New York Community Bancorp, Inc. (NYSE:NYCB) Q4 2022 Earnings Call Transcript

So, we’re getting the benefit of repricing just from the optionality of them making a choice and in very rare circumstances, you’ve seen in property transactions. So, we’re probably — we could have a higher balance for longer because there’s less activity. As indicated in my previous comments, there’s very little economic in our internal forecast for prepayment activity. I think we had probably one of our worst years last year. We still had a strong — it was a record year on earnings. We had $46 million of prepaid going back to the high of about $140 million in previous years going back to 2013. So, we have the opportunity here for a great economic if the marketplace changes. But we’re assuming that it’s going to be relatively benign. So, we — even on our first quarter guide, we said the prepayments are not going to be impactful in any meaningful way going forward in this current rate environment.

Matthew Breese: Great. I appreciate that. And then on the spot rate on interest-bearing deposits at year-end quarter end?

John Pinto: Yes. At year-end, the spot rate on interest-bearing deposits is $217 million.

Thomas Cangemi: Matt, just one point. So, I want to talk about some of the other lines of business. I mean we have a great builder finance business. That number is close to 400 spread off of repricing for SOFR indices. We have fees involved in those types of businesses. We have the warehouse business, that’s a substantial spread in the 200-basis point spread. We look at that as a great opportunity because we know that business very well. We’re very comfortable with that business, clearly, a very attractive yielding business. And we have other C&I businesses that are part of the legacy Flagstar coming over that we think we’re going to grow very, very nicely on a combined basis. Those spreads are very high. They’re not near what we are typically accustomed to their floating rate, they have fees, they have structure behind them, and they have very good incremental benefits to the margin, which is going to be a capital deployment opportunity in 2023 and beyond.

That is the game change that we’re putting together here. So we’re not just at one bank that does one thing. So we have many, many verticals with different opportunities, and we’re going to be very cautious given the rate environment to deploy capital to ensure we have the best capital allocation story to talk about as we build a new Flagstar.

Matthew Breese: No. Understood, Tom. I appreciate all that. I did want to also touch on the government as-a-service deposits, just considered it comes in in lumps, and then it sounds like as it’s spent, it winds down. Could you give us a sense for the pace of attrition on the government as-a-service deposits? And is it — is it expected to roll off to a near zero towards the end of the year, or is this something that holds a residual balancing can grow off of that residual year-over-year?

Thomas Cangemi: So I’m going to start. I’m going to refer to John. We’ve done a lot of work around on expectation and modeling and doing regression analysis on how this would be active in and we actually have an experience with the stimulus payments and how well they held on the balance sheet, more than we expect that we conservatively model it, which is in our model. So we had a large benefit in the fourth quarter that came from the California stimulus opportunity that we would have been provided for. It’s holding better than expected. Probably it will be there for longer than expected, but we model it conservatively. Ultimately, that will go down to a tail to a point and John can get into some details on the tail. At the same time, we have other ones ramping up in 2023, although not the same type of program, there will be consistent with unemployment programs that matters we have a large relationship with Jersey and others.