Flagstar Financial Inc (NYCB) 2003 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the quarter four 2003 New York Community Bancorp Inc. earnings conference call.

My name is Carol, and I will be your coordinator for today. (OPERATOR INSTRUCTIONS).

I would now like to turn the presentation over to the host for today's call, Ms. Ilene Angarola, First Senior Vice President of Investor Relations.

Ma'am, please proceed.

Thank you.

Good morning everyone and thank you for joining the management team of New York Community Bancorp for our quarterly post earnings conference call.

Today's call will focus on the highlights of our 2003 performance, our recent merger with Roslyn Bancorp and the upward revision in our earnings projections for 2004.

We will also discuss the impact of the follow-on offering that was completed last evening and which prompted us to further increase our projected diluted earnings per share for the year.

Today's discussion will be led by our President and Chief Executive Officer Joseph Ficalora, who is joined by Robert Wann, our Chief Operating Officer;

Thomas Cangemi, Head of our Capital Markets Group, and Michael Puorro, our Chief Financial Officer.

This morning's conference will feature several forward-looking statements, which are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

You will find a discussion of forward-looking statements and the associated risk factors in our recent SEC filings and on page 13 of yesterday's earnings release.

If you need a copy, please call our Investor Relations department at 516-683-4420, or visit our Website, www.mynycb.com.

At this time, I would like to turn the call over to Mr. Joseph Ficalora, who will make a brief presentation before opening the lines for Q&A.

If we don't get your questions during the call due to time limitations, please feel free to call the Investor Relations department later today.

In addition, Mr. Ficalora will be speaking tomorrow at 2:45 at Citigroup's Financial Services conference in Manhattan.

The presentation and the accompanying PowerPoint may be accessed live through our Website and will also be archived through February 11th.

Mr. Ficalora?

Thank you, Ilene, and good morning everybody.

I know that the timing of our earnings release was somewhat earlier than expected, but I think you'll agree that earnings like these are worthy of an early release.

We have a lot to talk about given the strength of our 2003 performance and the implications of our solid fourth-quarter results for our earnings in 2004.

We will also want to acknowledge the significant benefits of the transaction we announced last evening and which is expected to be accretive to 2004 earnings and substantially accretive to our tangible book value per-share.

Starting with our fourth-quarter results, we realized a 74 percent rise in net income to $65 million, equivalent to a 39 percent rise in diluted earnings per share to 64 cents.

Excluding the net gain on the sale of the South Jersey Bank and certain merger-related charges, our fourth-quarter diluted earnings per share on a core basis were still well ahead of consensus, amounting to a 35 percent rise in diluted earnings per share to 62 cents.

We also provided solid fourth-quarter earnings returns on equity and assets, the first one amounting to a 19.71 percent and the second to a 2.16 percent.

On a core basis, these measures were still well above the average for our peer group amounting to 18.76 percent and 2.06 percent.

The growth in our fourth-quarter earnings was driven by two primary factors, the record volumes of loans produced during the year, especially in the fourth quarter, and the merger of the Roslyn Bancorp into our institution on October 31st.

During the quarter, our cash flows were largely deployed into loan production.

Fourth-quarter originations amounted to a rather dramatic $2 billion, representing 45 percent of total loans produced in all of 2003.

Of the $4.3 billion of loans produced, multi-family mortgage loans amounted to 3.3 billion.

Of these, 1.6 billion or 46 percent were originated in the last quarter of 2003.

The growth in the volume of loans produced is reflected in our total loans outstanding.

At year-end, total portfolio amounted to $10.5 billion signifying a 92 percent increase year-over-year.

Included in the year-end amounts were multi-family loans totaling $7.4 billion.

While some of this was growth attributable to Roslyn's merger, 33 percent of the growth we achieved was strictly homegrown.

That percentage is especially impressive when you recall that a year ago projection was for 20 percent multi-family loan growth in 2003.

As if these figures were not enough to reaffirm our niche in multi-family market, our current pipeline is $1.4 billion.

