave, I want to be clear on that. We did a deep dive in Q4, and we assumed rates that are at the current level in Q4. We did not anticipate the flow curve adjusting downward.

Manan: The offset between any changes that we are estimating in non accrual compared to that see more significant loan decline.

Thomas Robert Cangemi: So, we took that into account. Establish the RISC-V. I believe we have about $3 billion, Jon, so $3 billion coming due to reprice in 2024. Hopefully, family, 3.4.

Manan: <unk> declined from the loan portfolio since there is no pickup on the security side there.

Speaker Change: Got it and then.

Thomas Robert Cangemi: So when you take that into account as far as what that impacts, these loans are going from a very low coupon to the market, where customers decide to lock in a fixed rate versus keep the floating rate as they make the decision. Last year, 80%, or maybe more like 90%, were taking fill-for-options. At the beginning of, I'd say towards the tail end of 2023, it was more like 75%, and some of them were grabbing the fixed-rate option, so it's more compelling for them to take a fixed-rate option now, but the rate is still high, current devotion. Mark. So in the event we have a non-relationship loan coming at a 3% coupon coming off the book, they'll probably end up in That will gravitate our concentration of multifamily down significantly.

John J. Pinto: And then on the percentage of book that you've scrubbed, you're at, at current valuations, you know, there haven't been many transactions, there hasn't been much price discovery. So how hard do you think you've hit valuations here as you build reserves in that multifamily as well as the office book? In the office book, I mean, we've looked at not only some transactions, as you mentioned, there's not a lot in the marketplace, but we have looked at the actual appraisals that we're getting and looking at the percentage change, peak to trough, and what those appraisals are and using that from a qualitative perspective to add to our office reserves. Thank you. Your next question comes from the line of David Smith with Autonomous Research. Please go ahead. Good morning.

Speaker Change: Hi, Todd.

Speaker Change: On the percentage of book that you've scrubbed you are at.

Todd: At current valuation.

Todd: There haven't been many transactions there hasnt been much price discovery. So how hard do you think you hit valuations here as you as you build reserves in that multifamily as well as the office book.

Speaker Change: And the office book I mean, we've looked at not only some transactions as you mentioned theres not a lot in the marketplace, but we have looked at the actual appraisals that were getting and looking at the percentage change peak to trough and what those appraisals are and using that from a qualitative perspective to add to our office reserves on the multifamily portfolio as we mentioned we.

Speaker Change: We took rates where they are now so the more punitive structure that the option loans could turn into which is the sulfur plus $2 50.

Reginald E. Davis: Did the actions you're taking to tighten up from a regulatory perspective affect the pace of the private banking bill there at all, or the earnings you're expecting there? So obviously, you know, we are highly regulated, and we're focused on enhanced prudential standards, but in respect to Signature and the teams that we've built, they're doing a phenomenal job, as indicated in my prepared remarks. They've had a great year, they really had stability for March, we're very excited about the stability, and more importantly, they had growth, $1.5 billion net growth, and the teams are geared up Reggie Davis, if you want to expand on some of the initiatives that we have been working on with the team, Well, yeah, and I actually want to speak more to the banking group, because the private bank consists of the legacy First Republic teams and legacy signature teams, but we're now under one envelope. So I want to talk about success and some of the progress that we've made in 2023. We've essentially taken four distinct teams and created one highly focused banking organization. And as Tom mentioned earlier, we created a single brand, and we launched that brand internally in mid-year. And that's something that teams have really rallied around.

Speaker Change: <unk> hit that along with any potential amortization that can come in place. So we really we really think we hit the portfolio from a repricing perspective on the multi side, especially for those loans coming over the next 12 months.

Thomas Robert Cangemi: Assuming that they're not going to be a full service, that is the strategy going forward. It's going to be relationship lending, and clearly, we have an opportunity to take a very low coupon off the portfolio, assuming there's a shift in customer sentiment to lock in their next round of lending. Many of our customers are focusing on the second. So with your bumped-up classified loan balance, that assumes all the repricing that you're expecting for this year and where you see those debt service coverage ratios going based on the rates that you're seeing today, is that right? Yes, yes, that's not on the solar curve, that's in the fourth quarter. And those two options, the fixed option is still 250 over 5, and then the SOFR is 250 over the SOFR, is that right? Those two repricing options? Just to be clear, we assume they all went into the SOFR option, so the more punitive option, because there was an error of conservatism there. We did not take the..., other options.

Speaker Change: Got it thank you.

Speaker Change: Your next question comes from the line of David Smith with Autonomous Research. Please go ahead.

David Smith: Good morning, David.

David Smith: Good morning.

David Smith: So the actions youre, taking to tighten up from a regulatory perspective affect the pace of the private banking build out at all or is the earn backs youre expecting there.

David Smith: So obviously, we are highly regulated and we are focused on focus on enhanced Prudential standards with respect to.

David Smith: Signature and their teams have rebuilt theyre doing a phenomenal job as indicated in my prepared remarks.

David Smith: Had a great year, they really have stability for March were very excited about the stability and more importantly, they had growth one 5 billion net growth and the teams are geared up for first Republic team started onboarding.

David Smith: And focusing on the relationship and White Glove service Reggie Davis, if you want to expand on some of the initiatives that we have working with the teams want to expand upon that as well.

Thomas Robert Cangemi: We went more conservative and looked at everyone to the rise of the SOFR curve until they decided to lock in their next round of refinancing, which also stressed the debt service coverage ratio for SOFR versus the fixed rate. And more recently, they've been going into the fixed rate option, right? Because that's the least punitive option.

Reggie Davis: Actually want to speak more to the banking group because.

Reggie Davis: Private bank consistently legacy first Republic teams and legacy Cigna teams, but we are now under one envelope. So I don't want to talk about success in some of the progress that we've made in 2023, we've essentially taken four distinct teams and created one highly focused banking organization and as Tom mentioned earlier, we create a single brand and.

Thomas Robert Cangemi: The activity has been very, very slow, but what we've indicated probably towards the back end of the fourth quarter of last year, more like 25 percent of them are locking in some fixed rate terms, but there's still a high percentage of them willing to roll SOFR with the expectation that rates are going to be projected to go lower. And where's the multifamily reserve now? How much of that provision went into the multifamily book versus the office book? You already gave the office a cue.

Reggie Davis: We launched that brand internally in mid year, and Thats something that seemed to really rallied around and I think the brand represents the current capabilities and future aspirations of the combined company.

Reginald E. Davis: And I think the brand represents the current capabilities and future aspirations of the combined company. We've also completed a restructuring of the banking group in total. So the new structure has some synergies, quite frankly, between the four legacy institutions taking advantage of each other's strengths. And part of creating that new structure was reducing the number of client coverage models from 10 to three.

Reggie Davis: We've also completed a restructuring of the banking group in total so the new structure has some synergies quite frankly between the four legacy institutions, taking advantage of each other's strengths.

Reggie Davis: And part of creating that new structure was reducing the number of client coverage model from 10% to three so now we operate as the private bank the commercial banking group in the consumer banking group and as a result of that and I think Tom mentioned as we discontinued operations in several legacy businesses to further focus on relationship banking and so the translation of that is if we're going to use our <unk>.

Reginald E. Davis: So now we operate as the private bank, the commercial banking group, and the consumer banking group. And as a result of that, and I think Tom mentioned this, we discontinued operations in several legacy businesses to further focus on relationship banking. And so the translation of that is, if we're going to use our balance sheet, we're going to use it to get deposits. And so we've combined two separate branch teams from legacy Flagstar and NYCB under one leadership structure; we introduced common routines, common client engagement models, and common tools across the entire network. And we've also accelerated our move onto a common platform with common AI tools across the entire branch network. We've also combined our retail investment business into one platform, one structure under one leader. And then we've also combined our wealth management organization with a clear mandate around teaming up with both the commercial bank and the private bank for greater relationship experience. And so the legacy First Republic teams and signature signature teams are under one leader.

Thomas Robert Cangemi: Yeah, when you look at the allowance coverage ratio, the quarter over quarter is up 95%. So we went from 42 basis points to 82 basis points. Got it.

Reggie Davis: Balance sheet, we're going to use it to get deposits and so we've combined also combined two separate branch teams from legacy Flagstar and NYSE under one leadership structure, we introduced common routines common client engagement models common tools across the entire network.

Thomas Robert Cangemi: Perfect. Okay, great. Thanks, guys. I'll step back. Your next question comes from the line of Kasey Harrow with Jeffries. Please go ahead. Yeah, thanks. Good morning, everyone.

Thomas Robert Cangemi: So question on the 10% CT1 target, you know, I kind of reiterate what Steve was talking about with the PPNR guide relative to consensus. And, you know, I'm coming out at like 875 for next year, which, you know, I know you guys are talking about the balance sheet, loans down, so you get some deleveraging on the risk weighted asset front. But it's basically to get to that 10% to 90 bps of CT1 build, credit's going to, provision's going to have to be de minimis by my math. So I kind of, again, want to address, you know, what are you guys baking in for provision to get to that 10% level? And is that, is that aggressive?

