Flagstar Financial Inc (NYCB) 2016 Q3 法說會逐字稿

Good morning and thank you all for joining the Management team of New York Community Bancorp for its quarterly conference call. Today's discussion of the Company's third-quarter 2016 performance will be led by President and Chief Executive Officer Joseph Ficalora, together with Chief Financial Officer Thomas Cangemi, and John Pinto, the Company's Chief Accounting Officer.

Certain comments made on this call will contain forward-looking statements that are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those the Company currently anticipates due to a number of factors, many of which are beyond its control. Among those factors are general economic conditions and trends, both nationally and in the Company's local markets; changes in interest rates, which may affect the Company's net income, prepayment income, mortgage banking income, and other future cash flows, or the market values of its assets, including its investment securities; changes in the demand for deposit, loan, and investment products and other financial services; changes in litigation, regulation and policies; and the Company's ability to complete the proposed merger with Astoria Financial Corporation, which is pending the receipt of regulatory approvals at this time.

You'll find more about the risk factors associated with the Company's forward-looking statements on page 9 of this morning's earnings release and its SEC filings, including its 2015 annual report on Form 10-K. The release also includes reconciliations of certain GAAP and non-GAAP measures that may be discussed during the conference call. If you would like a copy of this morning's release, please call the Company's investor relations department at 516-683-4420 or visit IR.MYNYCB.com. As a reminder, today's call is being recorded.

(Operator Instructions)

To start the discussion, I will now turn the call over to Mr. Ficalora, who will provide a brief overview of the Company's third-quarter 2016 performance before opening the line for Q&A. Mr. Ficalora?

Thank you, Michele, and thank you all for joining us this morning as we discuss our third-quarter 2016 results. This morning we reported earnings of $125.3 million, or $0.26 per diluted share for the quarter, and $381.7 million or $0.78 per diluted share for the first nine months of this year.

This translates into a return on average assets of 1.02% for the quarter and 1.03% for the first nine months, and an 8.24% return on average stockholders' equity for the quarter and 8.44% for the first nine months of the year. On a tangible basis, our profitability was also solid, with a return on average tangible assets of 1.08% for the quarter and 1.09% for the first nine months of the year, and 13.79% return on average tangible stockholders' equity for the quarter and 14.22% for the first nine months of the year.

Contribution to our results came from the three core components of our business model: originating loans for investment and for sale, maintaining the high quality of our assets, and operating at an above average level of efficiency. Reflecting third-quarter originations of $3.7 billion, the volume of loans produced year to date reached $10.7 billion, including $7.2 billion of held-for-investment loans.

Multi-family loans represented $1.3 billion of the quarter's loan production and $4.5 billion of the year-to-date amount. At the end of September, multi-family loans represented $27.1 billion of total loans held for investment, a $1.1 billion increase from the balance at year end.

In keeping with our short-term goal of managing our assets under the SIFI threshold of $50 billion, we continued to sell certain loans during the quarter. In the current third quarter, we sold $206 million in multi-family loans and $108 million of CRE. In total, we have sold through participations $1.4 billion of multi-family and CRE loans during the first nine months of this year.

Absent multi-family loan sales of $1.1 billion, that portfolio would have grown $2.2 billion through the end of September, representing an annualized growth rate of 11.1%. Likewise, CRE loans would have grown at an annualized rate of 3%, absent loan sales of $268.5 million.

The volume of multi-family loans we have produced year to date and in the current third quarter is indicative of our ongoing commitment to this market and to the relationships we have established over decades with the borrowers that are our main customers with the brokers that focus on these borrowers. As further evidence of our market position, our current pipeline is $2.5 billion, with the majority of the loans in that pipeline consisting of loans held for investment.

Moving on to asset quality, our asset quality measures continue to be stellar, and rank among the best in the industry, as well as among the lowest we have reported since 2008. Non-performing, non-covered loans represented just 0.12% of total non-covered loans at the end of September, consistent with the measure recorded at the end of June.

Similarly, non-performing, non-covered assets represented 0.12% of total non-covered assets, and the ratio of net charge-offs to average loans was 0% over the past nine months. In fact, we have recorded a modest level of recoveries on a year-to-date basis. In addition to the continued growth of our loans and the high quality of our assets, our third-quarter performance was highlighted by an increase in mortgage banking income, as originations rose to $1.4 billion, the highest volume in more than a year.