Loan growth was the primary force behind our 2003 earnings and is expected to be a comparable force in 2004.

The growth in our earnings was largely fueled by the rise in fourth-quarter net interest income, which was up 50 percent linked quarter and 80 percent year-over-year.

Reflecting the rise in long-term market rates and the successful repositioning of our assets, our fourth-quarter spread in margin was a healthy 3.80 percent and 3.84 percent, which was well above the pro forma measures we originally expected when the Roslyn merger was announced.

For more details, I suggest you read the earnings release we issued last evening as I would like to devote some time to discussing the transaction we announced last night.

If you saw the release, you know that we issued and sold about 10 million shares in a follow-on offering that is expected to generate about $400 million in proceeds for the Company.

The benefits of this transaction are considerable.

First, it is 40 percent accretive to tangible book value.

It is accretive to our 2004 diluted earnings per share.

It provides funding for our significant multi-family loan production.

It boosts our capital strength and flexibility.

It positions us well for future acquisitions, and it supports various other corporate purposes, including share buybacks.

Reflecting the accretion we expect to achieve as a result of the transaction, we upped our 2004 earnings estimates from the range we announced in our earnings release to a higher range of 290 to 294 per-share.

The high-end of this range is 34 percent higher than our 2003 diluted earnings per share and 28 percent higher than our stand-alone projection at the time the merger was announced.

As adjusted to reflect the 33 1/3 percent stock dividends we paid in mid-February, our 2004 estimates range from 217 to 220 as compared to split adjusted 2003 diluted earnings per share of $1.65.

What does the rise in our estimates say about our institution?

That we are confident in our ability to originate loans in a highly competitive market.

That we are confident in our ability to maintain our asset quality and efficiency even as a much larger bank.

That we are confident in our ability to manage our balance sheet regardless of changes in interest rates and changes in our market.

And that we are confident in our ability to manage interest rate risk.

If you think the actions we have taken thus far, just four weeks into the new year, I think you would have to agree that we are off to a bold and exciting start.

As in the past, our actions reflect our focus on shareholder value.

You can be certain it will still be our focus when the year comes to an end.

On that note, I am reminding you that our comments about the offering are of necessity limited to what is included in last night's SEC filing.

I would now be happy to take any questions you may have about the 2003 performance, the offering and our projections for 2004.

(OPERATOR INSTRUCTIONS).

Jack Micenko, Lehman Brothers.

Nice quarter.

In the past, you have gone as far as giving some line item guidance following the closing of transactions.

I was wondering if you could help us out on your margins, noninterest income growth, noninterest expense growth, buyback plans -- anything you can give us color on to get to the 294?

And then also, if you could help us with some of the assumptions around the accretion to EPS on the follow-on offering?

I think the follow-on (technical difficulty)-- take care of the answer there.

With the margin in our spread and how we believe we're going to be able to hold that, we expect our margins and spread during the course of '04 to stay flat.

As everyone well knows, the margin and spread of Roslyn coming into the transaction was significantly below that of NYB.

So the composite company, while we are going through the balance sheet restructuring, is dealing with the lower spreads and margins of a substantial portion of our assets and liabilities while we are creating, if you will new assets and liabilities, in an environment that has rates at historical lows.

So as we sit today, we are going to say the margins and spreads are going to stay flat through the year.

As we sit today, we are looking at the likelihood that the earnings that we are projecting meet our normal standards for being conservative.

We are going to be growing the Company, as I guess it was indicated.

We do believe that this capital offering, which Mr. Cangemi will address, will, in fact, further enhance our flexibility and some of the other things I said earlier with regard to dealing with the opportunity that this period holds ahead.

In respect to the offering, the reasonable leverage spread on about approximately 4 to 5.5 times leverage.

Taking that into effect, depending on market conditions, we will execute within the next short period of time going into '04.

That spread could be -- as you know, the yield curve has widened up a little bit.