Reggie Davis: And we've also accelerated.

Reggie Davis: Our onto a common platform with common AI tools across the entire branch network. We've also combined our retail investment business into one platform one structure under one leader and then we've also combined our wealth management organization with a clear mandate around teaming up with both the commercial bank and the private bank for greater relates.

Reggie Davis: And ship experience and so the legacy first Republic teams and Cigna gene signature teams are under one leader.

Reginald E. Davis: And together they comprise the private banking group. And you know, as Tom said, their performance has really been stellar this year. They recaptured all the deposits that we lost in the March and April timeframe, which is about a billion and a half billion six. In addition, the DBA portion of that book has been rock solid at $11 billion. And that's essentially unchanged because that represents the operating accounts that are very much reflective of the relationship nature of those deposits. And then also, our retail bank only lost 3% of the deposits in the March and April timeframe. And quite frankly, we've captured all of that back as well. So those two businesses, the private bank and the retail bank, are deposit engines for the company. And I might add, from a signature perspective, we haven't lost any teams.

Reggie Davis: Together they comprise the private banking group and as Tom said the performance has really been stellar this year. The recapture all of the deposits that we lost in March and April timeframe, which is about $1 billion to 5 billion. Six. In addition, the DDA portion of that book has been rock solid at $11 billion and Thats essentially unchanged because that represents the operating account.

Thomas Robert Cangemi: Yeah, I mean, if you look at the provision that we took in the fourth quarter, we're not, we're expecting that that covers the emerging risks and the portfolio that we have currently. As you know, through CECL, external factors, changes in the portfolio, macroeconomic changes are going to impact what our provision is going forward. So, historically, if you look at where our provisions have been, they've not been as, you know, as big as, of course, we took in the fourth quarter. We are very comfortable with the early delinquencies that we're seeing, and those trends have not dramatically jumped up.

Reggie Davis: They're very much reflective of the relationship nature of those deposits and then also our retail bank only lost 3% of the deposits in March and April timeframe and quite frankly, we've captured all of that back as well. So those two businesses the private bank and the retail bank our deposit engine for the company.

Reggie Davis: And I might add from a signature perspective, we havent lost any teams and the addition of the signature book has actually helped us from a mix perspective in our deposit book is shifting it from a 39% pre signature to 25%.

Thomas Robert Cangemi: So, you know, when you look at that concept of where the provision can be, we'll flow it through, of course, our CECL models and go through that process. But yeah, there's not, you know, anywhere near as significant a provision as we saw in the third and the fourth quarter combined in 2024 that we're expecting right now, given what we're seeing in the portfolio and in the portfolio dynamics. We do appreciate that substandard and criticized loans, of course, could still increase from here. And that's something that we will manage through as we go forward. But when we're looking at that potential, you know, that's what we've tried to capture in our CECL modeling with the facts that we know right now.

Reginald E. Davis: And the addition of the signature book has actually helped us from a mixed perspective in our deposit book; it shifted it from a 39% pre-signature to 25% CDs, which is actually more in line with our peers. So we feel really good. Our deposits actually grew 5% quarter over quarter, and that has a lot to do with the growth embedded in our retail bank and in the legacy signature book. And we expect that to continue; quite frankly, we're starting to see more and more momentum and more success as those teams are part of our larger organization. So, all good news.

Reggie Davis: <unk>.

Reggie Davis: <unk>, which is actually more in line with our peers. So we feel really good our deposits actually grew up 5% quarter over quarter and Thats a lot has a lot to do with the growth embedded in our retail bank and in the legacy signature book and we expect that to continue quite frankly, we're starting to see more and more momentum.

Reggie Davis: And more success as those teams are part of our larger organization.

Reggie Davis: So all good new stores.

Thomas Robert Cangemi: Yeah, Casey, just so in addition to that, obviously, the dividend adjustment is adding back to recruitable capital. That's right, as well as the shrink in RWA as we're taking loans down and we're growing it with cash and 0% securities to a lesser extent, of course, 20% securities in Fannie and Freddie. Okay, so of the criticized assets in office and in multifamily, it looks, collectively, it looks like about How much of that is coming due in 2024? From a maturity perspective, it's a very, very low number.

Speaker Change: Okay. So not looking to really take your foot off the gas there yet.

Speaker Change: I think the reality is it's deposits deposit deposit we have great opportunity with experienced bankers that are welcome here in the energy is Reggie indicated and that long winded answer which is a lot of positive momentum as a lot of positive momentum the conversions happening in a few weeks from now excited about to add one platform one bank one brand, but what's exciting about it is that there.

Reginald E. Davis: Okay, so not looking to really take your foot off the gas there yet. I think the reality is it's deposit, deposit, deposit. We have a great opportunity with some experienced bankers that are welcomed here and the energy, as Reggie indicated, and that long-winded answer, which is a lot of positive momentum.

Speaker Change: Are you seeing on a white glove service, what they hear with Iberia lending model here. This is about deposit opportunity to service. The clients are specifically in the middle market position.

Thomas Robert Cangemi: There's a lot of positive momentum. The conversion's happening in a few weeks from now. We're excited about that. One platform, one bank, one brand. But what's exciting about it is that they're focusing on their white-glove service, what they do.

Thomas Robert Cangemi: From an option perspective, it's a very manageable amount because when you look kind of through why it would be substandard, it's coming through in that year bucket that Tom mentioned, so when we're looking at repricing risk, a lot of the substandard category would be the stuff that's coming through in the next 12 months from a repricing perspective. So when we look at the, especially on the multi-side, you know, those would be coming up to their option dates, a large portion of that number, and that's due to the fact that that's how we're capturing that repricing risk, that's getting to that 1-0 or 1 just over or just under 1-0 coverage ratio. Gotcha, thanks. Your next question comes from the line of Chris McGrady with KVW. Please go ahead. Good morning, Chris.

Speaker Change: Okay, and then on capital do you view, the 10% target at the end of this year to be an ending point or would you be looking to ultimately get your capital ratios higher.

Speaker Change: And ultimately as we think about capital we were very clear in our public.

Speaker Change: Now turn this morning, along with our viewers do that we want to be within the peer group, we have a new peer group that we have obtained through and Thats clearly the focus here. So as we gravitate to that double digit CET, one the dividend adjustment and plus we will call a conservative view of guidance with respect to our balance sheet will generate increasing capital quarter over quarter with the expectation of a.

Thomas Robert Cangemi: It's not really a lending model here. This is about deposit opportunities to service the client, typically in the middle market. Okay, and then on capital, do you view the 10% target at the end of this year to be an ending point, or would you be looking to ultimately get your capital ratios higher? Ultimately, as we think about capital, we were very clear in our public announcement this morning, and along with our views that we want to be within the peer group, we have a new peer group that we have, [inaudible] Thank you. Your next question comes from the line of Brody Preston with UBS. Please go ahead. Morning, Brody.

Speaker Change: To be within the peer group that's the plan over the long term clearly we have a long history of strong payment and dividend we have to go through the capital planning process. This is our first submission under the Red Red why with the fed that's going to happen in April and they want to prepare for that accordingly.

Thomas Robert Cangemi: Oh, good morning, Tom and Jon. The slides mentioned the goodwill impairment test, and I know in the past when banks have had to write off goodwill, it's led to a dividend. I assume this is a little bit in reverse order, right? You cut the dividend first and may impair intangible goodwill going forward. Is that the right way to read that? Well, we're in the middle of evaluating the goodwill in our balance sheet and going through the process to see and evaluate if there is any impairment of goodwill. You know, as you know, that that goodwill stems from transactions back to, you know, 2003. But we will evaluate that based on the facts in the fourth quarter and the and what we're looking at now as part of our impairment analysis, and we'll make that decision. Okay, but if you were to impair it, would there be any subsequent action you think would need to happen?

Speaker Change: Thank you.

Speaker Change: Youre welcome.

Speaker Change: Your next question comes from the line of Marty Preston with UBS. Please go ahead.

Brody Preston: Good morning Brody.

Thomas Robert Cangemi: Hey, good morning. I wanted just to ask, within the deposit book, how much of the increase in CDs was brokered CDs this quarter, and then the uptick in wholesale borrowing, I'm assuming that's all FHLB. What's the remaining capacity that you have for FHLB borrowings at this point? So, from a FHLB borrowing perspective, you know, we have, as of 12-31, significant capacity to borrow, and we'll use that to continue to build our liquidity here in the first quarter to, as we mentioned earlier, prepare for Reg YY. So, we're very comfortable with the on-balance sheet liquidity and the contingent liquidity we have behind that. From the broker deposit question, broker deposits were up about a billion dollars, and broker CDs were up about a billion dollars quarter over quarter. Okay, so the influx in the CDs; the rest came from the retail network. Yeah, the rest came from the retail network. We actually raised about $2 billion in about two months.

Brody Preston: Hey, good morning.

Brody Preston: I wanted just to ask.

Within the deposit book.

How much of the increase in Cds.

