Flagstar Financial Inc (NYCB) 2003 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Rosalyn Bancorp first quarter 2003 earnings conference call. My name is Nicole and I will be your conference coordinator for today. If you require assistance during your conference, please press star-0. Statements contained in this presentation may be forward-looking statements as the term is defined in the private security litigation reform act of 1995. Such statements are subject to forward-looking statements disclaimer printed at the end of Roslyn’s earnings press release. You are encouraged to read that disclaimer which can also be found in the Rosalyn Bancorp pages on the web site, ROSLYN.com. I would like to introduce your host for today's conference. Jack Bransfield Junior, Vice Chairman of Roslyn Bancorp, and President and Chief Operating Officer of Roslyn Savings Bank.

Thank you, Nicole, and good morning everyone and welcome again to Rosalyn Bancorp's first quarter 2003 earnings conference call. Our CEO, Joe Mancino cannot be with us this morning. He's recently undergone knee surgery and is recuperating but he will be back shortly. With me is Mike Puorro our CFO. We're pleased to report yet another quarter of solid earnings and financial results. You may recall about two and a half years ago we implemented a strategy of transitioning from one to four family residential loans to multifamily lending. We're pleased to say this past quarter has start to show the dividends from that decision with solid loan growth and not only for the first quarter but we expect that to continue throughout the year.

We're also extremely pleased with not only the record amount of our funding, but also with the asset quality that we're building into the portfolio. On the liability side, deposits grew at very strong levels during the first quarter. I'm now going to hand it over to Mike, who will give you a brief overview and a little more detail of our financial results, and also comment on the repositioning of our balance sheet to ensure some future profitability for the company. Afterwards we'll try to answer any questions that you might have. Mike?

Okay. And good morning, everyone. Happy holidays to all. I guess we'll start right at the top with some top earnings statistics for the quarter. For the first quarter, Rosalyn achieved an EPS of 50 cents, it was up 22% over the prior year quarter. And 3 cents ahead of the quarterly consensus. We continued to produce an industry leading return on equity of 26.5%, and efficiency ratio of approximately 27%, while we continue to further up and go forward with our Denovo (ph) branching strategy.

In terms of dollar amount of net income for the quarter, that was $37.5 million, representing a net income increase of 11.5% from the prior year's quarter. As for retail banking, quarter deposits growth continues to be significant with annualized growth in the first quarter of 27.3%, representing increase $176.5 million. Over the past twelve months quarter deposits have now increased $871 million, or a little bit more than 46%.And the growth in the core deposits being achieved across the bank's entire branch network which is very important to us. Our mature branch continues to grow at an annualized rate of 20%, and the mature branch has supplied the company with 50% of it’s first quarter core deposit growth.

Quick Denovo update. The last ten Denovos opened from November ’01 to December ‘02 -- have accumulated deposits. $372 million and core deposit rate of 51%. Seven of the ten branches have achieved profitability on average in just over five months which continues to be well ahead of the industry standard of at least two years. More impressive is the fact that our Denovos which have already achieved profitability continue to grow at an annualized rate of 95%.

We still expect to grow our locations by 20% or more for the foreseeable future and continue to target 10 to 15 additional locations for the rest of this year through the end of next year. [indiscernible] Asset generation and quality, loan origination for the quarter totaled $551 million, that was up approximately 170% from the prior year quarter. Construction and commercial real estate origination reached a record $463 million for the quarter, representing an increase of 246% over the prior year quarter. More importantly, on a linked quarter basis, construction and commercial real estate loan originations were 93% higher and the portfolio grew in absolute dollars by 23% since year end. We continued to project 2003 originations of approximately $1.72 billion, of which 85% is estimated to be in multifamily loan products. The current loan pipeline is a $1.8 billion, reflecting strong origination capacities for the upcoming quarters. As for asset quality, nonperforming loans decreased in the quarter by 34%, charge-offs were an immaterial amount of 53,000, they were all consumer lending related. That continues to translate into a charge-off ratio of less than 1 basis point and since we've gone public in 1997, the average charge-off ratio continues to be 1 basis point. As for asset generation for the balance of the year, we remain committed to redeploying our cash flows into high yielding multifamily loans and in light of the current rate environment, the balance of the cash follows primarily into non-NBS liquid asset, that would minimize extension risk and market value volatility should rates begin to rise in the second half of the year. With, that we'll be more than happy to answer questions.

Ladies and gentlemen, if you wish to ask a question, press star-1, if your question has been answered, press star-2. Our first question is from John Dunn (ph) of Sandler O'Neill. Your question, please.

Hi, John, good morning.

Hi, good morning. Great quarter. I had two questions. First, have you completely delivered all the units on the last joint venture project?

Yes, those were delivered in the first quarter, John.

Okay they were all in foreclosure. Should we assume much balance sheet growth in the remainder quarters of '03 or is it likely the securities will run down or the balance sheet will remain constant.

What we know will happen is a shift in the balance sheet, but in terms of overall growth in assets, we're projecting slightly north of 10%.

Great, thank you.

Thank you, John.

All right.

Our next question is from Rick Weiss of Janney Montgomery Scott. Your question, please.

Good morning,.

Hi, how you doing?

Good, thank you. I was wonder if you could give more color into the multifamily loan growth if you can talk about the areas where you're growing, the competition, and I guess the reason why it's picking up so fast over the last quarter compared to the December quarter.

Sure. The areas to start off, Rick, are primarily Brooklyn, Queens, Manhattan. What we concentrate on is primarily the rent subsidized, rent-controlled and if not rent subsidized and controlled, the lower end of the market. That gives us very little downside and a lot of potential for upside. Part of the reason for the somewhat phenomenal growth and if you don't mind I'll put it that way, is that we bring to the table, to the multifamily market, the rehab and construction component which really has not been there.

What we've done, we've been the leading provider of construction lending on Long Island for a long time, at least ten years. We've taken and leveraged that expertise and brought that into the multifamily market, which our competitors don't offer. So we really offer one-shop stopping. One-stop shopping. We give the construction loan and then roll that right over into the permanent once the building is re-hand (ph) and leased. So it's not only the first quarter, as I said earlier, that we had this very strong loan production, but our pipeline and our projections is that will continue for the next three quarters. And beyond that, as well.

On the permanent financing, are you charging prepayment points, like some of your competitors do?

Yes. Our market rates are not on the lower end, they're for probably a little bit higher than the market, and we do charge prepayment points if the loan is prepaid prior to maturity.

You charge a point up front as well?

We can charge a point up front but that would reflect in the rate being lower. Typically, the multifamily market is a par rate environment.

Okay. If I could ask just one other question. The joint venture activity. I think the last call said you thought there would be the next project would be coming on the fourth quarter of this year?

Yes.

That's it.

Bye, Rick.