We are pretty bullish about putting a nice spread on the transaction, which would add about 4 cents on top of the earnings that we have currently.

In addition to that, it's also offsetting the dilutive effect of the swing shares.

Okay.

On new production of multi-family in the quarter, what kind of couponing are you seeing there on average?

I think the range is running in the 5 percent area.

Obviously that may not hold all through up next quarter.

It can go up and go down depending on how rates are moving.

There has been a tremendous amount of activity in all lending over the course of the last year, and there will be activity this year as well, but it will be different.

The degree to which we depend upon continually refinancing property owners will greatly enhance our particular segment, but there is no question that rates have encouraged people to do a significant amount of refinancing, which is not necessarily going to bring some of them back to the table early in the course of this year.

Got it.

Okay.

Thank you.

Rick Weiss, Janney Montgomery Scott.

I just wanted to follow up a little bit on the multi-family portfolio.

If you could just tell us what the average size is of the multi-family loan.

Are you still making any of the Roslyn type of the multi-family rehab loans?

No.

Actually the average of the loans in the portfolio was still running at about $2.5 million, and the portfolio is principally the very assets that we have always had.

It is not changing.

Okay.

Also, if you are looking at the average yield on the multi-family loans that are dropping on a sequential quarter basis, is that closely due to the interest rate environment, or is there a change in the competitive pricing market?

I think it is actually those two points in addition to the fact that a large number of loans that were in the portfolio from Roslyn were actually added in one fell swoop and they were lower.

So when you add a substantial amount to any number and the amount that you're adding is at a lower yield than the portfolio, that drops the portfolio as a whole.

So in the course of the quarter, we originated a great number of loans, but we also added a portfolio that had a lower yield to our existing portfolio, so that is the main contributor to the drop in yield.

So that should help the margin stay about where it is?

That is right.

That is -- the worst of what we are likely to see you're looking at, and the worst is not so bad.

It really was not so bad.

The last question was interest rate sensitivity.

Can you speak to where you are now?

I would say that interest rate sensitivity, we are neutral on that.

We are pretty well in the place that we had hoped to be, and I think that puts us truly in the right place given the uncertainties of where rates are going to be in the periods ahead.

Thank you very much.

Scott Valentin, FBR.

A question on the securities portfolio.

It was up linked quarter, and I know shrinkage was not as great -- I guess 3.5 billion is the number bandied about when the Roslyn transaction was announced and securities were down about 2.3 billion.

And can you go through some of the thought process as far as securities portfolio going forward.

I think Tom mentioned some leverage being added.

At what point, do your securities become too much of the overall balance sheet?

Tom will take care of that question.

Let me address this is one as a comparable.

We have a calculated since the announcement of Roslyn and into the consolidation of the 1231 a portfolio drop of about 2.4 billion approximately on a reduction.

Obviously we did not shrink the company.

We deployed the majority of that cash flow into the multi-family loan.

Our loan demand was extremely strong in the fourth quarter and going into the first quarter of '04, so I would say principally all of our cash flow generated from either prepayments into the calls from the portfolio went into the multi-family loans.

That was a significant trend that changed during the time we announced the transaction in the summer.

As far as going forward into '04, obviously we are putting some reasonable leverage on the capital rate.

Keep in mind, in light of our portfolio projections for the multi-family business, some of that spread on leverage will be levered on multi-family loans, not so much all securities.

We will see us a slight uptick in the portfolio, obviously to offset the costs associated with raising the capital.

Right now securities assets is about 40 percent.

Is it going to move materially from there do you think?

I think based on our growth record, you can see a significant change in the balance sheet components toward multi-family loans.

Can you talk about duration of securities portfolio?

In this market, it is running between four and half to five years now, a little bit longer than the prior two quarters.

Matthew Kelley, Moors & Cabot.

I just wanted to follow up on the last question.

I know that you're down 2.3 billion in the securities portfolio since Roslyn.

Will you get to the 3.5 billion reduction?

