Flagstar Financial Inc (NYCB) 2015 Q3 法說會逐字稿

Good afternoon, and thank you all for joining the management team of New York Community Bancorp for its third-quarter 2015 earnings conference call. Today's discussion of the Company's third-quarter 2015 performance will be led by President and Chief Executive Officer, Joseph Ficalora; together with Chief Financial Officer, Thomas Cangemi. Also present on the call are Chief Operating Officer, Robert Wann, and Chief Accounting Officer, John Pinto.

Certain comments made by the Company's management today will contain forward-looking statements, which are intended to be covered by the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those the Company currently anticipates, due to a number of factors, many of which are beyond its control. Among those factors are: general economic conditions and trends, both nationally and in the Company's local markets; changes in interest rates, which may affect the Company's net income, prepayment penalty income, mortgage banking income, and other future cash flows, or the market value of its assets, including its investment securities; changes in the demand for deposit, loan and investment products, and other financial services, as well as changes in legislation, regulation and policies.

You will find more about the risk factors associated with the Company's forward-looking statements on page 8 of this morning's earnings release and in its SEC filings, including its 2014 annual report on Form 10-K. The release also includes reconciliations of certain GAAP and non-GAAP earnings and capital measures, which will be discussed during this conference call. If you would like a copy of the earnings release, please call the Company's investor relations department at 516-683-4420, or visit IR.MyNYCB.com.

(Operator Instructions)

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

Thank you Kaylee, and I apologize for all of you that have unfortunately been subjected to the burdens that resulted from our provider, difficulties this morning with regard to the telephone services. I thank you for joining us today, and this is a discussion that we are going to have on performance for our third quarter 2015.

If you are among those able to listen into the call we had at 8:30 this morning, thank you for your patience as I repeat my prepared remarks before opening the line for Q&A. If you are among those who could not access the call we had this morning, please accept our apologies for the inconvenience, which was caused by a technical breakdown on the part of the conference call vendor we used. We are grateful to all of you for calling again to listen in.

To begin, our third-quarter earnings were notable for the continued high volume production of our principal asset, the continued sales and participations of certain loans, the continued management of our balance sheet below the current SIFI threshold, which again, is a short-term objective, as we expect to cross over the line in the second quarter of next year. The quality of our assets, as reflected in our quarter-end measures, and the consistency of margin at a time of uncertainty that has generally been driven by the extended lower for longer scenario, with regards to the fed funds rate.

As we noted this morning, we generated GAAP earnings of $114.7 million or $0.26 per diluted share in the current third-quarter, providing a 0.99% return on average tangible assets, and a 13.66% return on average tangible stockholders equity. We also generated cash earnings of $124.6 million, or $0.28 per diluted share in the third quarter, which provided a 1.07% return on average tangible assets, and a 14.74% return on average tangible stockholders equity.

Reflecting our earnings and capital strength, the Board of Directors last night declared a $0.25 per share dividend payable on November 18 to shareholders of record as of November 6. This is our 86th consecutive quarterly cash dividend in general, and our 47th consecutive quarterly cash dividend of $0.25 per share. The strength of our earnings and capital have long been supported by the quality of our assets, which in turn has largely been supported by the strength of our multi-family lending niche. This was clearly the case in the recent quarter, and it is fair to say, it has been the case throughout the year to date.

To begin, we originated $2.8 billion of held for investment loans in the current third quarter, bringing the volume of loans originated in the first nine months of this year to a record $9 billion. More than 71% of the loans we produced year to date were multi-family credits, including $2.2 billion in the third quarter of the year. As a result, our portfolio of multi-family loans rose $882.3 million sequentially, and $804.4 million since the end of December, to $24.7 billion at quarter end. Multi-family loans thus represented 72.2% of total loans held for investment, with commercial real estate loans representing $7.6 billion, or 22.4% of total held for investment loans.

As I mentioned in this morning's release, we fully expect that our fourth-quarter production will take us beyond our existing record for the volume of held for investment loans produced in a single year. That record, by the way, now stands at $11.2 billion, which was the volume of held for investment loans we produced in the year 2013. As of this morning, our total pipeline of loans was about $3.7 billion, including approximately $3.1 billion of loans held for investment, and approximately $575 million of one to four family loans held for sale. Multi-family and CRE loans represent the bulk of the held for investment loans in our portfolio. Approximately 93%, in fact.

Of course, the degree of loan growth achieved year to date is only part of our story, given the volume of multi-family and CRE loans we sold thus far this year. Consistent with our short-term goal of managing our assets under the current SIFI threshold, we sold $863.2 million of multi-family loans, largely through participations from January through June. During that time, we also sold commercial real estate loans of $122.4 million, and another $510.3 million of CRE loans in the third quarter of this year.

Year to date, the sale of multi-family and CRE loans totaled $1.5 billion, which accounted for our ability to achieve two of our primary goals. The first of these was keeping the lid on the growth of our assets. The second was maintaining our dominant role in our primary lending niche.

Given the quality of the loans and their added appeal as CRA-qualified credits, the market for sharing in our multi-family and CRE loans has been strong. Furthermore, the volume of loans we choose to share and the terms at which we share them can change from quarter to quarter, as befits our needs.

Another benefit of selling loans through participations has been the infusion of non-interest income, in the form of gains on sale. Gains on the sale of CRE loans added $7 million to our third-quarter non-interest income, and with the sale of multi-family loans, gains of $21.7 million in the first nine months of this year. This proved to be a real positive, given the declines we've seen year to date in mortgage banking income, and particularly the $8.5 million linked quarter decline we saw in the most recent period.