Besides the resultant increase we witnessed from origination income, servicing income also rose linked quarter and year over year. While net interest income slipped sequentially, as did our net interest margin, the year-over-year comparisons tell a tale of growth. Reflecting the debt repositioning that took place in last year's fourth quarter, our net interest income rose $39 million year over year to $318.4 million, and our margin rose 35 basis points to 2.91%.

Pre-payment income contributed 20 basis points to the current third-quarter margin, as compared to 24 basis points in the trailing quarter and 22 basis points in the third quarter of 2015. Excluding pre-payment income, the net interest margin would have declined 4 basis points to 2.71% during the third quarter, but would have increased 37 basis points year over year.

Another factor contributing to our third-quarter earnings was a linked-quarter reduction in G&A expenses, which resulted in our recording a level of operating expenses that was consistent with the level reported for the second quarter of this year. The benefit of the linked-quarter decline in G&A expense was modestly tempered by a rise in compensation and benefits expense, as we expanded our bank office operations to further support our readiness to become a SIFI bank.

Reflecting our earnings and capital, the Board of Directors last night declared a $0.17 per share dividend for the quarter, representing a 4.7% dividend yield based on last night's closing price. The dividend will be paid on the18th of November to shareholders of record as of November 7, 2016.

On that note, I would now ask the operator to open the line for your questions. We will do our best to get to all of you within the time remaining, but if we do not, please feel free to call us later today or this week. Michelle?

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

(Operator Instructions)

Ken Zerbe, Morgan Stanley

Good morning.

Good morning, Ken, how are you doing?

Maybe just start off on the net interest margin, I understand the guidance prior last quarter's were flat to down from here? It looks like it declined a little bit more than what we were expecting or what you might have been expecting? Can you talk about what drove the change versus your guidance?

And more specifically what is the outlook in the net interest margin from here? Is it sustainably lower at these levels?

Good morning Ken, its Tom. Obviously, previous guidance was flat to down 2 basis points; we came in down 4, so there was a two basis point offset to the estimate for Q3. I think driving it is the current interest rate environment. No question that portfolio yield that came on, are reasonable compared to the markets for a spread.

But there really hasn't been a significant impact on the market yield. So with that being said, we are anticipating, based on the forward curve on interest rates, a fourth quarter potential interest rate rise and the short end of the curve in December, that will put us at down 3 basis points in Q4 for guidance purposes.

But, again if you think about the portfolio as far as the market yields, we're looking at about an 180 spread on five-year money, which is about 3.125% at the current market offering. Seven years, more like a 3.65% for multifamily. The portfolio yield where we stand today is about 3.35%-type yield coming in.

So, overall it is consistent with an ongoing consistent coupon quarter over quarter. We're not seeing any real bump up in the current yield environment.

(Multiple speakers)

Bear in mind, the securities portfolio has rolled up dramatically. Those are in the mid- to upper 3%. But that had an impact as well. We don't anticipate any future payoff of the securities portfolio, with the exception of our dust portfolio and that's subject to sales activity, which we have no control of. The [Colovo] portfolio was driven off of the interest rate environment.

So down three, assuming rate hikes, and if rate hikes do not happen in December?

Probably jump up a basis point --1.5 to 2 basis points.

Of upward movement?

Yes.

Got it. Fair enough. In terms of theory -- the 180-basis point spread that you're talking about, how does that change? Remind us versus last quarter, are you seeing the impact from the OCC cracking down on some of the smaller CRE lenders? It does not seem, just looking at the spread, it doesn't seem that there is a huge move. But I'd love to hear your thoughts?

I think there is no question that there has been a change of players. So, whereas some of the smaller players have been restricted with regard to their participation in this market, some of the giants have actually increased their participation in the market. So the market is changing.

And some of the observations that have made by others and yourself are correct that there are players that do not have an experience trend that justifies the exposures that they are taking to a market that regulators are not necessarily comfortable with new players in. So the important thing here, and this may be from the standpoint of overall philosophy -- the reality is that some of the largest players in this market - including us - may become more active and some of the smaller players or the newer arrivals into this market, may become less active.

All right. Perfect. Thank you.

Dave Rochester with Deutsche Bank

Good morning, guys.

Hello, David.

On operating expense, you came in nicely below your previous guidance. I was just wondering what drove that differential and what the outlook is for 4Q?

Dave, its Tom.

I would say that consistent with our previous guidance, we came in pretty close to the guidance forecast. I think we guided around $159 million or $160 million, so we came in at around that level with $158.9 million. Again I will say for the fourth quarter around 160. I do not see any major uptick with the exception of any merger-related expenses that may come into play.