We feel very confident absent this offering.

Obviously we are going to (inaudible) some of the cost of the offering on a pure leverage (inaudible), which we believe will be put back into multi-family loans.

But in our internal model, we feel very confident on the reduction, as well as very strong.

We believe that the cash flow generated from the portfolio would be more than adequate to fund loan growth.

In addition to that, these new securities being put on for the leverage trade will also help move the money back into multi-family loans.

Okay.

I just am trying to get an update on the joint ventures from the Roslyn operation.

The joint venture did not deliver any units in the fourth quarter.

We are expecting units now to be delivered in the first quarter and all throughout the year.

And about how many should be delivered in the first quarter, and what are the average gains?

We had always projected that joint venture would deliver on a pretax basis about $10 million in profit.

You could take that ratably over about six or eight quarters.

Okay.

I am trying to get a sense on the average earning asset base that we should be using here to start first quarter and then tack on the offering, the leverage and the growth.

I just want to make sure we are the right spot.

I am coming up at around 21.5 billion.

You should be a bit higher than that.

You should be using in the 23 to 24.

21.5 and then add on the leverage on the offer?

Yes.

Thank you.

Mark Brenan, Omega Advisors.

Can you flesh out a little bit, Joe, the $1.4 billion loan pipeline in terms of anecdotally?

It is more from the same borrowers, or have you expanded your borrower base?

I remember when you first announced the merger, you explained to us how the larger balance sheet would help that.

I was just wondering how growth is coming on so strong?

I think we are dealing with such a large population of people now.

We have many of the people that had been there before.

A lot of the explanations with regard to how we were growing our lending are exactly the same.

However, we do have additional components to the lending that would reach into market that include South Jersey, Philly and other places that some of the really large property owners that we do business with have properties there.

And then we have the construction lending which is obviously adding to our mix and some of the other lending that is within our market, but not necessarily to the same party that we have dealt with in the past.

So we do have a rather interesting mix both geographically, as well as from the standpoint of who the individuals are that we are dealing with.

None of the lending that we're doing, though, is outside of our normal practice of being risk averse and understanding both the properties and the people that we are dealing with.

If you starting with a $7.4 billion base of multi, this product generally has a four and half year average life, fully average life depending on rate environment.

A lot of that will turn over ratably throughout the next four years.

So take a high percentage of the reply coming back to us, we retain approximately 85 to 90 percent of all our business.

That is also stemming for a very robust origination stream.

What are you guys seeing in terms of prepayment penalties?

Is the competition bidding those down?

Are they going up as you consolidate the market, or what is going on there with those fees?

I think there is no question as the market winds up having new players in this particular segment, they have a lesser capacity to be consistent.

So there are people out there that are not necessarily getting paid the fees that they are contractually eligible to get.

We are still getting prepayment penalties.

There has been a consistency in what we do that does not change with regard to the cycle.

So we are getting prepayment penalties on larger properties.

As you well know, we have been adding to the portfolio over the course of the last several years larger and larger properties.

So as these properties refi, there is going to be more in the way of prepayment penalties.

And for all the reasons that we have discussed many times in the past, we will continue to get refinancing of very large segments of our portfolio.

Okay.

Thanks a lot, guys.

Kevin Timmons, C.L. King.

Most of my questions are answered, but can you tell me what the tax rate looks like going into '04?

Kevin, I think you should basically expect an effective rate closing in on the 35 percent range.

Chris Buonafede, Fox-Pitt Kelton. (technical difficulty)--.

Robert Albertson, Sandler O'Neill.

There has been a very prevalent and unanimous forecast out there that national single-family originations will be down 50 percent '04 over '03.

Could you take a stab at the regional multi-family origination macro?

I think it's a much more difficult task in particular for us.

We are very focused on a segment that is not typical of all multi-family products within the mixed New York metropolitan area.

So there are many property owners here who are dealing with new buildings or at market properties, and they are going to react somewhat similarly to other commercial properties and other one-to-four family loans.