It was a nice press release the way it was laid out with that information. I very much appreciate it.

We appreciate that. Thank you very much.

Our next question comes from Steve Crusado (ph) of Satellite Assets. Your question, please.

Good morning, Steve.

Good morning, guys. Actually just a follow-on to the prior question. I'm curious if you could just lay out for us your expectations for the joint venture income for the rest of this year and maybe into '04?

We expect overall for the joint venture about a $10 million profit. That's in addition to a prime-plus one preferred return. We don't expect that to start until the fourth quarter, and I think Mike, we have about $1.8 billion in.

And that's before tax.

Okay, great, thanks a lot.

Okay, Steve, you're welcome.

Our next question comes from Chris Buonafede Fox-Pitt Kelton, Inc.

Good morning, Chris.

A couple of questions. Just a follow-up on some of the previous ones. You mentioned that you don't expect -- you expect balance sheet growth of about total asset growth of about 10%?

Yes.

So if we're seeing -- you mentioned that there's about $2.5 billion of NBS.

Right.

Pay-downs coming in, you sold another $500 some odd million so. There's $3 billion floating around there somewhere, and then the multifamily growth is, you know, several hundred million dollars a quarter, so what are we going to do with the rest?

First of all, we are projected, the NBS, portfolio, prepayments $2.6 billion in quarter 2 and we've effectuated sales of $500 million.

In addition to the --.

Yeah, in addition to the --.

Yeah, okay.

Also, we had forwards coming into April of the traditional NBS that we were buying back by (inaudible) paper of about a billion. If you reflect that, we expect to end the second quarter with our available sale of NBSs down to $3.6 billion or $3.8 billion. The excess cash flow that's over and above the amount we need for our multifamily production will go into non-NBS, primarily floater type instruments.

Okay. What about -- so, the share buyback, I would assume, would tend to be less aggressive because of where the capital ratios have fallen to?

No, actually, the capital ratio, that's most important to us, is at the quarter end, bank capital is about $5.46 million. The net income generated could be used to end up the holding company or we can stick to capital markets again, which we're looking into the end of the second quarter. We're anticipate the buyback activity to be consistent with what you saw in quarter 1.

Okay. Secondly, a couple of -- on the Denovo branch sheet, or table that you gave us, why is it that the two branches with the highest core percentage of deposits carry the highest cost of funds, or near the high cost of funds, I should say?

Okay. Why don't you give me an example?

Syosset (ph) and Historia (ph), and -- it says the current core percentage is 66% and 62%, and the cost of funds --.

261 and --.

Yeah, near the high end --.

Which is on average all available in the table is 252. SYOSET is a high network area which has a bit nor teaser rate money market accounts, which will trend down over the course of the year. If you actually look at the other deposit table you can see we bought off core deposit average cost of funds down ten basis points in just three months, so we have the ability to ratchet it down over and above what your competition does.

Does the -- I guess, I've heard from some companies that they're cutting rates on some of their high interest checking. Is that helping you out?

the highest, you know, if you're talking about interest checking, high interest checking or high money market rates coming out of the gate, the highest that we have available today is roughly 1.85%, that's for $100,000 or more and we guarantee the rate for 60 days. After that, it falls to below 1%.

Okay. And then, finally, just one other thing, if I can.

Sure.

Why -- what was the joint venture negative?

Yeah.We expected, and did have a few residual closings during the first quarter. However, because of the winter and the press to get certain units closed to meet delivery schedules, as well as some end of projects adjustments there was a minor, I think it was $80,000 negative on the joint venture which came out -- obviously came out of prior earnings. Overall, however, the joint venture, we were within 5% of the originally anticipated profit of $25 million, and I think what's especially pleasing and satisfying to us is that we show a very strong first quarter earnings with no joint venture income.

Chris, remember the fourth quarter had $3.6 million pretax in JV income. We've had first quarter growth and earnings with no JV income, so we've been questioned in the past, can the company continue to have earnings momentum with no JV income and I think we answered it during the first quarter.

I thought that was a bright spot there. So you also got your $25 million back, I take it?

Oh, yes, sure.

That came in quite a while ago.

Oh, okay, that came in before the project, then?

Absolutely.

All right, I see. Thank you.

Thank you, Chris.

Our next question comes from Alan Brunsest (ph) of ASR Corporate Consultant. Your question, please.

Hi, congratulations on a great quarter.

Thank you, Al.

What I don't understand is all the figures seem very, very good, and you've probably been asked this question many times before. Why are insiders selling their stock at this low price?

the insiders, you see mainly John, Tsimbinos, our Chairman, not that he's selling his stock. It's his stock options that were granted when Roosevelt savings went public and the ten year life is running out this summer. He's not selling stocks. He's in a regulated plan that is just taking advantage of so-called cashless exercise before the term of the option runs out.

Okay, thank you very much.

Noting that, you know, I can speak for John Tsimbinos since the merger he has not sold one share of the company stock.

And we appreciate that question. It's good to get that put out.

It's great to get that out of the way and congratulations again. It was a super quarter.

Thank you.

Our next question comes from Robert Pauly of Sigma Capital. Your question, please.

Good morning, Robert.

Good morning, how are you?

Thank you, Robert.

Just a quick question on the NBS portfolio and the prepays and the sales net of the loan growth. Can you just let us know what amount you expect that to be in the second quarter, and then maybe going forward for the year?

Sure. In terms of the amount -- was your question the amount of pay-down.

Pay downs and then I think you said sales, you said $2.6 billion?

We expect $2.6 billion, NBS, portfolio. Through today we've effectuated sales of $500 million in the second quarter to date.

Is that on top of the $2.6billion?

Yes, it is.

Okay, and so you probably will grow, I mean if I just analyze what you expect to grow the multifamily, maybe get another $500 million of loans in the next quarter?

That's correct.

and then the net of it, which I guess is around two and a half, $2.6 billion, you said that would be invested in floaters?

It will be reinvested into non-type NBS securities, early floating rate securities to protect against interest rate risk, assumption risk and market value volatility.

What is the -- what's the yield you can currently get on those floaters?

The type of floaters that we'd be looking into over the past two years have ranged in spread from 110 to slightly over 200 basis over LIBOR, we've been purchasing at the high end of that range.

So the difference, the yield difference that you experience is around, what, 200 basis points, maybe slightly less?

Approximately, that's correct.

Uh-huh. What is the yield on the multifamily loans that you're originating?.

Multifamily loans, our pricing on a rehab or construction will be tied to LIBOR, or prime. On your traditional permanent multi, we've been pricing it at 200 basis points over the five-year home loan bank rate, and but we've actually been realized about higher so roughly anywhere, if we use the home loan bank pricing from April 17 it would be roughly from 5.35% to about 5.5% today.

Similar to the yield you're losing on the NBS portfolio.