Brody Preston: Was brokered Cds this quarter and then the uptick in the wholesale borrowings on assuming thats all else hlv, what's the remaining capacity that you have for <unk> borrowings at this point.

Speaker Change: So from the FHFA borrowing perspective, we have as of 12 31 <unk>.

Thomas Robert Cangemi: I guess that's my question. Now from a capital from a regulatory capital ratio, the goodwill impairment wouldn't impact the regulatory capital ratio. So there's not anything else that I would, Okay, great. And then maybe, Tom, for you.

Speaker Change: Significant capacity to borrow and when we use that to continue to build our liquidity here.

Speaker Change: Here in the first quarter or two as we mentioned earlier prepare for Reg YY. So we're very comfortable with the with the.

Speaker Change: On balance sheet liquidity and contingent liquidity, we have behind that.

Thomas Robert Cangemi: Whether it's a 50% or 40% cut to the numbers, we can work through our numbers. But the ROE is gonna be, by my math, kind of mid to upper single digits. How do we think about just the ROE that constructed this company now that you're through 100, understanding you've got some near-term headwinds? But how do you think about ROE? question. I mean, obviously, you know, 24 is going to be the year of the category.

Speaker Change: From the broker deposit question broker deposits were up about $1 billion brokered Cds were up about $1 billion.

Speaker Change: Quarter over quarter.

Speaker Change: Okay.

Speaker Change: The influx in the Cds. So the rest came from our retail network. Yes. The rest came from our retail network, we actually raised about $2 billion over about two months.

John J. Pinto: And that I mean, again, that reflects the strength of our retail franchise. You know, about 72% of those were new to bank, and about 28% were existing relationships and were able to cross sell about 15% in on checking accounts. And that's going to set us up for next year in terms of converting some of those single-product new clients into DDA accounts, relationship accounts. And so it's not only, you know, good for the balance sheet, obviously, but long term, it will also add to a cheaper funding base we feel really good about. About 6,700 new clients. Okay, great.

Thomas Robert Cangemi: We have some heavy lifting to focus on regarding balance sheet metrics, the ACL, which we built up significantly, and the dividend adjustment. But going forward, when you think about the long-term process of the business model, the company is in a unique position to compete. We're focused on being within the median peer group over time, and we're gravitating toward a significant enhanced liquidity position as a result of Reg YY. That's really driving the margin under pressure in 24. As we reset the core structure, as we integrate the systems, the processes, and build out the businesses, and we focus on businesses that have higher returns to the company, and we focus on relationship banking, we would like to be in the median peer group over time. It's not going to happen in 24, but that's the strategy over the longer term.

Speaker Change: And that.

Speaker Change: Again that reflects the strength of our retail franchise.

Speaker Change: About 72% of that were new to bank and about 28% or existing relationship and we're able to cross sell about 15% in on checking accounts.

Speaker Change: And that's going to set us up for next year in terms of converting some of those single product new clients into DDA accounts relationship accounts and so it's not only good for the balance sheet, obviously, but long term. It also will add to a cheaper funding base, we feel really good about that about 6700 new clients.

Speaker Change: Okay, Great and then just on the.

John J. Pinto: And then just on the deposit, you know, on the deposit front again, I guess 32.7% of the deposits are uninsured. You know, but you also have escrows down this quarter for, you know, seasonality. I guess I wanted to ask, you know, is the 32.7% uninsured a good read on what percent of the deposit base is institutional clients at this point? If not, what percent of the deposit base is institutional clients?

Speaker Change: On the deposit.

Speaker Change: On the deposit front again.

Speaker Change: I guess, the 32, 7% of the deposits are uninsured.

Speaker Change: But you also have asked grows down this quarter for.

Speaker Change: Seasonality I guess I wanted to ask is the 32, 7% uninsured a good read on what percent of the deposit base is institutional clients at this point, if not what percent of the deposit base is institutional clients.

Thomas Robert Cangemi: As the market understands the longer-term strategy to be a Category 4 bank, as our peer group has changed dramatically, going from $90 billion prior to the acquisition of Signature in March into that right catapulted into the $100 billion club, we have some balance sheet items that we need to focus on, and we believe we were focused in the Q4 to address some of those items. That was what we talked about. Now, it's going to be about operating effectively as an institution with enhanced financial standards and a risk governance framework that's necessary as we roll out this Category 4 bank. Over time, if you think about the median peer group, over time, that's what we'll strive for. It's not going to be a 24-story building.

John J. Pinto: And then secondarily, we saw at least one other bank that went through some stress on the deposit front earlier this year sign NDAs with some of its larger depositors. Um, you know, did you guys consider doing anything like that moving forward with some of your larger depositors so that they can, you know, feel good about the health of the balance sheet? Yeah, when you look at some of those, those uninsured deposits, they're not all institutional by any stretch.

Speaker Change: And then secondarily, we saw at least one other banks that went through some stress on the deposit front earlier. This year sign NDA is with some of its larger depositors.

Speaker Change: Did you guys considered doing anything like that moving forward with some of your larger depositors so that they can.

Speaker Change: I feel good about the health of the balance sheet.

Speaker Change: Yes, when you look at some of those those uninsured deposits theyre not all institutional by any stretch there is customers in there theres businesses in there so that is not the.

John J. Pinto: There's customers in there, there's businesses in there, so that's not the escrow or entirely large balance institutional deposits. But, you know, if you look at the organizations, we had some of those balances from a 15C3 and that type of money, those types of business institutional type accounts. You know, we don't have a lot of those deposits at all anymore. I mean, that deposit base that's uninsured is primarily business type deposits and operating accounts. And yeah, there's a lot of DDA in there as well.

Speaker Change: The escrow or entirely large balance institutional deposits, but if you look at net the organizations. We had some of some of those balances.

Thomas Robert Cangemi: It's going to be a long-term story, and hopefully, the market will truly understand the long-term story as we reset ourselves as a Category 4 bank. Okay, Tom. Your next question comes from the line of Christopher Marinac with Janie Montgomery Scott. Please go ahead. Thanks. Good morning.

Speaker Change: <unk>, three and that type of money those types of business institutional type accounts.

Speaker Change: We don't have a lot of those deposits at all anymore. I mean that deposit base that is uninsured is primarily business type deposits and operating accounts.

Thomas Robert Cangemi: Jon, I know you talked a little bit about the migration of criticized assets. What are your thoughts? What has to happen with those? And again, what didn't you recognize that could go wrong from here? So, yeah, when you look at the migration, a lot of it will be due partially to interest rates. So, depending on what happens to the five-year part of the curve, that can dramatically change the trajectory of, especially the multifamily book. You know, we're seeing loans that hit their option date take that floating rate option. That is not the typical spot that these borrowers want to be.

Speaker Change: Yes, there's a lot of DDA in there as well.

John J. Pinto: Thank you. Your next question comes from the line of Matthew Breese with Stevens. Please go ahead. Hey, good morning.

Speaker Change: Got it thank you guys.

Speaker Change: Your next question comes from the line of Matthew Breese with Stephens. Please go ahead, hey, good.

Thomas Robert Cangemi: Hey, so understanding some of the actions to take this quarter to course correct is $100 billion over $100 billion bank versus some of your similarly sized peers. Are there additional capital-related actions to be considered apart from CET-1? So I'm looking at total risk-based capital, 11.8 percent; your peers are at 13.5%. Should we be considering any sort of need for additional subdebt to kind of get you to that peer range? And if so, when?

Matthew M. Breese: Good morning.

Matthew M. Breese: Hey, so understanding some of the actions taken this quarter to course, correct as $100 billion over $100 billion bank versus some of your similarly sized peers.

Matthew M. Breese: Are there additional capital related actions.

Matthew M. Breese: To be considered a parkman CET one so I'm looking at total risk based capital 11, 8% of your peers are at 13, 5% should.

Thomas Robert Cangemi: So, depending on what happens with rates, we could see some movement pretty quickly in that portfolio from a pay-off perspective or just the re-rating of that portfolio. As, you know, as rates start to drop and the payment shock gets less and less, we start to see more and more information on 23 financials and how the cash flows and the net operating income are coming on. That'll start the trend of, you know, getting these closer and closer to out of the criticized buckets. You know, that's kind of the thought process we're looking at, it's dependent on interest rates and where they're headed.

Matthew M. Breese: Should we be considering any sort of need for additional sub debt to kind of get you to that to your range and if so what.

Jon Glenn Arfstrom: So Matt, I do appreciate the question. I will tell you that between Forward Guide, along with the Give and Adjustment and our targets for CET-1, we're focusing on that specific area in respect to building capital. Obviously, we're waiting for the new rules on Basel III. That will come out, and it will apply to us.

Speaker Change: I appreciate the question I will tell you that between forward guide along with the dividend adjustment and our targets for CET. One we're focusing on that specific area in respect to building capital.

Speaker Change: Obviously, we're waiting for their new rules on Basel III that will come out in the end it will apply to us as it is a category four bank over time, but no question the adjustment.