So there will be a definite slowing in that segment.

We are not in that segment for the most part.

The segment that we are in is constantly rebuilding their cash flows, so they are constantly refinancing in order to reinvest money in the property for the purpose of building that cash flow.

So our particular segment will continue to refinance because that is what they do, although the general markets will, in fact, slow in commercial lending and multi-family lending across the country, as well as in the New York metropolitan area.

Would you then take a stab without exceeding your guidelines of disclosure of both what your origination outlook looks like '04 over '03?

I would say we are definitely going to be very strong. '04 over '03 should be up, and it should be up for a variety of reasons, including the wider geography and the wider use of a lending model that has segments that we did not have in the prior year.

As I'm sure you all know, we have some people that are with us today that came from the Roslyn origination force, and those individuals are doing loans that are well within our guidelines but that are different from the loans we had done in the past.

So between the geographic additions that we are adding, as well as the loan types that we're adding, and the existing portfolio that has a consistency of refinancing, we expect the originations in this year to be up over last year.

Terrific and terrific quarter.

Jim Ackor, RBC Capital.

Good morning. (multiple speakers).

I have got a quick question for you on interest rate sensitivity.

I know you sort of answered Kevin's question, but do you guys have a one year GAAP number?

It is Mike.

It is basically neutral to slightly a few basis points negative.

Thank you very much.

Chris Buonafede, Fox-Pitt Kelton.

Sorry about that before. (multiple speakers).

Can you guys tell me where are we along in terms of the balance sheet restructuring?

How much more is there to do, and where do we stand in that whole process?

I would say, and what I should do is maybe go back to the first transaction, almost all of the assets from the Haven transaction are no longer in the portfolio.

The vast majority of the assets from the Richwood (ph) transaction are no longer in the portfolio, and we have begun the process of dealing with changes in our asset mix.

And, therefore, there are $3 or $4 billion worth of assets that had been in the Roslyn portfolio that are not in the new portfolio.

An important thing to remember about this is that since we are so consistent in how we approach transactions, the risk averse nature of our balance sheet causes us to change assets that have as a result of the purchase financial impact that is explicitly better than the assets that we replaced them with.

However, the asset mix in our view is more conservative and clearly more risk averse, and that is why we do what we do.

So over the course of the last three plus years, we have been consistently changing assets that otherwise would have added more to the bottom line, but represented a greater risk with regard to the uncertainties of the environment that we are in.

That is continuing.

So we are actively working on restructuring the portfolio, and that will probably I would say be done for the most part before the end of this year.

When I look at the mortgage-backed securities portfolio, the yield that you guys had in the fourth quarter, was 473.

The last Roslyn brought in a lot, and they were at in June at 455.

So my guess is you have been putting on something that has obviously some kind of higher yield.

Can you explain what you have been adding? (multiple speakers).

Basically what we have here is a significant cash flow stream coming from Roslyn.

Obviously since the announcement, their portfolio was significantly short the way it was structured with the high-growth flat paper.

We pre-invested a lot of that paper when the market sold off in respect to fixed-income in the summer months at close to 5 percent.

In addition to that, as you know, the Roslyn portfolio gets mark-to-market as of October 31, which will also contributes to an increase there as well.

It looks to me on the deposit side, you took out the ax and really took a big chop at their CD rates.

Can you explain a little bit about what has happened there and what you're seeing on that side?

Sure.

As was the case in each of the other transactions that we entered into, we do a balance sheet restructuring which includes the liability side.

So other than the fact that we took out a very substantial portion with the sale of South Jersey, we also have a restructuring of the deposit base of the company, which primarily means that we are not being aggressive on the CD side.

So we are looking for the CD portfolio basically to continue to trade down and for the rest of core deposits to go up, and that is something that has a twofold benefit.

It basically gives us a deposit base that is stickier or more likely to withstand changes in rates on a go-forward basis that are upward moving, and it also gives us a lower cost of funding broadly.