Selling off on the NBS, portfolio will be anywhere in the mid to upper 4s. We'll be increasing our yield on those assets.

Can you just help us out in terms of the margin came in about 20 BIPS. Where do you see that going, what range are you comfortable with?

Sure, in the current range environment we're in, we can see a similar trend, second quarter, in our minds we also have CDs coming due of a $1.9 billion over the course of the four quarters.

So you get some offset down.

Down about 60 basis points. The CDs we put on the books month of March are at 1.79% so there will be some significant fuel to the margin from that event. Deposit growth we're projecting still to be at least 15%. We have the $1.8 billion pipeline, we still projecting originations of $1.5 billion between now and the rest of the year. And you know, we continue to have probably the best expense control in the industry.

Sure, sure, absolutely.

All those things, when you package it together, will mitigate some of that margin compression in the current rate environment.

So next quarter maybe it goes down another 20 BIPS, and have offsets going forward?

if the current rate environment -- you could see similar trend that you saw in quarter two.

And what about the -- you gave us some nice guidance on the runoff of the NBS portfolio for next quarter, but is it going to be similar or for the remaining part of the year?

NBS, is that we were purchasing, we took advantage of to create unique structures beaks backed by high coupon mortgage paper to ensure that the pay-down accelerate more rapidly in the shorter term. You know, I can tell you because we've modeled out the NBS portfolio many ways, rising in a flat, down and in an up, that -- in the current rate scenario, by year end, we expect the NBS portfolio to be approximately down to $2.2 billion.

Down to 2 points-- that's the -- there's the support NBS support portfolio.

That's correct.

Okay. Thank you very much.

Thank you.

Our next question comes from Saldy (ph) Martino of Bear Stearns. Your question, please.

Hi, guys.

Hi, Sal, how you doing?

How you doing?

Good.

Good. Got a couple of questions. Just getting back to the multifamily portfolio, or the multifamily originations. Can you talk about, you know, you spoke about sort of where you're making the loans. Can you talk about the LTV’s, I'm doing my math right, the average loan size on what you have in the pipeline is over $3 million.

Yes, that's about right. The new loans going on are between three and four million. The average LTVs in the portfolio, are approximately 62%. Obviously, some of the new loans that go on will -- because of the volume, will bring up that a little bit, because most of the loans that go on are at or in the 70% to 75% range.

Okay. And just so I have this clear in my mind, the commercial pipeline, the $1.7 billion, the $1.8 billion.

Yes.

Is that an application pipeline or commitments that just haven't been -- haven't been funded?.

That's a combination of both, and we should clarify this, and we will the next time. The-- that is a total of loans that have been approved, loans that are in the pipeline that have not been approved, and also if you see that -- if you're on Page 4, that $304 million, that actually consists of loans that have closed -- it's the unfunded portion of those loans that have not closed. And for the most part, that's multifamily or subdivision construction loans.

Okay. And just -- if I can, just a couple of other questions.

Be my guest.

Mike, I guess, the rest of the questions are more for you.

Thank you.

You talked about -- you're welcome. You talked about what you expect to see in NBS pay-downs in second quarter.

Yes.

Can you tell me what they were in the first quarter, and sort of what you, you know, how much was put on and sort of the structure of what was put on?

Okay. Well, the pay-downs in quarter 1 were averaging close to a billion dollars a month.

Okay.

Primarily for the first quarter, we were putting on the type of paper we were successful in accumulating throughout 2002, which was NBS’s backed by mortgage coupon paper roughly 7.5% to ensure the consistency of the pay-downs on a go-forward basis. Does that answer your question, Sal, or was there more to it?

I think I'm fine, if -- I may have to go -- yeah, I think I'm fine.

Okay.

I may have something else unrelated to the NBS. On the expense line, what accounted for the significant drop in comp and Benny? I mean, you were running in the mid 13s to high 13s all of last year and now we're down at 12.2?

Okay, the original stock incentive plan, we went public, ended in September of '02.

Okay. And so, is the first quarter a good run rate going --.

Absolutely. I would tell you the first quarter you should utilize as your run rate, no higher.

Okay. And then, just -- I know the loan loss provision didn't decline that much and I know credit quality is not an issue, but maybe you can comment from a perception point of view. You know, you're shifting into more nonresidential businesses. Can you kind of give me your thoughts or your outlook on level of provisioning going forward. Is that part of the loan portfolio in PR ECIS (ph)?

We truly believe that the multifamily and rent controls and, rent stabilized market is a better market for four family residential loans. If in our mind we're shifting into a loan asset that historically has proven to be a better credit quality.

As for provisioning we put $500,000 in, but I think it's important to note that nonperforming decrease bid 34%. What's left of the approximately $28 million in MPA; I believe three and a $3.5 million or so of FHA/VA. And assisted living loan that we've talked about in the past of roughly $18.5 million. We backed those to anomalies out and you have MPA of 6 basis points and MPL’s of 17 basis points. Our coverage is 1.35%, which is ahead of the average for a traditional thrift.

Right.

We're quite comfortable in our allowance and quite comfortable with the quality of the loan portfolio that we've put on the books.

Okay, and then Mike, just one final question.

Yes.

Can you give us sort of a little bit of guidance on the tax rate. I notice it was down to like the 34% range this year from 36%.

What will happen with the effective tax rate, one, JV income at the holding company is taxed at a higher incremental rate, less JV income this year will mean a lower effective rate, and we're contemplating some balance sheet transactions which will bring the rate down even lower.

Okay, thank you.

Okay. You're welcome, Sal.

Our next question comes from Scott Valentin of Friedman Billings and Ramsey. Your question, please.

Good morning,.

How are you?

Good. Question on -- in prior releases you provided two pieces of data I didn't find in this release but I may have overlooked them. You have a detailed release, which is nice?

Thank you.

One is the period-M(ph) margin, I don’t know if guys disclosed that or what it was? I know it was 256 but do you have a period-M. margin.

Period-M. will be approximately in the low two 250s.

Not different than the average. Okay. In past quarters you provided some guidance, I guess general guidance for the year I didn't see it in this. Maybe you're going to give it at the end of the call.

(inaudible) contrary to some of the chatting that we've heard done early in the morning before the call, we're not sitting here today lowering our guidance. We still remain comfortable with the consensus.

Okay. All right. And then, back to the NBS securities, I want to make sure I have the assumptions correct for my model as far as the balance sheet. You have total assets increasing 10% this year, and you have NBS coming down to about $2.2 billion by year end.

In the current rate environment, that's correct.

Okay, all right. And balance of that will be loan growth multifamily and commercial real estate loan growth?

That's correct, and the excess cash flow on top of that will be a non-NBS securities, primarily floaters.

Okay. I guess they'll be agency-backed?

Absolutely.