Thomas Robert Cangemi: Given the trend we're starting to see now, we're hoping that that's abated, and we could see less of that repricing risk on the customer. I just want to reiterate the magnitude of what we've seen historically with the customers that were running in place. We were doing $8 billion a year in net origin, and we ran in place.

Speaker Change: Distributions to shareholders, along with building out the business and running a run rate based on our guidance as we're able to focus on the capital build so clearly that's going to put us.

Speaker Change: Slightly below the table, but with the expectation of building capital overtime and accrued capital going forward.

Speaker Change: Okay and again understanding this quarter you took some actions to course correct.

Jon Glenn Arfstrom: And again, understanding that this quarter you took some actions to course correct, could you give us some balance sheet mixed targets? Once you're done in terms of cash to assets, securities, and security to assets, so where you would like to be and by when. Yeah, well, the main issue and thought process that we're talking through this quarter on balance sheet liquidity is just preparing for Reg YY. So if you look at where we were at 1231 at 18%, with the peers at 25, we're going to we're going to be in that range, and we'll be above 18. So we're going to get to that 22-23% range and get closer and closer to peers. You know, as you know, our securities portfolio has historically been very small on a percentage basis to total assets.

Thomas Robert Cangemi: The growth was in mid-single digits, which meant long growth. And when we were stand-alone, Franchise. So. Lending. Last year, our originations, like I indicated, were down 90%. We did about $100 million. Richard Draglin and I, and we feel very strongly that many customers are focusing on the back half of 24 to make that longer-term decision with the expectation that the Fed isn't in a position, which will have a position on our customers to take advantage of long-term financing. Right now, if they lock in a fixed-rate coupon, it's more attractive than a SOFR, as well as many customers still choose the SOFR option as they're looking to make those decisions as we go into the back half of 2024.

Speaker Change: Can you give us some balance sheet mix targets once you're done in terms of cash to assets security securities to assets.

Speaker Change: So where you would like to be and by when.

Speaker Change: Yes. The main issue in thought process that we're talking through with this quarter on balance sheet liquidity is just preparing for Reg YY. So if you look at where we were at 12 31 at 18%.

Speaker Change: With the peers at 25, we're going to we're going to be in that range will be above 18, So we're going to get to that 'twenty, two 'twenty, 3% range and get closer and closer to peers.

Speaker Change: As you know our securities portfolio has historically, we've historically been very small percentage basis to total assets and that securities portfolio is really the main liquidity buffer that we need to keep it in place here going forward. So that's why when we look at that portfolio it will be significantly skewed towards zero and 20% risk weighted.

Thomas Robert Cangemi: We talked about the $3 billion coming due. Last year, most of those loans were SOFR. We see a little bit of a shift to fixed rates. At the same time, there's a significant appetite by the agencies for these types of loans. And we're going to be very focused on right-sizing our position. We want to make sure that relationship lending stays on the books, and non-relationship lending will move outside of the portfolio as we reduce our exposure to this area and put our cash flows into businesses that have higher returns as a firm. Tom, thanks, that's a helpful background.

John J. Pinto: And that securities portfolio is really the main liquidity buffer that we need to keep in place here going forward. So that's why when we look at that portfolio, it'll be significantly skewed towards zero and 20% risk-weighted assets, high quality liquid assets in order to ensure that we can meet our on balance sheet liquidity demands and regulations. So I'd say that will be, you know, much closer to that 25% range of our peers over time, and we'll get there in the first and second quarters.

Assets high quality liquid assets in order to ensure that we can meet our on balance sheet liquidity demands.

Speaker Change: And regulation, so I would say that it will be much closer to that 25% range of our peers over time and.

Speaker Change: Then we will get there in the first and the second quarter.

John J. Pinto: And when you measure security, are we talking securities assets or total assets? Because I'm looking at 9% security. Okay, so 9% security assets today, that's going to... You have tripled by next quarter? No, you have to add cash in there as well, right?

Speaker Change: And when you measure securities TARP securities to assets our.

Speaker Change: Total assets, because I'm looking at 9% to.

Thomas Robert Cangemi: And just to follow up, I guess, do any of your borrowers have alternatives outside of the banking industry? You know, could they go to alternative funds? Or is that interest rate simply too great for them to consider?

Speaker Change: <unk> securities assets today that is going to.

Ian Triple by next quarter.

Speaker Change: Again, Ed cash in there as well right. So I'm looking at cash and securities as a combined basis as a percentage of total assets right and that's how we manage that so we manage on balance sheet liquidity normally there'll be more in the securities portfolio given the buildup here at starting in cash and over time, we'll be putting that out in the securities portfolio. I think it's fair to say that the guide has most of these.

John J. Pinto: So I'm looking at cash and securities on a combined basis as a percentage of total assets, right? And that's how we manage it. So we manage on the balance sheet liquidity. Normally, that'll be more in the securities portfolio. But given the build-up here, it's starting in cash.

Thomas Robert Cangemi: I mean, look, the government is open for business. There is a huge appetite for this product. The agency is always one of our largest competitors.

John J. Pinto: And over time, we'll be putting that out in the securities portfolio. I think it's fair to say that the guide has most of these assets sitting in liquidity. Correct. And you assume that the lion's share of whatever you need to do here will be completed by the end of the first quarter. It's not going to drag out throughout the whole year. That's right. That is correct. And then we go back to the CRE concentration.

Thomas Robert Cangemi: There's other banking competition as well as some of the largest banks in the country. We're pricing our risk accordingly. We feel very strongly that it's going to be a relationship-driven model that will focus on true customer relationships. And ultimately, our largest competitor is Fannie and Freddie, and they probably have, you know, probably close to collectively, two of them, $200 billion of an appetite on an annual basis. But there hasn't been any

Speaker Change: Assets are sitting in liquidity in the form of cash.

Speaker Change: Correct, which is and you assume that the lion's share of whatever you need to do here and will be completed by the end of the first quarter, it's not going to drag out throughout the whole year.

Speaker Change: Right.

Speaker Change: That is correct.

And it goes back to the CRE concentration. So so when you look at the CRE concentration versus peers is it still appropriate to exclude multifamily given the new pricing risks and do the regulators look at it that way I know for decade. After decade rent regulated multifamily has been virtually risk free but post 2019.

Thomas Robert Cangemi: So when you look at the CRE concentration versus peers, is it still appropriate to exclude multifamily due to the repricing risk? And do the regulators look at it that way? I know for decades after decades, rent-regulated multifamily has been virtually risk-free, but post-2019, the rent law changes to the new paradigm. In the release, in your commentary, you're discussing repricing credit risk here. It feels like CRE Concentration, including multi-families, is the right one to look at, with all due respect. Take Advantage of Market Conditions and Reduce Cost and Concentration, putting into higher yielding loans and higher margin businesses over time, with a focus on relationship deposit lending. That is a meaningful statement as we have no activity in the market. If you go back to history, when we were doing $8, $9 billion a year in originations, we were running flat at 4% to 5%, at best, to stay flat.

Thomas Robert Cangemi: Last year was the lowest activity we've seen, actually lower than during the pandemic. So, you know, we're in a unique position given the fact that there's no activity, but when activity does pick up, and rates do tend to move, customers will find the best vehicle, and the government is very accommodating. Great. Thank you both for taking my questions. Your next question comes from the line of Steve Moss with Raymond James; please go ahead. Good morning, Steve. Good morning.

Speaker Change: Law changes in the new paradigm.

Speaker Change: At least in your commentary Youre discussing re pricing credit risk here it feels like.

The CRE concentration, including multifamily is the right one.

Speaker Change: With all the.

Fair point as you know, we're not going to speak specifically on a regulatory conversation, but clearly we understand our business very well. We also have a focus on looking at Cree concentration is a much lesser number as we focus on relationship banking that is the mission of the new flagstar.

Thomas Robert Cangemi: Just, you know, kind of on the loan side here, just given the change in the growth outlook, curious, you know, how are you guys thinking about commercial real estate concentrations relative to capital and how we're thinking about, you know, the loan portfolio remixing here going forward? Yeah, great question, Steve. And obviously, we're targeting, you know, down growth that's really driven off. My dialogue is talking about customers going to the government versus staying in our portfolio, not in a relationship. We are moving towards a relationship lending bank focus, and clearly a lot of the lines of business, which are higher return businesses, will have the ability to build up our C&I book over time. We have Reggie Davis here who can talk specifically about some of those issues. Well, that's basically it. Yeah, sure.

Speaker Change: Bank customer deposits at the bank and their full relationship deposits, we have an opportunity here to significantly take advantage of market conditions and reduced saw can concentration and putting into higher yielding loans higher margin businesses over time with a focus on relationship deposits lending that is a <unk>.

Speaker Change: <unk> statement as we have no activity in the marketplace. If you go back to history and then June.

Thomas Robert Cangemi: So when the market does react to changes in interest rates and customers look for refinancing, we have a golden opportunity here to take low-yielding coupons off the book. We do subconcentration materially here and move that into high-yielding assets and obviously focus on our liquidity expectations. Having a lower compensating balance on the asset is not the focus of the new Flagstar.