And if you look at the current quarter we have $2.2 million in the bottom line that was a result of the Astoria merger. So obviously (technical difficulty) expenses, its around $160 million and that should be hopefully a conservative number for the quarter. That is ex-CDI, as well.

Okay. Can you mentioned the deal and I'm curious what your thoughts are, updated thoughts on when that actually closing this quarter? And if there are any sticking points that you guys see on the horizon, potentially?

So obviously the Astoria transaction, that as we have publicly said throughout the year -- we're at a position where we're in the fourth quarter and there's not much we can say other than get through the fourth quarter. And await our regulatory approval and go through that process.

I think given where we are, saying less about this may be more prudent than saying more about it, since we are not in the position to drive and we certainly don't want people that are, in fact, in the position to drive, to feel any undue pressures from us about this. So I think that we will say less about it, but hopefully to see it happen as soon as possible.

That's a good point. Thanks. Just to follow up on that, since we are potentially close to the close, I'm wondering if you have any updates on what you thought you needed from an HQLA standpoint, just based on the 3Q balance sheet?

Dave, again going back to the concept of putting the two companies together and expect a dealing with the level one asset that is going to be a mandate as we cross over to SIFI world. We have spent about $2 billion in the Astoria portfolio on the security side,$2.5 billion from our side, which most of that was on our balance sheet at the beginning of 2016.

That was paid off predominantly due to callables. That was a level 2 asset. So we will replace the level 2 on our portfolio's level 1. We will be in the market at the appropriate time to buy assets consistent with a level 1 categories. In particular we will look at the 30 AGs potentially from Treasury to fix that mix. And then when we consolidate with the Astoria franchise, we have a $2 billion securities portfolio that will evaluate mark to market and be replace with level I.

Okay. Great. Thanks guys.

Thank you.

Bob Ramsey with FBR Capital Markets

Hey, good morning you guys. It looks like the gain on sale of multifamily loans this quarter was lighter than it has been running in recent quarters? I am just curious if you could kind of talk about the outlook for that line plans to sell certainly as you manage the balance sheet size, et cetera?

As you know, markets change from time to time, and it is all depending on rate environment, the types of transactions you participate, some participations are done as a joint effort at the table, so you may have a larger credit that you have as a partner. And you set up a participation and there may not be a substantial economic gain in that, but we're partnering on a large multifamily relationship. And that goes to [the lone shelf] as well.

But in theory, in general we look to try to get around a 101 with -- approximate 101 with cash servicing maybe another 20 basis points. So slightly north of 101, as a transaction that we service the loan over time and keep the relationship. That has been the strategy since 2004, and since this quarter, 2004. It has been a three-year process. And since that process we have executed approximately $4 billion of activity within the portfolio, both CRE, multifamily predominantly and a handful of resis, going back to 2014.

The strategy is ongoing and has obviously been a workable strategy to manage our short-term strategy for managing the SIFI threshold, but clearly depending on market conditions, if rates were to spike here, it may be a little more challenging to get those types of gains, but if rates stay consistently where they have been -- and they've been relatively consistent -- we feel there is a very strong interest in the product mix. A lot of these homes are CRE eligible, they're long-term customers and we have a strong desire within the market to share these relationships and be in control of the servicing behind that.

It is a very important thing to recognize, our presence in the market is enhanced by our capacity to do this -- our ability to earn money on unbooked assets.

Meaning that these assets are not going to show up as part of our concentration or part of our asset base as a whole. To whatever degree they are off-balance sheet, that does give us greater flexibility. So on a go-forward basis, we may have reasons why we increase or decrease the amount of the asset that we share.

The very, very good news is there are plenty of very skilled players in the market that would love access to the very loans that we are sharing. So, I think that we are establishing ourselves as a market player that has the ability in good markets and in bad markets to produce product that in fact there is a very strong market to buy.

So, Bob, going back to Mr. Ficalara's point at the beginning of the conference call -- we're growing at north of double digits to be back out the loan sale. That is being consistent with our philosophy, that we can grow the portfolio around 10% to 12% over time. And that is reasonable in a very challenging interest rate environment, and in a market where you are originating average assets that have a yield in the low 3%s, with an average life of something between 2.8 to 3.1 years.

But holding on that process of being a double-digit grower over time. When we cross the SIFI threshold and we have that ability to put this all on balance sheet. Right now we're being very cautious.