So straight floaters, okay. Thank you very much.

Thank you. You're welcome.

Our next question comes from Glen Shapiro from Sigma Capital. Your question, please.

Hi, guys.

How are you?

Good. I apologize, I've heard a couple different things. I want to make sure I can get this right for my model.

Okay.

It sounds like I should expect earnings assets growth about 10% year over year, is that correct?

Yes.

Okay. But I should expect the NBS portfolio to come down, it actually grew during the quarter but I assume at that point you were swapping into variable rate?

It grew at the end of the quarter because we had some (inaudible) that settled on March 31.

Okay but I should expect it to be down about $3.2 billion at the end of the quarter and then should it be flat?

the NBS, we expect to be down roughly into the $3.6 billion, $3.8 billion by June 30 and in the current rate environment, if we don't add to that portfolio, down to approximately $2.2 billion by year end.

Okay, great. And then, you guys are expect to go put over, it sounds like offset the runoff in one to four family. You expect a little over 2 billion in origination.

Actually, Glen, I should go back on that, in terms of if rates stay where they are now, in a flat rate scenario, we could see the NBS down further, to about a $1.6 billion.

$1.6 billion by year end? Okay. And then, you're talking about, it sounds like, 240 basis point margin in Q2?

I don't think we quoted the margin except to say in the current rate environment.

Right.

That you could see, if that rate environment continues, you could see a victim trend that you saw in the first quarter.

In the second quarter, I guess my question is if you also think that in the current rate environment you'd see additional runoff in the NBS book, would that mean the margin would come in further in the latter half of the year?

In the latter half of the year, you have to remember the NBS portfolio has been geared with prepayment, so the biggest runoff will be in the midterm, and we'll just keep putting that excess cash flow into, as we said before, higher yielding multifamily loans, floating type securities, and mitigating the margin compression over that will a$1.9 billion, and CDs coming due which we expect to precise 50 to 60 basis points lower. Deposit growth overall somewhat north of 15% but core deposits still growing at the rates we've communicated and effectuated to in the past. So you have a number of items which will mitigate margin compression if the rate environment continues as is.

Okay. Mike, what's your rate scenario for the remainder of the year? This is a conversation you and I have had in the past.

Sure.

I'm trying to kinds of figure out what I think is run rate on an EPS is, and if I think we're going to get a light margin compression in the second quarter, just thinking about it kind of takes five cents off of the first quarter. Does it pick up in the latter half of the year?

We're not here today saying we expect EPS to be, if any, cents lower in the quarter. We're comfortable with the consensus, and in the breakup of the consensus over the course of the quarter. And, you know, what we believe, as a team here at Roslyn is that we expect rates to be slightly higher by year end, mainly roughly about 50 basis points in the second half of the year and more than importantly I guess to the latter.

50 point rate increase in the back half, okay. Maybe this is something you and I can do off line, I was just -- if all else is the same, you guys got great expense cuts in this quarter, so assuming that kind of transitions forward, and I have some other questions in a second but all else being the same if you're going to see additional margin compression, assuming a flat rate environment which is kinds of happening.

It's happening right now.

So what I expect, if there's a little bit of top line pressure, what's the mitigating factor? How do I think about that? Is it a lower tax rate or is it ?

Certainly we expect the effective rate to be lower, but the mitigating factor, again, is the three or four items that we just went over in terms of the downward pricing of liability. Exception of multifamily growth. Keeping the expenses tightly under control and you can see we've done that.

You guys have done a great job for. Two more questions. I apologize for monopolizing time.

Go ahead.

You did a great job keeping advertising and comp costs low. Is that something we should expect to continue, and continue to see this deposit growth, or do you expect some pickup toward the back half of the year?

The only increase, and your question was on advertising expense? Advertising and --.advertising expense was a bit lower in the first quarter, because we haven't rolled out the next group of Denovos. But you can see in the fourth quarter and toward the end of last year when we did, it's only incrementally higher and we expense advertising as incurred.

Okay.

Advertising, as we open our line of Denovos in the second half for the year will not be much greater than what you saw in the first quarter. And the comp expense will be controlled as is.

Okay, great. And then my other question was, you know, obviously you guys are changing the composition of your loan book pretty quickly, net, net will actually still see some increase. As you switch in and you're growing, you know, that multifamily pretty fast, the reserve coverage to overall loans went down, should we expect to see some pickup in the provision just pause obviously you're end running bit of a new market and growing the book pretty quickly?

It went down from 1.38%, I think at December 31 to 1.35%. That 1.35% loan coverage is still substantially ahead of our competition.

Okay.

That is the type of business we do. And again, you know, we're quite comfortable by staying in the rent control when stabilized market. And not participating in the high end of the multifamily market that the credit quality will remain quite good.

Okay. Great, and can I ask who you're taking the business off of, or is it additional business? Who are you seeing out there in the market?

If we want to name names, the real competitors out there are New York community independence for the most part, north fork is in that market as well. And it's almost seems to be an unending market. Our loan growth this year has been exceptional compared to last year, but if you look at the two major or three major competitors, particularly New York community and independence, their loan growth has been approximately the same as well.

Okay. Great. I appreciate, it guys.

Okay, you're quite welcome.

Our next question comes from James Ackor of RBC Capital Markets. Your question, please.

Yeah, thanks, good morning.

Hi, Jim.

I was hoping you can provide a little bit more detail on -- I've heard the term floaters here quite a bit. I'm not sure what specifically you're talking about here.

Okay. They're primarily Fannie Mae, Freddie Mac agency type floating debentures.

Backed by.

These are fanny and Freddy, backed by the agency.

Fixed, 30-year.

Floating rate, LIBOR.

They're LIBOR, so they're monthly floaters?

I would think on average probably quarterly.

and what sort of yield are you looking to take on these?

As we said a few minutes earlier, that the thread of LIBOR, approximately the 12, 24 months, average a low of 110 to 200 basis points. What we've put on the balance sheets have been at the higher level, Jim.

Jim. Does that answer the question?

So you're tug talking about 90-day LIBOR.

Slightly over 3%.

Right.

Roughly 3.30 on a spread of 200 basis points. Adjusting up when LIBOR does in fact go up.

And the 3-plus billion dollars of securities, would the high whack collateral?

the yields that will be running off in the 4% and a half to 5% range.

Okay. It looks, I don't know what I'm missing here, but it looked to me like on the table that you gave us was actually really good detail on the available for sale portfolio with the weighted average duration in years weighted average life in years and then weighted average yield it looked like all these Fanny, Freddy Janney(ph) CMO’s.. Whole loan, agencies and NBS pass-trough’s are yielding 5.3, 5.6.

When you blend in full commitment sold in April, that was when you're down to the numbers that we talked about.

Okay. Fair enough. Also, on the multifamily stuff that Jack was making some comments with regard to LTV.