Speaker Change: June $89 billion a year in originations, we were running flat at 4% to 5% at that to stay flat to when the market does react to changes in interest rates and customers look for refinancing we have a golden opportunity here to take low yielding coupons off the books reduced our concentration materially here and move that into higher yielding assets and obviously focus on our liquidity.

Reggie Davis: I mean, Thomas, from a warehouse lending point of view, as you know, we're the second largest warehouse lender. If you look at the mortgage market in Q4, it was down 12%, but our warehouse and MSR outstandings were flat. And I think, you know, we've benefited from the dislocation in the market, and we've grown market share from a mortgage finance point of view, and we're also leveraging those relationships from a deposit point of view. So, as I've mentioned before, we picked up a cash and treasury management team as part of the signature acquisition, and they're working very closely with our warehouse team and our mortgage team to leverage deposits from our TPOs, warehouse borrowers, MSR borrowers, and the MSR owners we subserve for.

Expectations for us, having a lower compensating balances to the asset is not the focus of the new flagstar, it's going to be well balanced towards relationship deposit lending that is the focus of the institution on a combined basis going forward and we think that given the activity last year as I indicated was 90% down there's no activity in the market.

Thomas Robert Cangemi: It's going to be well-balanced towards relationship deposit lending. That is the focus of the institution on a combined basis going forward, and we think that given the activity last year, as I indicated, was 90% down, there's no activity in the market. Although the customers that we speak to, they're waiting on the sidelines, and they're going to react when they feel confident about the next 5 to 10 years of financing costs. Some I mentioned are taking fixed-rate loans, some are going to the agency now, but the agency has a huge appetite, and when the customer feels prudent that it's time to lock in the next 5 to 10 years of financing, they will make that decision. And we will work with our customers for balance sheet purposes, and if it's not a true customer relationship, that will be a significant reduction in our pre-concentration. Over time, I mean, there's a lot of peer comp going on this quarter. Over time, the CRE concentration needs to get to peer level. Look, I mean, it's a huge business model of ours. We have a great track.

Speaker Change: Although the customer activity that we speak to they are waiting on the sidelines and they're going to react when they feel confident the next five to 10 year debt financing costs have semi indicated taking fixed rate loans. Some will go into the agency now, but the agency has a huge appetite and when the customer feels prudent that it's time to lock in the next five to 10 years of financing they will make that decision.

Reggie Davis: And right now, we're probably generating anywhere from $9 to $11 billion in deposits from that mortgage ecosystem that we touched on. Maybe just put it this way, is there a commercial real estate to total capital ratio you guys are targeting longer term that we should think about going forward here? No, I mean, look, if you call that multifamily, I think our CRE ratio is probably in the low hundreds. Is that right, Jon, the low hundreds?

Speaker Change: And we will work with our customers for balance sheet purposes, and if it's not a true customer relationship that will be a significant reduction in luxury concentration.

Speaker Change: Okay.

Speaker Change: Over time, I mean, there's a lot of peer comp going on this quarter.

Speaker Change: Over time, the CRE concentration you need to get to pure.

Thomas Robert Cangemi: So when you look at our legacy multifamily portfolio, which we've been doing for multiple decades, and we have a long track record of success there, we're going to look at, like I indicated very specifically, relationship deposit lending. So as we look at the marketplace, we have the lowest interest rates we've had in our public life, and that's going to have to make a decision in the coming quarters and years ahead. You're going to be very prudent to manage that risk and manage the CRE concentrations and move it into higher-yielding businesses. Assuming these customers are not depositors, it's going to be deposit-driven. That's going to be a significant shift in our concentration by the business strategist becoming a full-service promotion. Okay, and maybe just one in the office here.

Speaker Change: Look I mean, it's a huge business model of ours, we have a great track, we have great customers, who have lots of relationships on the deposit sides of our obviously uniquely different.

Thomas Robert Cangemi: We have great customers. They have lots of relationships on the deposit side. So we're obviously uniquely different. That's who we are, and that goes back to our roots.

Speaker Change: We are and that goes back to our roots, but ultimately we're a new company. We're a commercial bank are evolving from a monoline thrift. We're excited about the lines of business that we have we're excited about the opportunity with mortgage and the ecosystem. We're excited about Reggie Davis is doing with his lines of businesses and we have choices and is going to be based on a return on equity model, which is very different than history, where it was driven off of a monoline.

Thomas Robert Cangemi: But ultimately, we're a new company. We're a commercial bank evolving from a monoline thrift. We're excited about the lines of business we have. We're excited about the opportunity of mortgages in the ecosystem. We're excited about what Reggie Davis is doing with his lines of business. And we have choices.

Thomas Robert Cangemi: And it's going to be based on a return on equity model, which is very different from history, where it was driven off of a monoline business, which was multifamily-free. So we're going to reallocate those resources, take advantage of market conditions, and work with our customers. We feel very strongly that just by the mere fact that the coupon was coming off the lows, we have an opportunity to move a lot of assets at low coupons to make our balance stronger and our earnings profile better. Last one for me, you know, the language here around being over 100 billion feels far more urgent today than just a few months ago. Has anything changed on the regulatory front in terms of overall standing or timeline to be ready for new stress testing? There's a lot, like I said, a lot of peer comparison here.

Speaker Change: <unk>, which was multifamily create so we're going to reallocate those resources take advantage of market conditions and work with our customers. We feel very strongly that just by the mere fact that the coupon was coming off the lows, we have an opportunity to move a lot of assets at low coupon to make our balance sheet stronger and earnings profile debtors.

Thomas Robert Cangemi: I mean, obviously, a big driver of the reserve build. As you guys stress test that portfolio, does this is this a true indicator of the office reserve allocation? Or, you know, what should we expect for the reserve build off this level? So, you know, we did a really deep dive on the office portfolio, as Tom mentioned earlier, and really took into account some of the more recent appraisals we're seeing and what we're seeing in that sector and really tried to capture that risk in that portfolio. So, the 800 percent coverage, the 800 basis points of coverage that we have there, we're comfortable with right now. We still have two loans that are the same loans we talked about in the third quarter that are sitting in non-accrual.

Speaker Change: Okay.

Speaker Change: Last one from me the language here around being over 100 billion feels far more urgent today than just a few months ago.

Speaker Change: Has something changed on the regulatory front in terms of overall standing or timeline to be ready for new stress has been like I said a lot of pure comparison here.

Thomas Robert Cangemi: If so, can you give us some updated timeframe milestones? I know you mentioned April submission in terms of being prepared for, you know, the first, first stress. Matt, Matt, we are obviously, we're not going to speak specifically about regulatory conversations. We're highly regulated.

Speaker Change: If so can you give us some updated timeframe milestones I know you had mentioned in April.

Speaker Change: Our submission in terms of being prepared for the first for <unk>.

Matt, let Matt obviously, we're not going to speak specifically about regulatory conversations we're a highly regulated institution in an industry is highly regulated but the reality is that we do have an April submission, we've adjusted our capital position significantly as well as the ACL those are big steps.

Thomas Robert Cangemi: [inaudible] We've adjusted our capital position significantly, as well as the ACL. Those are the big steps. Reg Y.

Thomas Robert Cangemi: We haven't seen any other significant trends from a delinquency perspective yet in that portfolio, so we're comfortable with where we are now. We'll continue to revisit it, of course, as we get additional appraisals in for properties that have been rated and that have been criticized. But as of now, we're comfortable with where that is, and at an 8 percent coverage ratio, I think we've captured a lot of the risk in that portfolio that we've seen so far. Okay. Thank you. Your next question comes from the line of Manon Gasaglia with Morgan Stanley. Please go ahead. Morning. Hey, good morning.

Speaker Change: As we forecast our submissions to the Reg why that's an important milestone as John indicated we're doing significant work on Reg YY bond balance and liquidity.

Thomas Robert Cangemi: That's an important milestone. As Jon indicated, we're doing significant work on Reg Y. We catapulted into the $100 billion club post-liquidity crisis in March. We were preparing for that last year to cross over organically. An opportunity came, and we thought it was a great opportunity for building out the conversion from a thrift model to a commercial bank model. We are in a unique benchmark now. We're in a different

Speaker Change: We went into the we catapulted into the $100 billion club pulse liquidity prices in March we were preparing for that last year Thats, a crossover organically and we an opportunity came in with what is a great opportunity for building out the conversion from a thrift model to a commercial bank model.

Speaker Change: We're in a unique benchmark now we're in a different category as eight of us the benchmark <unk> and wanted to get those ratios in line to a group that makes sense going forward as we run our business and I think the market will understand what's in front of us, but more importantly, as we build and flagstar, we're excited with the team and the energy as they gravitate to here to be part of this team.

Thomas Robert Cangemi: There are eight of us that we benchmark against, and we want to get those ratios in line with a group that makes sense going forward as we run our business. I think the market will understand what's in front of us, but more importantly, as we build new sites, we're excited with the team and the energy as they gravitate here to be part of this new team. We've made significant changes on the risk side, significant changes to bringing people in-house as a larger institution. That's the journey that we're focusing on here. So it is fluid given the situation in respect to the timing because it became, you know, a little bit unexpected in March of last year as we opted to be able to summit and buy signature Bank through receivership. And now we have to make sure that we're in place to be honorable of the fact that we are a Category 4 bank, and that's a regulatory obligation. I'll leave it be.