So we are going to have the benefit of a sizable dollar amount in CDs that are maturing at much higher rates than the renewal rates that we are offering.

It also gives us the ability to sell third-party products to those individuals who are most interested in getting the best possible yield in a low-interest rate environment, and that has worked out extremely well in each of the transactions we have done.

Have you changed -- in what ways have you changed the deposit gathering mechanisms or tools that Roslyn had used on opening the branches?

I think the most important thing to say about that is that Dan Murphy, who was heading up the Banking Group at Roslyn, is, in fact, heading up the Banking Group now with NYB.

So the methodology which they have used in the past is, in fact, being introduced across the bank bank-wide.

So we do expect we will have a very favorable mix of deposits as we go and that we are going to be positioning ourselves well for changes which may or may not occur in the periods ahead.

Is it safe to say that -- fair to assume that total asset growth in '04 is going to be somewhat modest I guess as you continue to remix the assets?

No, no.

We're planning on double-digit assets, and the deposits will grow as well.

Okay.

Thank you.

John Dunn, Sandler O'Neill.

Staying on the liability side, with the Roslyn great deposit generating capabilities, how much benefit do you see from the fallout from the Fleet merger as it comes through?

Actually I'm not too sure we are going to see much fallout from that.

Remembering that as Fleet acquired banks in this particular market, there was some substantial fallout.

Fleet has been in the market for a while now, so whatever the residue of those earlier transactions might be, that is behind us.

The B of A introduction is not necessarily going to do too much to convince depositors that they need to change anything.

Fleet was already a big bank, so I don't really see the transaction as adding much to anybody, other than possibly some of the business relationships that might find a B of A relationship more attractive somehow.

I am not anticipating any impact to us at all.

One more question.

Could you just give us a sense of maybe EPS-wise how much Roslyn contributed to the 64 cents?

It is very hard to do that.

It would be near impossible given that you got the assets and you got the liabilities.

We only have two months of their numbers being combined with our numbers, and exactly where the pluses and the minuses were it is very hard to say.

Thank you very much.

Matthew Kelley, Moors & Cabot.

Just a quick follow-on.

Taking a look at the model real quick, with the flat margin and we have a pretty good sense of where the fee income will be and the expenses will be, you have got the tax rate.

It is being driven by the topline earning asset growth, and as you grow the balance sheet upon that double-digit number, it will be back under 5 percent tangible capital pretty quickly.

So I am just wondering what we should be expecting in terms of additional offerings and how you will manage the growth on the capital side?

I will Tom answer that because I think somehow the number did not work out right.

On our modeling, we feel pretty confident about where we stand today on a pro forma basis.

Including the expected growth, we are looking at about a 524 tangible capital ratio as of today's environment.

That will be accreting aggressively our capital.

Throughout the year, we pay a strong dividend payout ratio, and we also have buybacks in the model.

So overall, our biggest hurdle going into '04 is that we will probably be north of 6 percent without growing the balance sheet.

So we will continue to grow the balance sheet.

We do not like operating above 6 percent tangible because of our risk profile.

We feel pretty confident that the amount of capital put in place last night is more than adequate to run the business in opportune times; however, it is also a nice warchest to have in the event there is some opportunity with respect to M&A.

Just following up on that, the M&A point.

I mean if you could just refresh what the priorities would be with the end market deposit franchise or extension of geography, what would be the priority?

I think you touched on a couple of interesting points.

There is only one priority that will drive us to do a deal, and that is that the deal will actually create a greater value for our shareholders than not doing a deal.

The fact is that there could be many attributes of a company, and also there could be reasons why a particular company would not fit either on the asset side, the liability side or maybe even on the social side.

But we have been looking at transactions for a decade now, and we are very disciplined in our approach.

If the transaction is genuinely beneficial to our shareholders, we go forward.

If it is not, we take a pass.

Thank you very much.

Michael Shep (ph), CRES Investments.