Yes.

I got the sense that you were talking specifically about the permanent stuff.

Yes.

It looks like the multifamily rehab and construction average loan advertise is actually closer to 6 million, and if you could give us just a little bit of color commentary about LTVs and the duration on these loans.

What I can say, and I'll turn it over to Jack, is whenever you're doing a rehab or construction type loan, the amount of the so-called commitment is never what is released all at one time. As is the case in our subdivision of residential building, you only (inaudible) below as construction progress progresses throughout the term.

Yeah, and also, as I said earlier, Jim, we are one of the few, perhaps the only one in the New York market doing the construction rehab lending, so therefore we get some of the requests for rehabs and construction loans that on the bigger properties perhaps even the better properties, so the average loan size on those loans would be obviously higher than the run of the mill apartment building, rent control, and stabilize.

Can you give us a feel for what say, the top ten largest credits look like in terms of size or exposure?

Sure. We have the largest loan that we currently have on the books is $85 million. However, that's made up of five different properties. And the reason we put it on the books in one is because we got -- we received, were able to receive cross collateralization on all of those. That's something, as a lender, you like to get.

Unfortunately, you can't always get it. And even on those five properties, two are LIBOR-based, and scheduled to pay off very shortly. The other loans are, we have are lending policy, we like to keep our per project loan below $15 million, and our relationship aggregate loans below $50 million. Occasionally we have an exception to that, but it's on prime, very solid loans.

Okay. And just one more quick question. The origination volume, as you mentioned is strong for you guys, but strong across the board, what is the source of the majority of your origination volume?

Well, the multifamily market is driven -- is broker-driven, and we've developed some very good relationships with some of the major brokers in the market. You know, it seems like we're patting ourselves on back a bit, but they like to deal with us, because, as I said, we have the construction rehab component. We also can turn around these loans in a relatively short period of time in terms of our approval.

Not that -- we probably have a more extensive underwriting requirement than most of our competitors, but we have a team that is all credit-trained for the most part they've come from commercial banks and even though we're the new kids on the block in terms of multifamily, we've made quite an impact in the last two years.

I think it's important to note that we're certainly not the new kids on the block in terms of construction and rehab. That was (inaudible) niche and continues to be. .

So, all right, so like the meridians of the world are a good source.

Meridians, GCP Capital, PE RGOLIS, others we deal with.

The same brokers that would be utilized by our peer group.

Thanks a lot.

Thank you, Jim.

Our next question comes from Kevin Timmons of CL King and Associates. Your question, please.

Thank you. Most of my questions were answered but I have two small ones. On the expense side you addressed the salary and benefit component so the run rate will reflect pretty much what the first quarter looked like. But I see that the other non-interest line was also down by close to a million is that also a good run rate?

You mean of the non-interest expanses?

It went from 5 to --.

Yes, that is a -- I would use that as the run rate, Kevin, and the major item there, it's (inaudible) fees way down, mainly legal costs because of the American tissue credit is no longer with us. And we're pretty much expended in terms of legal costs that we had to on the assisted living nonperforming asset.

Okay. And then, earlier somebody mentioned something about, you know, well, EPS come down a nickel in the second quarter and you mentioned no, we're comfortable with the $1.95 to $1.98 range.

We're comfortable with the consensus out there and the consensus is approximately the same as the guidance that we had put out a few months ago.

Okay, but in terms of sequential progress here, I'm assuming that did does -- and also understanding the joint venture begins to provide revenue in the fourth quarter, I'm assuming that Q2 and Q3 will have to be, for numbers to add up, down versus Q1?

Are you saying versus the 50 cents?

Versus the 50, yes.

The 50 cents also had a small amount of security gains and prepayment expenses on liquidating some borrowing. But as far as -- once again, we're saying we're comfortable with the consensus out there, for the remaining course of the year.

Okay. I'm just trying to get out what the fourth quarter looks like I guess more than the second and third. Clearly the second and third are going to be down for the factors you mentioned.

the fourth quarter, Kevin if you're anticipating as we said the $1.8 million in terms of JV income, you know a $1.8 million is a penny and a half in EPS.

Right, okay.

It's not really material at all.

Okay, thanks lot.

You're welcome, Kevin.

Our next question comes from Eric Konerlly (ph) of Boston Partners. Your question, please.

What was the 4Q stock basis incentive plan expenses?

It was approximately almost $2 million.

Okay. And second question, where does the option just duration sit for the earnings asset and same for liability?

Excuse me, I didn't.

Option adjusted duration, what is it for the earnings assets and what's the similar figure for liabilities?

If you go by the table we put in, in the press release, which is the security portfolio, the durations and rate average saw approximately on the majority of those assets, nine months in the current rate environment.

That's option-adjusted in.

I don't follow what you mean by option-adjusted.

Clearly the NBS, even if their straight duration is let's say three years, the option adjusted is going to be something less than a year.

Yes, the prepays as it stands right now, the pay-down, CPRs are up 60%.

You adjusted for the option already.

Which really translate into a weighted average weighted life of nine months.

Okay. Okay, great.

Okay.

And what's it on the liability side?

The liability side will basically, you know, the deposit portfolio, you know what the core is, so -- in terms of the CDs we have a $1.9 billion coming due in the next four quarters so they would probably be in the neighborhood of roughly a year or a little bit more than that, the borrowings that you see on the balance sheet at quarter end on average they're about four-year average life.

Okay, thank you.

You're welcome.

Our next question comes from Ari Shoshet (ph) , of Millennium Partners. Your question, please.

Good morning.

You know, I'm not so familiar with exactly how the broker channel works in multifamily. I mean, how is it possible just logistically to put on the loans without increasing your expense rate. You have to have headcount to deal with it? What do you have to do to open channel, and in a sense, is it really -- is loan growth up to you in the sense that you can just, you know, dial is up by, you know, either calling up another broker or -- I mean, I just don't really understand how it works, this is so different?

As I said earlier, we have established these relationships with brokers. They like our turnaround time. They like our responses. That's not to say -- our turn-down ratio, we decline almost 70% of all of the loan requests that we get. That's not just multifamily. That's across the board. And it's not 70% in terms of the dollars. It's 70% of the number of loan requests that we get.

We have a full lending staff of six teams here, each team is made up of two people, a lender and an assistant, and then we have a full support staff behind them in loan administration and loan servicing. But it's taken us the better part of two and a half years to establish these broker relationships, and I guess the proof is just in the results. They give us the loans.

What volume can you do without adding you know --?

It depends. If you want to certainly go out of rent controlled, rent stabilized, you can probably turn the spigot on substantially. But we remain committed to stay in rent controlled, rent stabilized markets and the low end in terms of rents.