Thomas Robert Cangemi: On the capital side, can you talk a little bit more about how we should think about RWA migration from here? So, I know you're bringing your loans down as we move through 2024, but at the same time, as some of these criticized assets move into NPLs, is there another push for RWAs? Is there another denominator effect for capital that we should be thinking about next year? Yeah, I mean, if not accruals do not increase, then yeah, we will go to 150% from an RWA perspective. But you know, the big benefit that we're seeing from an RWA reduction is the actual loan portfolio reduction because the additions on the asset side and cash and securities, as we mentioned earlier, are at 0%.

Speaker Change: Significant changes on the risk side significant changes on bringing people in house as a larger institution. That's the journey that we're focusing on here. So it is fluid given the situation in respect to the timing because it became a little bit unexpected in March of this year as we opted to be able to stomach and buy signature bank in receivership and now we have.

Speaker Change: To make sure that were in place to be.

Speaker Change: Honorable of the fact that we are a category four bank and that's a regulatory obligations.

Speaker Change: I'll leave it there thanks for taking my questions appreciate it.

Thomas Robert Cangemi: Thank you for taking my question. Your next question comes from the line of Bernard Bon Gizycki with Deutsche Bank. Please go ahead. Good morning.

Speaker Change: Your next question comes from the line of Bernardo <unk> with Deutsche Bank. Please go ahead.

Thomas Robert Cangemi: When we're looking at cash, of course, Gini securities at zero, and to a much lesser extent, Cincinnati and Freddie's at 20. So those are the major items in the RWA walk, as you mentioned. It's the offset between any changes that we're estimating in non-accrual compared to that more significant loan decline and RWA decline from the loan portfolio since there's no pickup on the security side. I got it.

Bernardo: Good morning.

Bernardo: Good morning, so with the sales of the CRE multifamily loans from signature held at that <unk> now completed.

John J. Pinto: So with the sales of the CRE multifamily loans from Signature held at FDIC now completed, how does that impact the expenses from the loss sharing and then the fees, some of that loan administration income that you had, and how do we think about that for 24? Yeah, so if you look at those transactions that hit the marketplace, we expect that those loans will transfer off our servicing platform this quarter entirely. So we will see some loan servicing income, a little less than we saw in the fourth quarter. But we'll see some of that come in in the first quarter.

Bernardo: How does that impact the expenses from the.

Bernardo: The loss sharing and then the fees some of that loan administration income that you had.

Bernardo: And how we think about that for 'twenty four.

Speaker Change: Yes, so if you look at.

Speaker Change: Those transactions that hit the marketplace.

Speaker Change: We expect that those loans will transfer off our servicing platform. This quarter entirely. So we will see some loan servicing income a little less than we saw in the fourth quarter, we will see some of that come in in the first quarter. That's within the guide that we gave.

Thomas Robert Cangemi: And then on the percentage of the book that you've scrubbed, you're at current valuations, you know, there haven't been many transactions, there hasn't been much price discovery. So how hard do you think you've hit valuations here as you build reserves in that multifamily as well as the office book? In the office book, I mean, we've looked at not only some transactions, as you mentioned, there's not a lot in the marketplace, but we have looked at the actual appraisals that we're getting and looking at the percentage change, peak to trough, and what those appraisals are and using that from a qualitative perspective to add to our office reserves. On the multifamily portfolio, as we mentioned, we took rates where they are now, took So we really think we have hit the portfolio from a repricing perspective on the multiside, especially for those loans coming over the next 12 months. Thank you. Your next question comes from the line of David Smith with Autonomous Research. Please go ahead. Warren.

John J. Pinto: That's within the guide that we gave. And then from a cost save perspective, you know, that's some of that information. Once we get through the Flagstar integration, some of those cost saves are in the non-interest expense block that we put together in the slide deck. So that's included in that number.

And then from a cost save perspective.

Speaker Change: Some of that information once we get through the flagstar integration some of those cost saves are in that the noninterest expense work that we put together.

Speaker Change: In the slide deck. So thats included in that number so from a quarter over quarter perspective, we will see a decline fourth quarter to first quarter and income from the sub servicing and then by the second quarter, we expect that those loans will have transferred out.

John J. Pinto: So from a quarter over quarter perspective, we'll see a decline in fourth quarter to first quarter in income from the subservicing. And then by the second quarter, we expect that those loans will have transferred out so that we will have some cost savings that come out of that. And then the income will disappear.

Speaker Change: We will have some cost saves that come out of that and then the income will disappear there.

John J. Pinto: And then just as a follow-up, I know there haven't been many transactions and it sounds like you're more focused on appraisals, but did these sales potentially impact your decisions to add reserves for multifamily in office? Yeah, no, we know a lot of the information we're getting; a lot of it specifically comes from, you know, the appraisals we're seeing in our portfolio. We are looking at the market and any market indications that we can get our hands on and using that as well. So, you know, we're taking into account as much information as we can to develop the right qualitative framework for, especially the office portfolio. So those sales had no impact on the qualitative factor that you're mentioning? Yeah, no, from a we are looking at, we're looking at information in the marketplace, but specific sales from a portfolio perspective would not be, you know, as important for us to look at as the individual, the individual appraised information, and individual factors we're getting on our budget.

Speaker Change: And then just as a follow up I know there hasn't been many transactions.

Speaker Change: Sounds like Youre more focused on appraisals, but did these sales potentially impact your decisions to add reserves for multifamily and office.

Speaker Change: This is the signature sales yes.

Speaker Change: Yes.

Speaker Change: A lot of the information, we're getting a lot of it specifically comes from the appraisal we are seeing in our portfolio. We are looking at market and any market indications that we can get our hands around and using that as well. So we're taking into account as much information as we can to develop the right qualitative framework for the for especially the office portfolio.

Thomas Robert Cangemi: Good morning. Do the actions you're taking to tighten up from a regulatory perspective affect the pace of the private banking bill there at all, or the earnings you're expecting there? So obviously, you know, we are highly regulated, and we're focused on enhanced prudential standards, but in respect to signature and the teams that we've built, they're doing a phenomenal job, as indicated in my prepared remarks. They've had a great year.

Speaker Change: So those sales had no impact on the qualitative.

Speaker Change: The factor that you are mentioning yes.

Speaker Change: Now I will turn out we are looking at we're looking at information in the marketplace, but specific sales moved from a portfolio perspective will not be as important for us to look at it is the individual the individual appraised information and individual factors, we're getting on our book.

Reggie Davis: They really had stability for March. We're very excited about the stability. And more importantly, they had growth, $1.5 billion net growth, and the teams are geared up. You know, professional public teams have started onboarding and focusing on, you know, relationship and like-love service. Reggie Davis, if you want to expand on some of the initiatives that we have working with the team,

John J. Pinto: Got it, thank you. Our final question will come from Jon Arfstrom with RBC Capital Markets. Please go ahead. Hey, thanks. Thanks for sneaking me in.

Speaker Change: Got it thank you.

Speaker Change: Our final question will come from the line of Jon <unk> with RBC capital markets. Please go ahead.

Jon: Hey, Thanks, Thanks for sneaking me in.

Reggie Davis: Yeah, and I actually want to speak more to the banking group because the private bank consists of the legacy First Republic teams and legacy signature teams, but we're now under one envelope. So I kind of want to talk about success and some of the progress that we've made in 2023. We've essentially taken four distinct teams and created one highly focused banking organization. And, as Tom mentioned earlier, we created a single brand, and we launched that brand internally in mid-year. And that's something the teams have really rallied around.

Thomas Robert Cangemi: Just two, two important questions, I think. There's some confusion on this, but did the dividend reduction have anything to do with your outlook for credit? Or was it more about looking peer-like and adjusting for the new Earnings Run Rate? Great question.

Jon: Just two questions two important questions I think.

Jon: There is some confusion on this but did the dividend reduction have anything to do with your outlook for credit.

Jon: Or was it more about looking peer like and adjusting for the new.

Jon: Earnings run rate.

Speaker Change: Great question, let me be Crystal clear on this this is razor focused on looking at the company's long term plan and being part of a new category for banking institution, and having a capital position as we grow it into a level that were in our peer group and clearly the dividend significantly increases that capitalization in 2024 and beyond when you.

Thomas Robert Cangemi: Let me be crystal clear on this. This is razor focused on looking at the company's long-term plan and being part of a new category for banking, and having a capital position as we grow it into a level that we're in our peer group, and clearly, the dividend significantly increases that capital, and beyond. When you take all of the factors that we talked about.

Reggie Davis: And I think the brand represents the current capabilities and future aspirations of the combined company. We've also completed a restructuring of the banking group in total. So the new structure has some synergies, quite frankly, between the four legacy institutions taking advantage of each other's strengths. And part of creating that new structure was reducing the number of client coverage models from 10 to 3.