A quick question on the expense side of the equation.

One housekeeping issue.

What was the pretax charge?

The pretax charge on what?

The pretax charge -- the restructuring charge in the quarter.

How much was that?

I think that was 19, wasn't -- no (multiple speakers). 20.4 million.

That is correct.

That is not normal from the standpoint of the effective tax rate because that charge does not have the same tax attributes as other charges would have.

It that for the ESOP distribution?

That is right.

That is the ESOP plan.

That is why it doesn't have the same tax attribute.

Are there more charges to come?

No, that is complete.

In fact, in each of the deals we have done, there has been a similar charge in a quarter that the deal closed.

In terms of backing out that charge, are you at a core expense run-rate, or do you have some synergies still to be garnered?

No.

I think there is still more to come.

There is more to come.

Just one more on the margin while I have you.

When you talk about a flat margin, what sort of rate environment do you anticipate?

I think it is in this market with rates exactly where they are here.

We are expecting that the margins and the spreads will stay stable.

Okay.

Great.

Thank you.

Scott Valentin, FBR.

Two questions.

One, earlier you alluded to when speaking about '04 loan growth you referred to wider geography origination.

Is that referring to the Roslyn footprint being added, or are you talking about going outside of where you are, the metro New York area?

I think the geography additions include places such as -- and we have been lending there over the course of the last several years -- but it includes places such as Philadelphia, New Jersey and even a few properties in the Maryland area.

All of these are in one way or another tied to large lenders that we have had long relationships with.

So we are dealing with in many cases people that have a very strong positive history with the company.

The Roslyn piece is really in our geography.

It's just a different type of loan.

A follow-up question on the deposit side.

Roslyn, as you know, was a good deposit franchise.

They were very competitive on rates that they paid depositors.

Have you seen any attrition, and can you talk about the rate changes you have undertaken?

If you look at what their rates were before we announced the deal and what their rates are after we have announced the deal, they are basically the same.

There has not been much of a change there.

Our core deposit base is up and our CD base is down, but that is not inconsistent with the direction that their CDs were moving in.

I think that the attributes of our particular model were recognized by Roslyn and others, and there has been I guess in many of the fields that we compete within a realization that core should be growing and CDs should be coming down in this environment.

That is very easy to see since people are not inclined to take long holds in a CD when rates are as low as they are.

And then a follow-up question.

On deposit pricing, is that companywide, or are you still doing it by bank deposit price?

Actually we do have the capacity to do it by division, and we are in some cases as we were before doing it by division.

So, for example, we definitely had different rates in South Jersey than we might have had in Queens.

But as we look at this on go-forward basis, the good news is that we have the flexibility to offer deposit rates by divisional bank.

And by the way we have integrated, the entire bank has already been integrated, and people can do their banking in Suffolk even though their account was originated in Newark and all of the necessary mechanisms are in place to make that a simple task.

Great.

Thank you very much.

Jack Micenko, Lehman Brothers.

Thanks for the follow-up.

The 1.4 billion commercial real estate portfolio, are we right to assume that a lot of that is going to be the Roslyn legacy rehab multi-family projects?

That is correct.

Something has happened with the phone.

I don't know if you all heard it. (multiple speakers).

But you are right.

Most of that addition did come from the Roslyn portfolio, and that is going to be trading down.

And then the construction loans to builders on Long Island that Roslyn had done, is that a construction line item, or do you include that in the construction real estate line item?

Construction.

That is construction.

Okay.

Thank you.

Ladies and gentlemen, this concludes your question-and-answer session of the call.

Mr. Ficalora, I will turn the presentation back to you for your closing remarks.

Thank you again for participating in this morning's discussion about New York Community Bancorp's record 2003 earnings and our exciting prospects for 2004.

We believe we are well-positioned to generate another solid performance and to build on our ten-year record of substantial investor returns.

Thank you all.

Ladies and gentlemen, this concludes your presentation.

You may now disconnect.

Have a great day.