We have room on our threshold right now the average $49.3 billion of our take in the fourth quarter brought the $3.5 billion to trip over. So we're not going to put on $3.5 billion of growth in the fourth quarter. So we have some flexibility as we await the closing of the transaction.

Clearly, we have some flexibility here. But obviously we have to be very nimble to make sure we don't cross over the SIFI threshold prematurely.

And shifting gears to the mortgage banking business, could you maybe talk a little bit about the outlook for income and outline item? Obviously its good to see the servicing income was positive this quarter, could you get the breakout of servicing fees versus any hedge impact?

Sure I will give you the reconciliation. Total mortgage origination revenue was $10.9 million for the quarter. Loan servicing fees gross is $12.8 million versus $12.6 million in the previous quarter, so up slightly. The overall UPB is around 21.1, so it remains relatively flat and the subtotal of that transaction gives you the net adjustment to the servicing fees was NSR hedge of negative10.8, predominantly due to the market value change.

Which comes to a net servicing of $2 million and a net total mortgage banking income of $12.9 million for the quarter, up around 88% quarter over quarter. Which is kind of what we expected. We said it potentially could have been a double off of a very low Q2. And again we're going into the fourth quarter, I'm not going to give so much guidance, given that it is a seasonality quarter.

This is the fourth quarter of seasonality and we typically see somewhat of a slowdown. But market rates have been relatively volatile. But the purchase market has been somewhat stronger throughout the past six to nine months. So you're seeing a good mix of purchase versus refi. And now we see in the third quarter, we have a decent amount of refi given the low rates again in the summer.

So that helped a little bit on the total volume. We had a pretty good strong quarter I would say in respect to all activity in the mortgage bank. So as expected, we expect an approximately 80% to 100% rise in income in that division in Q3.

And looking into Q4 what is the expectation based on the pipeline today?

I think again, we have to watch the seasonality set and obviously the evaluation of the servicing asset as rates stay where they are right now. Is probably flat to the previous quarter, which is $12 million.

Okay, great, thank you.

Collyn Gilbert, KBW

Good morning. Tom, I wanted to clarify a couple things that you said? In your comment about the NIM, did you say it would be up 1 to 2 basis points without a rate hike?

No. My comment was -- if there was not a rate hike, in December, which we are forecasting a potential rate hike -- I was looking at the forward curve, which is sitting right now at 70-some-odd percent of an expected rate hike, we would benefit approximately a basis point and a half. With that being said, we're guiding down 3 basis points for the quarter, and the fourth quarter, given our position with interest rates. If there was no increase in December, we are probably looking at half that.

Okay. Okay. Okay. Then back to the securities discussion, what do you see the pro forma securities book to be in total?

I would theoretically look at adding approximately $4 billion in total -- $4 billion to $4.5 billion if you want to be conservative. In addition to where we are.

So seven something --

Right now we're at the lowest percentage we have ever been, I believe as a public company. We are at the lowest we have ever been since the Company went public. This is a low percentage of us who are gearing up to qualify for LCR at the appropriate stage of our public life. Which would be when we cross over to SIFI.

So then you said you would put on -- there would be $2 billion that you would replace that would move into level 1 --

That's right. So obviously we would look at the securities that are being brought over by the target. Those will be marked to market and evaluated for level one. Whatever assets are not level one we will replace with level I and go on the market and replace the securities.

They will be marked at the closing, our portfolio has already paid off. So we lost well over $2 billion of our callable debentures in 2016 and that will be replaced with Ginnie Mae-type securities that are LCR1 eligible. Which is long data securities that will qualify for LCR1 treatment.

Okay. But the yield of whatever you are going to have to buy, the level I, it's going to be, I would imagine significantly lower than what your current yield is?

Absolutely. There's no question (inaudible) Treasury at close to 0 to 80 basis points, depending on duration. And as you go into the Ginnie Mae market, you're looking at somewhere probably low 2%, to use and if rates go up, mid-2%. These are not high-yielding securities; they are L1-eligible securities.

We're not going to do this is an investment decision, we're going to do this as a construction decision and use the liquidity necessary.

Of course. Absolutely.

That would have an impact on the margin negatively, however it is topline accretive. Because you are putting on top positives slight carry to that asset class.

That was going to be my question. So, saying that there is going to be an earnings loss here, but you are saying no, Tom?

No, we are saying we're not going to fund it with negative carry. That's all I am saying.

Okay. (multiple speakers)

So if we say $250 million, then we will fund it sub-$250 million. With a positive carry.

But the spread of the new assets that are coming on is obviously going to be less than where the spread is today.