And we will not touch the high end market, which would be the first to suffer during an economic downturn in the real estate market. So certainly what you see is quite -- we're quite capable of producing on a growth daily basis by staying in terms of multifamily, in the highest credit quality readiness of that type of lending.

I think in answer to the question that you started to ask, how much volume can you do without increasing the staff, we're pretty much at the maximum right now in terms of what we can do with the staff that we have. If the volume and the request is such, we could add on another team of two people and if that supports another $250 million in loans, you know, we just did the math, that's certainly a good investment.

When your brokers and your lenders are deciding, you know, which loan to take, let's say you versus New York Community or Independence. What's the -- what's the factor that will swing them --?

I think primarily the biggest factor, you know, to date has been our (inaudible) due to rehab which puts us at a competitive advantage over your traditional companies that just do permanent financing.

And, you know, we have the ability to approve the -- but to do the rehab, which average life of that type of product would be 18 to 24 months. And then at the -- when the construction is completed, to support it with a permanent financing, if we so choose. I think it's worthy of noting that, you know, one of the questions that I'm always asked when I'm on the road, or doing investor shows, is what's your rate of success in terms of when the rehab construction project is finished in terms of the retention on the so-called plain vanilla multifamily product, which to date has been 100% retention.

but aside -- okay, aside from your rehab advantage, are there -- are the loans structural basically the same? How, you know, New York Community and Independence have come to the table?

Basically the same. We know our competitors. The brokers like to spread it around because we're an additional source of funding for them. I will tell you this. About two years ago and I'm not going to mention names, but one of the major brokers started dealing with us and loan after loan that they sent us, we declined and declined and declined. And it was just, I guess they were testing us out to see what your underwriting criteria was. We had a meeting with them and subsequent to that meeting we started getting quality loan requests, and they are one of our major providers of loans at this point.

and I like to note, we very experienced commercial real estate lenders. And we will stay -- we will stay close to our (inaudible) in rent controlled and rent stabilized, which there's substantial product to go around. You know, it's not that we have lower rates. I gave you the spread on the plain vanilla permanent, which we're averaging 200 basis points or slightly thereof higher over home loan bank. Certainly we're not getting aggressive in terms of cannibalizing the rate. Or exceeding 70% LTV or normal debt service coverage ratios.

I guess the question I have, and this is sort of with all these questions, is last quarter you indicated you were going to get more into multifamily. I never thought it was going to be this dramatic. I mean it's great to get the volume. I'm trying to think through the implications. Will these loans have a seasoning different from how one to four family loans season, is that something we have to think about?

the seasoning difference. As we said, the rehab is average life 18 to 24 months. Your plain vanilla permanent would have an average life of approximately four years.

Okay.

And, you know, going back into the fourth quarter, I know we talked about it on our other earnings conference call. If the pipeline back then was still over a billion dollars.

Right.

but today it's a $1.8 billion, including unfunded commitments of $300 million.

Great. I mean, one last question, if I can.

Sure, take your time.

People have a few questioners before me have tried to pin you down on guidance and EPS. And let me try and be more specific.

Sure.

You just put out 50 cents. First call consensus for second quarter is 47 cents. First call consensus for third quarter is 49 cents.

Yes.

and you were asked a couple of times if that means you're going to have (inaudible) EPS next quarter and you haven't really --.

if that means what?

if you're going to have down earnings, the 47 cents or if we should raise -- I don't have the numbers.

As I said before, just to clarify, you know, 1.6 cents, or approximately 2 cents of the 50, was net security gain, prepayment penalties on borrowings, the first call numbers you're quoting would exclude those types of transactions.

Okay.

I think hopefully that clarifies the difference.

Okay, so meaning you're sort of thinking of this quarter operating being -- 47, 48 cents.

What we're communicating is that the consensus for the year, we remain comfortable with, and the first call, which as you quoted was 47 cents in quarter 2, and I guess it's going up in quarter 3 and quarter 4, you know, that's giving you the dollar 94 for first call of the year which we're not uncomfortable with. We are comfortable with that number.

Okay. Terrific, thank you very much.

Okay, you're welcome.

Our next question comes from Tom Monico (ph) of KBW, your question, please.

Good morning.

Hi, Tom.

Hi, Mike, how are you.

Very good, thanks.

Terrific quarter. You guys are doing all the right things.

Thank you.

We appreciate that.

Can you give me an update, I guess, on a one -- I guess nonperforming loan, large nonperforming loan in the portfolio, where you guys stand with that?

Yeah, sure, Tom, this is jack I'll do that. American tissue is completely behind us, thank you. The assisted living facility is in bankruptcy, to some extent it's a little frustrating because you can only go as fast on this as the bankruptcy court will allow you but on March 4, the bankruptcy court will approve the final marketing agreement for marketing the property. The marketing agency has completed the marketing book. We are told we'll be receiving the final draft of that tomorrow.

They've already contacted some 1500 potential buyers of this and they're starting to get feedback, back as to what interest there may be out in the market. We've gotten, I believe it says in the press release, we've gotten two valuations on the property, both in excess of $16 million. We continue to receive monthly payments on the loan from the excess cash flow of $40,000 per month.

So we're hopeful now that we're ready to go, with the marketing certainly by the end of this year, and maybe that's even a little conservative, but by the end of this year this property will be sold.

Great, thank you very much.

Okay, Tom.

Our next question comes from Jack Micenko of Lehman, Brothers, your question.

Jack Micenko Same horse different stick. On the multifamily portfolio. How much of the $731 million would you estimate was through the conversion of the rehab versus going out and originating from a broker?

I would say, Jack can give you some color. The rehab component, both have average lives of almost two years. So there's not a great deal of those that have completed their rehab or construction as of yet. I'll turn to jack but I'm sure substantially all of that will be in the (inaudible) type which came directly from our broker relationships.

Yeah, our -- the rehab component of the request that we get in, is approximately 50 -- between twist and 60% in total dollars. As Mike said, as these loans fund, the permanent gets funded fully, the rehab or construction only gets funded partially and then after the -- over the life of the loan and then converts it to a permanent. So in that $731 million that was put on the books, my estimate at this point, and --.

$731 that you see in the table, Jack?

Right.

That's all permanent.

Right. How much of that did you go out and agree get at a broker and how much was a rehab loan at one time that you went and did the permanent on?

Most of it is the broker. As Mike said, the loans that are coming in to us, on the rehab loans, take a certain amount of time to convert to the permanent.

Sure.

(inaudible) time for the rehab project.

Usually 18 to 24 months, some case as little bit more than that.

Jack?

Yes.

No problem getting that get exact number.

Yeah, I was asking because you said earlier that was sort of your segue into the permanent market. So I was trying to figure out how much, you know, you've almost -- you've more than doubled the multifamily permanent on balance sheet, and you know, pricing competitive everybody is doing it I'm trying to figure out what you're doing differently. I know the loans are somewhat bigger but that can be explained through the (inaudible) is that a competitive advantage for you guys?

