Flagstar Financial Inc (NYCB) 2002 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Roslyn Bancorp fourth quarter earnings conference call.

Some of the information presented during this call and in Roslyn's earnings press release issued this morning contain forward-looking statements.

Examples of forward-looking statements include, but are not limited to, estimates with respect to the financial condition, results of operations and business of the company that are subject to various factors which could cause actual results to differ materially from these estimates.

These factors include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, loan demand and competition, changes in legislation or regulation, results of operations from real estate joint ventures, changes in accounting principals, policies or guidelines, and other economic, competitive, governmental, regulatory and technological factors affecting Roslyn's operations, pricing, products and services.

Investors are encouraged to review the forward-looking statement disclosure contained in the company's press release and to access Roslyn's periodic reports filed with the Security and Exchange Commission for financial and business information regarding the company.

At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation.

It is now my pleasure to turn the call over to your host, Joseph Mancino.

Sir, you may begin.

Thank you, Dan.

Good morning, and welcome to our fourth quarter and year end earnings conference call.

I have with me our executive vice president and chief financial officer, Mike Puorro, who is going to take you through the numbers real quick.

If you saw our press release on our de novo strategy, we did complete.

The branches are extremely successful and we're embarking on our 2003/2004 program as we speak now.

So with that, I'm going to turn it over to Mike who is going to run you through the numbers.

Good morning, and Happy New Year to everyone.

Before we get into the fourth quarter, in case whoever is on the call has not yet seen in the past hour, we put out a press release indicating that our non-performing assets have decreased by 26% or $11.1m through the sale of three of the four properties that were together encompassing our $13.3m credit to American Tissue. that has gone out in the last hour and we're pleased to note that, again, it has decreased our non-performing by 26%.

With that, we'll get into the fourth quarter results.

For the fourth quarter we achieved a record quarterly EPS of 51 cents.

That was up 41.7% over the prior year quarter and it's 5 cents ahead of our quarterly consensus and it's also 6 cents ahead of our September 30th, '02 quarter.

On a year to date basis, we had EPS of $1.82, that's up a little more than 42% over calendar 2001.

We produced an industry leading ROE, both on the cash and GAAP basis of almost 28% and 27%, respectively, and we achieved an ROA of 1.44% on a recorded basis.

In terms of the dollar amount of net income for the quarter, it was $40.1m and for the year $146.4m.

Those numbers represent net income increases of 32% for both the prior year quarter and the prior year calendar basis.

In the past 12 months, the company's ROE is up 38%, the efficiency ratio has improved 14% while we've expanded our branch network in the last 12 months by 10 additional branches, of which 5 are already profitable.

The efficiency ratio in the fourth quarter of 2001 was a little more than 32%, today it's approximately 27.7%.

Some retail statistics - - our core deposit growth continued to be significant.

We've had annualized quarterly and year to date growth of 47.4% and 49.2%.

Fees and service charge income for 2002 was approximately increased by 40% and compared to the prior year quarter, 24%.

A quick joint venture update.

In the fourth quarter, 59 units of the Plainview joint venture were delivered.

That leaves 14 units remaining to be delivered, of which we expect all to be delivered by the end of the first quarter.

A quick de novo update - - the last 10 de novos, which have been open since November, 2001 through year end, accumulated deposits of $278m and more impressively, a core deposit ratio of 50%.

As I said earlier, five of those 10 branches are now profitable, on average in just over seven months, which we feel is well below the industry standard of approximately two years.

One branch of particular note that we opened on November 15th, our Plainview, New York branch, has hit profitability in a record amount of time of just two months.

As of yesterday, that branch had $31.3m on deposit.

Our expectations for de novos in the future - - we continue to expect to expand our locations by 20% a year.

We've already identified approximately 15 additional locations for '03 and '04 and we're currently in the process of executing six leases.

Our mature branch location experienced a 19% growth rate for 2002 and our recent de novos that are now more than one year old in 2002 achieved annualized growth of 90%.

As for asset generation and credit quality, the loan originations for the fourth quarter were $338.2m, that's up 34% from the prior year quarter and on a year to date basis, originations were up over 38%.

In the fourth quarter we had construction multi-family and commercial real estate loan origination reach a record level of $240m.

As we said earlier, the non-performing asset story improved dramatically in the early hours of this morning.

But in the press release, we've noted that MPAs were down 1.9 million to a total of 42.6 and today they're down an additional 11.1m.