Of course, that is one of the industry trends in banking.

Of course. Right. So my question is -- are there offsets that you all see in your business to sort of absorb some of the lower earnings on where the balance sheet is going to have to go post-deal?

Sure. It is all part of the Consolidated Bank. The numbers for the Consolidated Bank clearly carry that differential.

Collyn, this is nothing new, this is ongoing dialogue since announcing the Astoria transaction. This has always been out there. The only change is that interest rates are slightly higher, not dramatically higher, so maybe a little bit better of a positive carry and that depends on when we actually execute.

Okay. And just on the pipeline yield, you said the pipeline yield was 3.33%?

3.34%.

3.34%. Okay.

And on that note, the portfolio yields are approximately at 3.53%. So we still have an unfortunate negative spread between what we are putting on, what we have but it is not material it is rough. But for example for the quarter, we lost around 45 basis based on originations and what we paid off.

So it is much better than what we saw in the previous two years as far as what we're losing in the portfolio yield versus what we are putting on, and that is an encouraging point.

Okay. But, I think you said in the second quarter the pipeline yield was 3.40% and I guess I am a little surprised? Tom, you may have touched on this, but surprised that the origination yields are coming down, just given the competitive nature of the market as well as the bump up that we have seen here a little bit in the --

Absolutely, the good news, we're north of 3%. We can't control the interest rate, but it has been consistent for multiple years it is a low rate environment. Spreads have went all over the map. You've had spreads as high as 210, as low as 170.

But the overall portfolio coupon that we originate in the market for a traditional bread and butter multifamily product is somewhere between 3% to 3.25%, depending on market conditions. That has been consistent, unfortunately for years. When I've seeing any real reaction to a bump up in interest rates and the rates happens to have what I call a significant rally, the coupons are staying the same. The market has been around 3% to 3.8%.

Collyn, the comment I made earlier with regard to the change in some of the players within our niche -- it is very important to recognize that giants can play at lower yield than the rest of the market typically plays at. And therefore the guys that are not in the market are getting rates similar to ours or even higher than ours. And certainly the giants, when they are in the market, they are in the market at lower rates.

Okay. That is helpful, thank you, gentlemen.

Sure.

Matt Breese, Piper Jaffray

Good morning Matt.

As you make the changes on the security side and we puncture through $50 billion, is there going to be any need for additional capital in the form of preferred or sub debt or even common?

Theoretically, when we think about capital, we have lost a substantial amount of our trust preferred securities as a matter of the implementation of level 3. So this year we have a hybrid structure on the down sheet for bonus units, and that is ineligible for tier one capital. We envision that being replaced and then given the attractiveness in the market from time to time, you have to evaluate these extremely low interest rates and being attracted to, we will say, heightened capital given the attractiveness of the rate.

So, there's no question that we would like to replace what we have lost and that has been something that we have talked about for years. And envisioned a very attractive interest rate environment both on the preferred market and the subdebt market. So clearly we evaluate that from time to time and at a minimum we would like to at least replace the Basel III capital that has been rolling off due to the regulatory changes under Dodd-Frank.

Can you remind us of the amount that you lost and if it was just --

It was approximately $400 million. Just south of $400 million.

And the preferred course would be preferred equity?

Terms of product to replace that would be traditional preferred, very prevalent in the marketplace as we see today.

Over what time frame would you envision this getting done?

Market conditions, and obviously as we move forward here, market conditions.

Okay. In terms of the expense load and being LCR compliant, can you give us an update on where you are in that process, what inning you are? And over the long-term, what needs to be layered on?

Again, I tried to give guidance quarter to quarter as far as where we are on the expense side. We've been adding personnel, we've been adding some of the, we'll call consulting fees are rolling off and that is being replaced with higher compensation costs for new hires that have the technical expertise we need to have to manage the SIFI threshold, that continues.

I do not see material numbers going forward with respect to personnel adds and additional systems adds. Obviously the areas that at this stage of our transition to SIFI would be dealing with Fed reporting, which is not a material expense. But we are positioned to have that in place in short order and also living will, which would be something that is down the road, but clearly within our grasp.

And that process has taken place and our overall timeframe and been well within our expectation to be qualified for living will. It is not a substantial number, but it is some consulting fees and legal fees and significant amount of workload that the management team will be working on, but the cost is not material.