Speaker Change: Take all of the factors that we talked about between forward guidance and a dividend adjustment, we get our CET one to double digits that is primarily focused on the rationale there as well as thinking about the future growth of this company as a category four bank.

Thomas Robert Cangemi: Forward Guidance and the Dividend Adjustment, we get our CET1 to double. That is primarily focused on the rationale there, as well as thinking about the future growth of this company as a Category 4 bank, and there's no question that this was a difficult decision as a firm, but clearly necessary as we re-establish our capital allocation. So really, it's not about the former. It's not about your outlook for credit, is what you're saying. Okay, tangible book value at a little over $10 may be a simpleton question, but do you expect tangible book value to grow in 2024?

Reggie Davis: So now we operate as the private bank, the commercial banking group, and the consumer banking group. And as a result of that, and I think Tom mentioned this, we've discontinued operations in several legacy businesses to further focus on relationship banking. And so the translation of that is if we're going to use our balance sheet, we're going to use it to get deposits. And so we've also combined two separate branch teams from legacy Flagstar and NYCB under one leadership structure. We've introduced common routines, common client engagement models, and common tools across the entire network.

Speaker Change: And there is no question that this was a difficult decision as a firm, but clearly necessary as we reestablish our cabinets from capital allocation story.

Speaker Change: So really not not.

Speaker Change: It's more about the ladder its not about your outlook for credit is what youre, saying, yes.

Speaker Change: Yes.

Speaker Change: Okay Tan.

Speaker Change: Tangible book value a little over $10, maybe a simpleton question, but do you expect tangible book value to grow in 2024.

Thomas Robert Cangemi: Yes, yes, yes, we do. Okay, all right, thank you very much. Thank you. With that, I'll turn the call back over to Thomas Cangemi for any closing remarks. Thank you again for taking the time to join us this morning and for your interest in MITD. We look forward to speaking with you in April regarding the first quarter of 2017. Thank you all for joining today's meeting. You may now disconnect.

Speaker Change: Yes, yes, yes, we do.

Speaker Change: Okay, Alright, thank you very much thank.

Speaker Change: Thank you.

Reggie Davis: And we've also accelerated onto a common platform with common AI tools across the entire branch network. We've also combined our retail investment business into one platform, one structure under one leader. And then we've also combined our wealth management organization with a clear mandate around teaming up with both the commercial bank and the private bank for greater relationship experience. And so the legacy First Republic teams and signature teams are under one leader, and together they comprise the private banking group. And, you know, as Tom said, their performance has really been stellar this year.

Speaker Change: With that I'll turn the call back over to Thomas Kim Jimmy for any closing remarks.

Speaker Change: Thank you again for taking the time to join US This morning and for your interest in an ICD. We look forward to speaking with you in April regarding the first quarter of 2024 results.

Speaker Change: Okay.

Speaker Change: Thank you all for joining today's meeting you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Reggie Davis: They recaptured all of the deposits that we lost in March and April, which is about a billion and a half, billion six. In addition, the DBA portion of that book has been rock solid at $11 billion. And that's essentially unchanged because that represents the operating accounts that are very much reflective of the relationship nature of those deposits. And then also, our retail bank only lost 3% of the deposits in the March and April timeframe. And quite frankly, we've captured all of that back as well. So those two businesses, the private bank and the retail bank, are deposit engines for the company. And I might add, from a signature perspective, we haven't lost any teams.

Speaker Change: Yes.

Speaker Change: Okay.

Okay.

Speaker Change: [music].

Reggie Davis: And the addition of the signature book has actually helped us from a mixed perspective in our deposit book. It shifted it from a 39% pre-signature to 25% CDs, which is actually more in line with our peers. So we feel really good.

Reggie Davis: Our deposits actually grew 5% quarter over quarter, and that has a lot to do with the growth embedded in our retail bank and in the legacy signature book. And we expect that to continue, quite frankly. We're starting to see more and more momentum and more success as those teams are part of our larger organization. So all good news.

Reggie Davis: Okay, so not looking to really take your foot off the gas there yet. I think the reality is it's deposit, deposit, deposit. We have a great opportunity with some experienced bankers that are welcomed here and the energy, as Reggie indicated, and that long-winded answer, which is a lot of positive momentum.

Thomas Robert Cangemi: It's not really a lending model here. This is about deposit opportunities to service the client, typically in the middle market. Okay, and then on capital, do you view the 10% target at the end of this year to be an ending point, or would you be looking to ultimately get your capital ratios higher? You know, ultimately, as we think about capital, we were very clear in our public announcement this morning, and along with our views that we want to be within the peer group, we have a new peer group that we have. Thank you. And that's clearly the focus here.

Thomas Robert Cangemi: So as we gravitate to that double-digit CET1, the dividend adjustment plus what we'll call a conservative view of guidance in respect to the balance sheet will generate, you know, increasing capital quarter over quarter with the expectation over time to be within the peer group. That's the plan over the long term. You know, clearly, we have a long history of strong payment and dividend. But we have to go through the capital planning process. This is our first submission under Reg Y. With that said, that's going to happen in April, and we want to prepare for that accordingly. Thank you. Your next question comes from the line of Brody Preston with UBS. Please go ahead. Good morning, Brody.

Thomas Robert Cangemi: Hey, good morning. I wanted just to ask, within the deposit book, how much of the increase in CDs was brokered CDs this quarter, and then the uptick in wholesale borrowing, I'm assuming that's all FHLB. What's the remaining capacity that you have for FHLB borrowings at this point? So, from a FHLB borrowing perspective, you know, we have, as of 12-31, significant capacity to borrow, and we'll use that to continue to build our liquidity here in the first quarter to, as we mentioned earlier, prepare for Reg YY. So, we're very comfortable with the on-balance sheet liquidity and the contingent liquidity we have behind that. From the broker deposit question, broker deposits are up about $1 billion, and broker CDs are up about $1 billion quarter over quarter. Okay, so the influx of the CDs; the rest came from the retail network. Yeah, the rest came from the retail network. We actually raised about $2 billion in about two months.

Reggie Davis: And that, I mean, again, that reflects the strength of our retail franchise. You know, about 72% of that we're new to the bank, and about 28% we're existing relationships, and we're able to cross sell about 15% in on checking accounts. And that's going to set us up for next year in terms of converting some of those single-product, new clients into DDA accounts, relationship accounts. And so it's not only, you know, it's good for the balance sheet, obviously, but long term, it will also add to a cheaper funding base. We feel really good about that. About 6,700 new clients. Okay, great.

Thomas Robert Cangemi: And then just on the deposit, you know, on the deposit front again, I guess 32.7% of the deposits are uninsured. You know, but you also have escrows down this quarter for, you know, seasonality. I guess I wanted to ask, you know, is the 32.7% uninsured a good read on what percent of the deposit base is institutional clients at this point? If not, what percent of the deposit base is institutional clients?

Thomas Robert Cangemi: And then secondarily, we saw at least one other bank that went through some stress on the deposit front earlier this year sign NDAs with some of its larger depositors. Um, you know, did you guys consider doing anything like that moving forward with some of your larger depositors so that they can, you know, feel good about the health of the balance sheet? Yeah, when you look at some of those, those uninsured deposits, they're not all institutional by any stretch.

Thomas Robert Cangemi: There's customers in there, there's businesses in there, so that's not the escrow or entirely large balance institutional deposits. But, you know, if you look at the organizations, we had some of those balances from a 15C3 and that type of money, those types of business institutional type accounts. You know, we don't have a lot of those deposits at all anymore. I mean, that deposit base that's uninsured is primarily business type deposits and operating accounts. And yeah, there's a lot of DDA in there as well. Thank you. Your next question comes from the line of Matthew Breese with Stevens. Please go ahead. Hey, good morning.

Thomas Robert Cangemi: Hey, so understanding some of the actions to take this quarter to course correct is $100 billion over $100 billion bank versus some of your similarly sized peers. Are there additional capital-related actions to be considered apart from CET-1? So, I'm looking at total risk-based capital, 11.8 percent; your peers are at 13.5%. Should we be considering any sort of need for additional subdebt to kind of get you to that peer range? And if so, when?

Thomas Robert Cangemi: So, Matt, I do appreciate the question. I will tell you that between Forward Guide, along with the given and adjustment and our target for CET-1, we're focusing on that specific area in respect to building capital. Obviously, we're waiting for the new rules on Basel III that will come out, and we'll try to make them work at the University of Alabama. Okay. And again, understanding that this quarter you took some actions to course correct, could you give us some balance sheet mixed targets once you're done in terms of cash to assets, and securities to assets? So where you would like to be and by when.

Thomas Robert Cangemi: Yeah, well, the main issue and thought process that we're talking through this quarter on balance sheet liquidity is just preparing for Reg YY. So if you look at where we were at 1231 at 18%, with the peers at 25, we're going to be in that range, and we'll be above 18. So we're going to get to that 22, 23% range and get closer and closer to peers. As you know, our securities portfolio has historically been very small on a percentage basis to total assets.