Competition advantage suspecting to do the rehab supply one-stop shopping for the best available out -- best developers out there. That has been what we perceive a competitive advantage, and you know, in terms of the average size of the loans, I don't think it's materially different than the other players in our marketplace doing the same type of loans.

Okay.

if you find that to be a bit different, please call me off line and we'll go over it.

Jack Micenko Okay. So, Jack, about -- would you say -- majority of the multifamily ask brokerage on the permanent side is what you said.

Almost all of it.

Okay. And on the branch, de novo branches, trying to go through next year, keeping the costs under control, as you open what did you say 10 to 15 more over the next two years. How-- can you walk me through a basic example of branch profitability in terms of deposit fee structure, you know, outlay, initial outlay, that sort of thing, so I can get a sense of how you measure a branch breaking even?

First we'll mention the fact that the amount of capital outlay from set a lease-hold improvement and/construction, equipment, IT costs, and even furniture and fixtures, it would be roughly about $750,000. In terms of how we calculate profitability in a branch, the respective de novo, it's cost to funds, whatever that may -- they'll be charged with that in our profitability analysis.

In terms of the duration of those so-called deposits, will be matched funded against an asset structure to come up with a net interest spread for that specific branch. One thing we're not doing in calculating our profitability levels in de novo is assigning average cost of funds across all our branches to Denovos. That money has been utilized a long time ago. So we calculate a specific spread which is inherent to that specific branch.

In terms of expense, we calculate fully loaded expenses, roughly on average it's about 10 to 12 FTEs and in each branch and even if we're utilizing staff from one of our current branches, we still charge that respective branch with those salaries and comp costs, including stock plans and ESOP, it's fully loaded. There's no deferral of expenses except for construction cost, which would be capitalized and amortized over the leased term.

Right, okay, so if I look at, you know, so then to summarize for my understanding, you have an overall asset yield that it is what it is, and then the individual branch has its own cost of funds and it's got its own cost structure in terms of outlay.

That's correct.

So then you would have expected like this west Babylon or Ridgewood probably has a higher cost structure inherent. Is it a bigger branch where there's more to be done because the actual cost of funds were low but they were opened up ahead of branches like Saint James?

We like to have too far to foot print 2700 square feet. Anything above, that if we like the location certainly we'll have a bigger branch.

Okay.

So there are some variables that would go into, it but I would note that west Babylon is -- will be in profitability very shortly, it already has over $23 million in deposits.

Right. Okay, that's very helpful, thank you.

Sure.

Our next question comes from Matt Kelly of Morrison and Cabot. Your question, please.

Matt Kelly Hi, guys.

Hi, Matt.

I wanted to follow up on the balance sheet growth assumption. You said 10%, that's year end 2002. For the full year?

That's pretty much over what you've seen in the press release right now for the quarter.

Okay, I mean, if you were to have 2002 to 2003 asset growth at 10%, it would take you close to $12 billion balance sheet.

That's correct.

Buyback activity, keeping that the same. I'm looking at the capital level at the holding company.

What really will determine is the capital level at the bank itself, which was 5.46. That terms the amount of asset the size we can grow the institution.

Okay.

Go ahead.

but conceivably by year end '03, capital -- at the holding company could fall below 4.5%?

Certainly if you're going in terms of consolidated equity to consolidated assets, you could get below 5%. But certainly the capital ratio at the bank level, which really gives us the ability to grow the franchise, will not be in a range lower than 5.20 went to 5.50. So it's the earnings capacity of the so-called savings bank that allows us to exhibit asset growth. You know, and it's not to say that if we indeed believe that we need to raise capital, you can bet we'll be into the capital markets to do so, which we've been quite successful with in the past.

Okay. Fair enough. I mean, what is the break point with the which you consider raising capital and what would be the preferred type of capital you would like to go after?

Certainly, it depends if we really think we need to raise capital, and one thing to note, the holding company structure that we have doesn't really have regulatory guidelines for capital. But certainly, you know, the types of capital structures that we could raise in the past we did subordinated debt. Certainly we can duplicate some of the other structures that you're peer groups have done and we're looking at all of them. And if indeed we believe we need to raise it, we'll be ready to go.

Okay, great and just one last question. Prepayment penalties, what are you looking for going forward?

on the low portfolio.

Debt extinguishment any additional?

It depends on the rate environment. Certainly in the first quarter they were quite minimal. Certainly with rates being where they are now, at lower levels, it's not entirely prudent to take the prepayment. So certainly, you know, we look at that constantly, you know, one thing we've always decided to really effectuate ourselves with is complete flexibility on the balance sheet. In terms of keeping our investment into available sale.

Which gives us the ability to so-called cherry pick in the right environment, and also in terms of using gains in a security portfolio, to offset prepayment penalties on the liability side. So, it's he not to say that we won't do it in the future. It really depends on the rate environment that we face on any given moment

Okay, fair enough. Thank you.

Okay, you're welcome.

Our next question comes from Julie Ann Carasino (ph) of ProSector (ph)Partners . Your question, please.

Julie Ann Carasino : Hi, this is Julie Ann.

Hi.

You mentioned that you expense construction costs. I'm sorry, that's the only cost that you capitalized, is construction costs?

That's correct.

for the new branches. Do you lease all of your new branches?

It really depends. If you're going closer to the city limits. For the most part they'll be lease type arrangements. If we, actually we find it quite effective to utilize leases with many different option periods, of course our de novo strategy is a bit different than some of the competition, mainly -- and one of the competitions that's doing de novos quite rapidly in our area, employs a strategy of building raw land and building from the ground up.

We all know land on Long Island is not that cheap, so we can quickly open a branch within 90 days, ebbs spending approximately$ 750,000 in terms of lease-hold improvements, in terms of furniture and fixtures, in terms of IT equipment, and the well below the average, if we had to build from the ground up and purchase land of $2 million to $3 million dollars, if not more.

So about how much of that $750,000 per branch is capitalized, approximately?

The computer equipment will be capitalized over a period roughly of about three years, furniture and fixtures is a tad longer than that. And the lease-hold improvements will be amortized over the lease term.

Does that come out it like approximately 50% in?

Excuse me?

Does that come out to approximately 50% in?

I would -- of the $750,000, the majority of which of 75% or so will be in terms of lease-hold improvements.

So about 75% would be capitalized?

and amortized over the lease term.

Okay, thanks.

Thank you.

We have a follow-up question from Rick Weiss of Janney Montgomery Scott. Your question, please.