Charge-offs for the fourth quarter were very much immaterial at 39,000.

For the year they were 213,000.

That continues to translate into a charge-off ratio of less than one basis point.

We did provide 750,000 into the loan loss allowance for the fourth quarter.

That brings our coverage ratio up to an impressive 1.38%.

As for the outlook and guidance for '03, we remain comfortable with the guidance we had given out towards the end of 2002 for 2003.

That guidance is $1.95 to $1.98 which is still currently 5 to 8 cents higher than the first call consensus of $1.90.

That's it.

With that, we'll be glad and more than happy to take any questions.

Thank you.

The floor is now open for questions.

If you do have a question, you may press the numbers one followed by four on your touch tone phone.

If at any point your question is answered, you may remove yourself from the queue by pressing the pound sign.

Questions will be taken in the order they are received.

We do ask that while posing a questions that you please pick up your handset to provide optimum sound quality.

Once again, ladies and gentlemen, that's one followed by four on your touchtone phone at this time.

Please hold while we poll for questions.

Our first question is coming from Mark Fitzgibbon with Sandler O'Niell.

Good morning, guys.

Nice quarter.

First off, I wondered if you could give us a sense on that second joint venture project, how many units you expect to deliver in say, the third and fourth quarters of '03.

Just - - I know it would be a rough guesstimate, but - -

Okay, first we expect some deliveries in the fourth quarter.

Currently, there are 46 contracts that we have in hand right now.

Roughly, once the JVs and the particular construction projects begin to be built, the amounts of total unit structures are over about five or six quarters.

So if you want to consider straight-lining the total, which I believe is 177 units, you can straight-line it over 5 or 6 quarters.

Also, Mark, this is Joe.

Our joint venture partner is trying to slow down the contracts.

The Plainview project went so fast that he felt he could have put in more price increases and still sold all the units.

So this project, the 177, he's decided to slow the contracts down and pace them so he can increase his price as he closes his contract.

He has a waiting list in excess of 800 or 900 people for the units that are left, which, if you take the 46 off, there are 100 and some-odd units, but he wants to slow down the process and build price increases in as he closes new contracts.

Gotcha.

And you're going to start to deliver then, I'm sorry, when?

Probably the first will go in the fourth quarter, but it's not going to be a big piece.

And, Mark, in the guidance that we had given, our joint venture income for 2003 will have the last remaining units from the Plainview, which are the 14 units that will be delivered in the first quarter.

Then in the fourth quarter, the Mt. Sinai will begin to be delivered.

In total, we're budgeting about $2.7 m in JV income for 2003.

Okay.

Then secondly, I wonder if you could maybe spend a couple of minutes talking about your plans in Manhattan for de novo branching.

I think this is something new that we hadn't heard in the past so maybe one of you could tell us what the impetus for it was and two, sort of what you sort of see as the Roslyn franchise in Manhattan for the next couple of years.

What we're doing in Manhattan, Mark, is many of our multi-family loans are Manhattan projects.

We've been endeavoring to get deposits from them, operating accounts and so forth, and the reason being we're not getting them is you don’t' have a presence in Manhattan.

You don't have a branch.

What we're looking for, and we're doing the same analysis as we do anywhere else, we're looking for areas that we feel are underserved that we can do well in with the type of service that we provide.

One of the areas is the uptown.

We're not looking to go into business districts.

We're not after business loans of any kind except for the multi-family loans, so it's going to be more of a residential.

And we're not going to look for that many.

It's only going to be a handful that we're going to look for.

Maybe one or two.

Just so we have a presence there and we can pick up these deposits which could be substantial.

I mean some of these apartment houses have 400, 500, 600 apartments and the operating account could be quite a bit of money and we could do well with it.

So we're just trying to get a presence there to take care of our customers that are in New York City.

Great.

Thank you very much.

Once again, ladies and gentlemen, if you do have a question, you may press one followed by four on your touchtone phone at this time.

Please hold while we poll for questions.

We show no further questions at this time.

I'd like to turn the floor back over to our speakers.

Okay, this is Joe Mancino again.

Thank you for getting on.

If you have any further questions, you might think of, give us a call.

We had a great year and we're looking forward to 2003 being another good one, and we'll talk to you soon.

Thank you.

Thank you.

This does conclude today's teleconference.

You may disconnect your lines at this time and have a wonderful day.