Thomas Robert Cangemi: And that securities portfolio is really the main liquidity buffer that we need to keep in place here going forward. So that's why when we look at that portfolio, it'll be significantly skewed towards zero and 20% risk-weighted assets, high quality liquid assets, in order to ensure that we can meet our on-balance sheet liquidity demands and regulations. So I'd say that we'll be, you know, much closer to that 25% range of our peers over time, and we'll get there in the first and second quarter. And when you measure security, are we talking about securities assets or total assets? Because I'm looking at 9% security. Okay, so 9% of the security assets today, that's going to... You will have tripled by next quarter? No, you have to add cash in there as well, right?

Thomas Robert Cangemi: So I'm looking at cash and securities on a combined basis, as a percentage of total assets, right? And that's how we manage our balance sheet liquidity. Normally, that'll be more in the securities portfolio. You know, given the buildup here, it's starting in cash, and over time, we'll be putting that out in the securities portfolio. I think it's fair to say that the guide has most of these assets sitting in liquidity. Tourette.

Thomas Robert Cangemi: And you assume that the lion's share of whatever you need to do here will be completed by the end of the first quarter. It's not going to drag out throughout the whole year. That's right.

Thomas Robert Cangemi: That is correct. OK. And then go back to the CRE concentration. So when you look at the CRE concentration for peers, is it still appropriate to exclude multifamily due to the repricing risk? And do the regulators look at it that way?

Thomas Robert Cangemi: I know for decades after decades, rent-regulated multifamily has been virtually risk-free, but post-2019, the rent law changes to the new paradigm. In the release, in your commentary, you're discussing repricing credit risk here. It feels like

Thomas Robert Cangemi: CRE concentration, including multi-families, is the right one to look at, with all due respect. Take Advantage of Market Conditions and Reduce Cost and Concentration, putting into higher yielding loans and higher margin businesses over time, with a focus on relationship deposit lending. That is a meaningful statement as we have no activity in the market. If you go back to history, when we were doing $8, $9 billion a year in originations, we were running flat at 4% to 5%, at best, to stay flat.

Thomas Robert Cangemi: So when the market does react to changes in interest rates and customers look for refinancing, we have a golden opportunity here to take low-yielding coupons off the book. We can start concentrating materially here and move that into high-yielding assets and obviously focus on our liquidity expectations. Having a lower compensating balance on the asset is not the focus of the new Flagstar.

Thomas Robert Cangemi: It's going to be well-balanced towards relationship deposit lending, and that is the focus of the institution on a combined basis going forward. And we think that given the activity last year, as I indicated, was 90% down, there's no activity in the market. Although the customer activity that we speak to, they're waiting on the sidelines, and they're going to react when they feel confident about the next 5 to 10 years of financing costs. Some I indicated are taking fixed-rate loans. Some are going to the agency now. But the agency has a huge appetite.

Thomas Robert Cangemi: And when the customer feels prudent that it's time to lock in the next 5 to 10 years of financing, they will make that decision, and we will work with our customers for balancing purposes. And if it's not a true customer relationship, that will be a significant reduction in our pre-concentration. Over time, I mean there's a lot of peer comp going on this quarter. Over time, the CRE concentration needs to get to a pure level.

Thomas Robert Cangemi: Look, I mean, it's a huge business model of ours. We have a great track. We have great customers. They have lots of relationships on the deposit side. So we're obviously uniquely different. That's who we are, and that goes back to our roots.

Thomas Robert Cangemi: But ultimately, we're a new company. We're a commercial bank evolving from a monoline thrift. We're excited about the lines of business we have. We're excited about the opportunity for mortgage and the ecosystem. We're excited about what Reggie Davis is doing with his lines of business. And we have choices.

Thomas Robert Cangemi: And it's going to be based on a return on equity model, which is very different from history, where it was driven off of a monoline business, which was multi-family residential. So we're going to reallocate those resources, take advantage of market conditions, and work with our customers. We feel very strongly that just by the mere fact that the coupon was coming off the lows, we have an opportunity to move a lot of assets at low coupons to make our balance stronger and our earnings profile better. Last one for me, you know, the language here around being over 100 billion feels far more urgent today than just a few months ago. Has anything changed on the regulatory front in terms of overall standing or timeline to be ready for new stress testing? There's a lot, like I said, a lot of peer comparison here.

Thomas Robert Cangemi: If so, can you give us some updated timeframes, and milestones? I know you've mentioned April as the mission in terms of being prepared for, you know, the first, first stress. Matt, we are obviously, we're not going to speak specifically about regulatory conversations; we're a highly regulated... We've adjusted our capital position significantly, as well as the ACL. Those are big steps, forecasting our submission to the REG-Y. That's an important milestone.

Thomas Robert Cangemi: As Jon indicated, we're doing significant work on REG-YY on the balance of liquidity. You know, we went into the, we catapulted into the $100 billion club post-liquidity crisis in March. We were preparing for that last year to cross over organically, and an opportunity came, and we thought it was a great opportunity for building out the conversion from a thrift model to a commercial bank model, and we are in a unique benchmark now. We're in a different category.

Thomas Robert Cangemi: There are eight of us that we benchmark against, and we want to get those ratios, you know, in line with a group that makes sense going forward as we run our business. I think the market will understand what's in front of us, but more importantly, as we build new sites, we're excited with the team and the energy as they gravitate here to become, you know, part of this new team. We've made significant changes on the risk side and significant changes on bringing people in-house as a larger institution. That's the journey that we're focusing on here. So it is fluid, given the situation in respect to the timing, because it became a little bit unexpected in March of last year as we opted to be able to take the step and buy Signature Bank through receivership, and now we have to make sure that we're in place to be honorable of the fact that we are a Category 4 bank, and that's a regulatory obligation. I'll leave it be.

Thomas Robert Cangemi: Thank you for taking my question. Your next question comes from the line of Bernard Bonjasky with Deutsche Bank. Please go ahead. Good morning.

Thomas Robert Cangemi: So with the sales of the CRE multifamily loans from Signature held at FDIC now completed, how does that impact the expenses from the loss sharing and then the fees, some of that loan administration income that you had, and how do we think about that for 24? Yeah, so if you look at those transactions that hit the marketplace, we expect that those loans will transfer off our servicing platform this quarter entirely. So we will see some loan servicing income, a little less than we saw in the fourth quarter. We'll see some of that come in in the first quarter, and that's within the guide that we gave.

Thomas Robert Cangemi: And then from a cost save perspective, you know, that's some of that information once we get through the Flagstar integration. Some of those cost saves are in the non-interest expense block that we put together in the slide deck. So that's included in that number.

Thomas Robert Cangemi: So from a quarter-over-quarter perspective, we'll see a decline in fourth quarter to first quarter in income from the subservicing. And then by the second quarter, we expect that those loans will have transferred out so that we will have some cost savings that come out of that. And then the income will disappear then.

Thomas Robert Cangemi: And then just as a follow-up, I know there haven't been many transactions and it sounds like you're more focused on appraisals, but did these sales potentially impact your decisions to add reserves for multifamily in office? Yeah, no, we know a lot of the information we're getting, a lot of it specifically comes from, you know, the appraisals we're seeing in our portfolio. We are looking at the market and any market indications that we can get our hands on and using that as well. So, you know, we're taking into account as much information as we can to develop the right qualitative framework for, especially the office portfolio. So those sales had no impact on the qualitative factor that you're mentioning?

Thomas Robert Cangemi: Yeah, no, from a portfolio perspective, specific sales from a portfolio perspective would not be, you know, as important for us to look at as the individual, the individual appraised information and individual factors we're getting on our, Got it, thank you. Our final question will come from the line of Jon Arfstrom with RBC Capital Markets. Please go ahead. Hey, thanks. Thanks for sneaking me in.

Thomas Robert Cangemi: Just two questions, two important questions, I think. There's some confusion on this, but did the dividend reduction have anything to do with your outlook for credit? Or was it more about looking peer-like and adjusting for the new?

Thomas Robert Cangemi: Earnings Run Rate. A great question. Let me be crystal clear on this. This is razor-focused on looking at the company's long-term plan and being part of a new category for banking, and having a capital position as we grow it into a level that we are in our peer group, and clearly, the dividend significantly increases that capital. When you take all of the factors that we talked about, forward guidance, and a dividend adjustment, we get our CET1 to double. That is primarily focused on the rationale there, as well as thinking about the future growth of this company as a Category 4 bank, and there's no question that this was a difficult decision as a firm, but clearly necessary as we re-establish our capital allocation. So really, it's more about Okay, tangible book value of a little over $10 may be a simple question, but do you expect tangible book value to grow in 2024?

Yes, yes, yes, we do. Okay, all right, thank you very much. Thank you. With that, I'll turn the call back over to Thomas Cangemi for any closing remarks. Thank you again for taking the time to join us this morning and for your interest in MITD. We look forward to speaking with you in April regarding the first quarter of 2017. Thank you all for joining today's meeting. You may now disconnect. Thank you all for joining today's meeting.

Q4 2023 New York Community Bancorp Inc Earnings Call

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