Got it. Then, last one, as you become over $50 billion, we talked about LCR? Are there any other changes that need to occur for your balance sheet? In a number of ways, historical to you it's normal but versus other Secor banks, your balance sheet is a little different, right? In terms of funding profile, loan deposit ratio -- does anything else need to change?

Again, this is something that when you look at a pro forma, and you look at putting companies together, there are some significant benefits at the capital like liquidity, securities composition, when we look at a pro forma company, and we have publicly said that our crossover will coincide with the transaction. So, when a given transaction is the impetus that has allowed the Company to be a SIFI Company, there are significant benefits for the transaction.

So when you look at that, historically we have looked at the SIFI threshold and the issue would be capital, liquidity, institutions that come together within our organization bring that to the table. The rationale behind the Astoria transaction itself. There is significant benefits that come across with consolidation.

Understood. That is all I had. Thank you very much.

Thank you Matt.

Ebrahim Poonawala, Bank of America

Most of my questions have been asked and answered -- I do have one follow-up on LCR, just so we get the timing right? If you close the deal on December 31 you need to be LCR compliant in 1Q 2017?

Right, after the closing. It's highly improbable that we would do that. In that assumption, by the first quarter of 2017 we would have to be LCR compliant.

There are very good reasons why a date in 2017 would have to be more explicitly beneficial.

Bear in mind, the proposed rule that hadn't been finalized will give us an extra year. We are still patiently waiting, they were supposed to be finalized by the second or third quarter, but they have not been finalized. There is proposed rules out there that give a transitional company to SIFI a one-year period to implement that strategy.

It is important to note that people at very high regulatory levels have made the decision that they would prefer to move the bar from 50 to some higher number. And obviously we're on the verge of significant changes in the government. If the changes go in one direction, there is a good likelihood that some change with regard to $50 billion might occur next year.

If the government changes in the opposite direction, then there is no likelihood that there will be a positive change. But, I think it is important to note that if in fact, Tarullo, and the chairman of the FDIC and the chairman of the OCC had their druthers, there would be a whole different scheme by which we would be operating in the year 2017.

And that right now is up in the air. There are many things on the horizon that are very unclear. The good news is that we have a great deal of flexibility to adapt to whichever direction this takes.

To that point, Joe, you are right in terms of Fed Tarullo coming out talking about easing some of the rules for the smaller SIFI banks. Even if you do not get a legislative action which pushes the SIFI threshold higher, do you expect or are you already seeing, in terms of your interactions with the regulators that the bar would regardless be lower as we look into 2017, for banks like you?

When we say the bar, are we talking about the size of the institution that's going to be impacted by the rules. The answer there is, without there being a change that is literally passed by the Congress, that won't happen. But with regard to how the rules are implemented, Governor Terullo and others have already made it clear that they are lessening some of the burdens based on their existing authority.

So, no question as we go into the year 2017, and that was one of the comments that was made earlier, for good reason we would likely go into 2017 with the closing of the deal. Because of all the consequences of closing the deal regulatorily with regard to the expected need to do explicit things on sides. I think as we sit today, there is a greater probability that there will be lessening of burden based upon the regulatory perspective that they have made public.

And, then there is the real possibility that there could be change that is congressional that would even lessen the burden further. The reality is that the year ahead is going to be filled with many, many possibilities, some of which will be very, very favorable. It does not seem as though there are any that would be more adverse than what we already have today.

Understood. Aside from that, Tom, if you could remind us in terms of when do you need to get the approval from the regulators to pay out the dividend, when does that cease to be a requirement?

Ebrahim, theoretically, the SO-09 for requirements, look back based on what we charged in the fourth quarter of 2015 and going forward on the earnings going forward. So obviously we believe that the previous quarter and the most recent announcement would satisfy that calculation. Going forward, we believe that the SO-09 for requirements under that significant GAAP expense or charge that we took in the fourth quarter has been absorbed.

It has been absorbed.

It is behind the system essentially.

This is a technical computation.

That is clear. Last question in terms of, banks are relieving their DFAST results? Should we expect that over the next week for you to put it out and is it safe to assume that included in some form the acquisition integration as you have submitted that plan?

Yes. That is correct.

Thank you for taking my questions.

Thank you. There are no further questions at this time. I would like to turn the call back over to Mr. Ficalora for closing remarks.

Thank you again for taking the time to join us this morning, as this is our last earnings conference call before the start of the new year, I would like to wish you and your families an especially festive Thanksgiving, along with a holiday season that brings you every joy. We look forward to chatting with you again during the last week of January, when we will discuss the performance with three and 12 months ending December 31, 2016. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.