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

Operator: Thank you. Our next questions come from the line of Christopher Marinac with Janney. Please proceed with your question.

Christopher Marinac: Hey Tom and John, I had a similar question as Matt on the capital. So is the $906 million likely to grow from here, or is there a scenario where it may dip a little bit as the balance sheet is considered quarter-to-quarter?

John Pinto: I think it will grow.

Thomas Cangemi: Yeah. I mean, the goal is to grow. I mean, it depends a little bit. One of the things we look at when we put both companies together is there’s a large portion of the assets but even though they have really low loss content in them, including multi-family, mortgage warehouse, they’re 100% risk-weighted assets. So we do have that that we have to work through from a capital perspective. But the goal is over time to ensure our capital ratios are where we want them to be in our capital target. So that’s no doubt the plan.

John Pinto: And, obviously, we’re planning strong earnings growth as well to increase our capital position.

Christopher Marinac: Last question

Thomas Cangemi: Just to be clear, we’ve traded off capital for accretion on the adjustment given the changes in interest rates. So you’re getting a lot — as John indicated, a benefit as far as the marks on the assets and liabilities. So that does have an impact. You get that back over time. So we think you’ll see some nice earnings per share growth as well.

Christopher Marinac: Got it. And then last question, John, just has to do with how the banking as a service and government as a service reprices over time. Do you have to have an absolute Fed cut before you can lower those rates thinking out just a couple of quarters from now?

John Pinto: Well, the government as a service deposits are primarily non-interest bearing or if there are, they’re really specific as to exactly what those costs would be. On the banking as a service deposits to see big cuts, you probably have to — to see big drops in those rates, you probably have to see some Fed cut, especially in this environment. But times change and sooner or later, the spreads can narrow a little bit on what you’re paying for a lot of those products. But I think we have to start to see us a pivot before we start to see some significant savings there.

Christopher Marinac: Okay. And are those banking as a service sold by maybe three-quarters or two-thirds of the Fed moves? Is that about right?

Thomas Cangemi: Yes, I mean, there a range. Some are 100% beta, then some are in that 75% range. So on the banking-as-a-service side it’s a range of what’s tied to the change.

Christopher Marinac: Got it. Great. Thanks for taking all my questions.

Thomas Cangemi: Sure.

Operator: Thank you. Our next questions come from the line of Ebrahim Poonawala with Bank of America. Please proceed with your question.

Thomas Cangemi: Ebrahim, you’re back.

Ebrahim Poonawala: Yes, I’m back. I feel sorry. I know it’s been a long call. Just one question, Tom. I think you mentioned multiple times around being becoming a commercial bank, multiple expansion for the stock. Give us a sense of what you think this combined franchise, as we look beyond systems conversion next year? Like, if you have any sense of where you think the bank is from an ROTCE, ROE perspective, what the franchise should be earning in a steady-state environment.