Hi, guys. Just on a big picture, just where do you see like the economy, particularly real estate market on Long Island right now, compared to three or six months ago?

in terms of residential, and I'm talking about residential construction, it continues to hold very, very strong. Month to month on medium price levels, for three years now in both NASA and Suffolk counties, the medium price levels of residential homes have increase bid 20% from the prior year's month. That's really holding very well. There has been a little softness in the commercial market in terms of office space. Vacancy rates have increased.

For the most part that's because some new properties have gone on the market. Actually, two fairly large buildings and have come n on and are in the lease phase. That has increased vacancy. But on the other hand, the actual leasing has increased from last year at this time. So, overly, real estate market is strong overall real estate market is strong on Long Island. There's always talk about hitting the wall, the bubble. We have an opinion on that.

This is unlike the late '80s and early '90s where prices were driven up because of speculation. There's just no speculation in today's marketplace out here on the island, or very little speculation. The prices are driven up because just not enough product to meet the demand. And that's healthy. So overall, Rick, the market is -- remains strong.

Okay, thank you.

Okay, Rick.

Our next follow-up question is from James Ackor of RBC Capital Markets. Your question, please.

Thank you. A couple of quick follow-ups.

Sure.

When you were going through the branch profitability with Jack, you mentioned that you, if I heard you correctly, you develop a cost of fund structure for each individual branch, depending on what the deposit look like?

Yes.

And then you create a match book, which assumes an asset yield, is that fair?

No, James, what really mean to say is the cost of funds for that respective de novo branch will be the interest expense.

Right.

Depending on if it's a core composite, that's raised in that de novo, it will be matched against one of our rehab or construction or completely adjustable rate assets. If it's a CD, it will be matched against a longer average life type asset, you know, multifamily or a security that has an average life fairly close to that of the CD. We're not really -- I don't want that answer -- I don't know if that answers your question. But it's being -- the cost of fund, every dollar of deposit is being utilized to fund a current asset. Not assets that are already on the balance sheet or in the loan portfolio already. Those already have been funded with deposits in the past.

Okay.

So, in terms of how we measure profitability, you know, I'd be very comfortable in saying that we're extremely conservative and, you know, from what I've heard of profitability models of in de novo branches, I think we're the most conservative out there.

Fair enough, I just wanted to understand the nature of the implied asset yield.

It really has to do with the duration of the respective deposit.

All right. Now, one more quick question with regard to GNA expenses.

Sure.

When you guys ramp up the original nation volumes and all of this volume comes from brokers, obviously an individual loan expense associated with everyone loan that you originate that goes to the broker. Now, where is that showing up on the income statement?

the borrower pays that. It doesn't show up on the income statement.

We don't pay any fees to the broker so absolutely no fees from you guys. Absolutely none.

Fair enough, thanks very much.

Thanks, Jim, you're welcome.

Ladies and gentlemen, if you wish to ask a question, please key star-1 on your Touch-Tone telephone. Our next question comes from Chris Buonafede of Fox Kelton. Your question, please.

Hi. I wanted to follow up again.

Sure.

On the multifamily, any of the loans being held in portfolio on the permanent side, any ten-year fixed, do you put any of that stuff --?

Occasionally we will do a ten-year fixed. It's not our policy to do that. But we will and of course the rates are higher on ten-year fix.

Am I correct in assuming that the market over the last year or so has gravitated that direction?

in that direction?

Yeah. Traditionally, it's been a five-year, five-one product and now I'm hearing there's a lot more ten-year fixed out there?

Yeah, with the rates as low as they are, borrowers would like to lock them in for longer periods of time. Even if they have to pay a higher price up front. But typically we try to hold ours to the -- although ten-year maturity, five-year on the rate and readjusting after five years.

We're not any different than your traditional players out there, Chris, you know, certainly, you know, I for one does not like to put ten-year fixed rate on the books.

Secondly, back to that earnings, the earnings guidance, whatever you want to call, it going forward. Would we be correct in assuming that part of the comfort with the consensus is going to be a net including some kind of securities gains, for instance you mentioned you're selling off $500 some odd million of NBS, I would assume there's some gain there.

Chris.

Yeah.

Any type of guidance, and the consensus that's out there on first call, would exclude those types of transactions.

Okay, fair enough.

Any type of -- any type of guidance or being comfortable with the consensus does not include security gains.

Okay. Fair enough. Thank you.

You're welcome. Thank you, Chris.

Our next follow-up question is from James of RBC Capital Markets. Your question, please.

Last time, I promise.

Okay, no problem.

Welcome back, Jim.

Of the 730 in the multifamily permanent line item, what percentage of that dollar amount is beyond the five-year fixed rate, and then also, looking at the multifamily permanent as well as the rehab, what percentage of the total balance, which is a $1.2 billion, is outside the New York/new Jersey foot footprint?

in answer to question number one, I can't give you a specific percentage, but it's very small that's beyond the five-year percentage. Maybe we'll get that number for you when he with get back to you off line. And there's nothing outside the New York metropolitan area foot footprint in terms of -- oh, I'm -- there's nothing multifamily as far as the New York -- outside the New York area.

We do have one major relationship as a matter of fact it's the relationship we did a joint ventures with, that have a project in Florida, it's a construction project that's virtually sold out. We financed that one for them. But that's because of who it is and the relationship we have. But that's the only loan that we have that's outside of the metropolitan area.

and Jim, please don't get the indication, because of the previous question that the ten-year product is (inaudible) out there. It certainly is preferable to the borrow. It's not preferable to us. So we really do not like doing that type of product.

Okay, thank you.

Okay. You're welcome, James.

Our next question comes from Kevin Timmons of CL King and Associates. Your question, please.

Sorry, guys to go back to the EPS thing again.

Hey, Kevin.

in the fourth quarter when you put your comfort range -- $1. 95 to $1.98--.

Right.

I want to make sure I'm understanding you correctly that when you say you're still comfortable with that range and you're excluding the -- any gains, net gains.

Yeah --. Go ahead.

in reality, the $1.95 to $1.98 we can effectively in terms of reported number, assuming you have no further gains this year, translates into a reported number of $1.97 to $2.

What's $1.97.

That would be 1.95.

I think what we communicated was we're comfortable with the first call consensus out there, which is approximately the same. As that guidance range that you've talked about.

Right.

and it would be correct in assuming that whatever we're giving comfort to would not include any security gain, or prepayment penalties the.

You add on to another two cents to whatever you're comfortable with.

Yes, in terms of reportable EPS, if we did not do another transaction except what we did in the first quarter, it would be roughly, if you net those two, I believe it comes to two cents.

Okay, thanks a lot.

Thanks, Kevin.

Ladies and gentlemen, this concludes your presentation for today. You may all disconnect and thank you for your participation. .

Thank you all -- this is Jack Bransfield. Thank you all again for coming. This has been -- and we thank you for your interest. We probably had nor questions on this call than we've had on any in the past. .--- 0