That reduction was primarily due to a $3 million decline in income from originations, as gain on sale margins narrowed, and refinancing activity tapered off. The remainder of the linked quarter decline was attributable to the $5.5 million difference between the $50,000 servicing loss we reported in the current third quarter, and the $5.4 million of servicing income we recorded in the second quarter of this year. This sequential decline was attributable to a decline in hedge effectiveness over the course of the quarter, absent which servicing income would have grown by 3.8%.

Yet another key feature of our multi-family and CRE loans is the contribution to net interest income and margin that stems from prepayment penalties. In the third quarter of 2015, the prepayment penalties on such loans contributed $23.1 million to our net interest income, and $279.4 million and 21 basis points to our net interest margin of 2.56%. In the second quarter of 2015, prepayment penalties contributed $26.7 million to net interest income of $285.1 million, and 24 basis points to our margin of 2.64%.

Prepayments of securities added another $1.4 million to our current third-quarter net interest income, and 1 basis point to our margin, as compared to $5.3 million and 5 basis points in the trailing three months. Excluding the contribution of prepayment penalties on loans and securities in the respective quarters, our third-quarter margin was 1 basis point lower than our margins in the second quarter of this year. This was at the low end of 1 to 3 basis point range provided as guidance on last quarter's conference call.

Leaving our income statement behind, I would like to bring the discussion back to the topic of our assets, and more particularly, to our asset quality. As we noted in this morning's earnings release, the measures of asset quality at the end of this quarter are the best that we've recorded in more than seven years. First, in lieu of recording net charge-offs, we recovered $5.2 million of losses, bringing our net recovery to $7 million year to date.

Next, our non-performing non-covered loans fell 28.2% from the year-end level of $55.2 million, representing 0.16% of total non-covered loans at quarter end. The improvement in asset quality was further conveyed by our non-performing non-covered assets, as ORE -- as the decline in nonperforming loans combined with a healthy drop in ORE. As a result, non-performing assets fell $43.2 million from the end of last year to $78.8 million at the end of September, representing 0.17% of total non-covered assets at that date. In addition, the balance of loans 30 to 89 days past due declined by 9.2% linked quarter, another indication of the quality of our loan portfolio.

Before opening for questions, I would like to remind you once again of the short-term nature of our intention to remain below the threshold for a SIFI bank. To be classified as a SIFI, the average of total consolidated assets would need to exceed $50 billion over a four-quarter look back. As we have stated before, we would not expect to cross that line until the second quarter of 2016.

While the sale of CRE and multi-family loans through participations will likely continue, given both the benefits and the demand for our product, we will be far more focused on portfolio growth in the quarter we are currently in, and in the coming year. On that note, I would now ask the operator to open the line for your questions. We will do our best to get to all of you within the time remaining, but if we don't, please feel free to call us later today, or during the week.

(Operator Instructions)

Ken Zerbe, Morgan Stanley.

First question, just in terms of the core margin, obviously we had a pretty sharp decline, I think it was in the DUS portfolio prepayments but on a go-forward basis, I know it's not part of your core NIM, but on a go-forward basis is this portfolio continuing to grow such that it will continue to have prepay income? I'm just trying to get a sense of what magnitude of prepays we should see from that.

Ken, it's Tom. I will tell you that we have a sizable Fannie Mae DUS portfolio as well as a Freddie Mac backed mortgage-backed security, and that's the case for multifamily loans that have the substantial amount of potential of yield maintenance provisions that is embedded in the structure. So in the event these loans happen to pay off they would be subject to significant yield maintenance provisions, which we benefit from. Since the vast majority of all securities are either at par or at a discount, we will enjoy the benefit of yield maintenance regarding that portfolio.

That number is approximately $2 billion of assets that we have no control over in respect to prepayment, however if they do prepay, it does go to the margin, because it is yield maintenance. With that being said, we carved out for the analyst community in the press release how much was contributed to Q3 as well as Q2. If you go back to the press release, $5.4 million was the benefit to the margin in Q2, and $1.4 million was the benefit to the margin in Q3. For the year, it's been about $11 million. So it's been an ongoing contributor; however you just want to make note of that, because it does go through the margin as yield maintenance provisions.

Understood. All right --

In addition to that, that's also part of the adjustment to the investment security yields that you see quarter over quarter.

Yes. Understood. On the expense side, obviously came down a huge amount, a pretty sizable amount this quarter, and I think you attributed it to franchise taxes and insurance premiums being lower. Why were they lower and what changed that might keep them lower going forward?

This is the second call, I just want to reiterate for full disclosure that we will give guidance for the quarter for Q4, we expect our overall expense base to be approximately $148 million, so it's within our range between $146 million to $150 million that we've been seeing throughout the year. But as far as the expectations on regulatory, if you look at the basis of the Company, we have a sizable amount of wholesale funding, and when that wholesale funding somewhat repositions, there is a different, we'll call it a regulatory taxation on the type of funding that we have. So obviously, as the Company continues to grow, and we hope to see the continued deposit growth over time, there is a different assessment regarding the liability funding for the franchise. So we are enjoying that benefit as we got into the second half.

Got it. Understood. And is that because your funding duration has been shrinking on the liabilities?

That has a lot to do the makeup of the liabilities in addition to that, as well as the level of nonperforming assets the Company has. I believe that Mr. Ficalora indicated the lowest level of NPAs we have had in seven years, so that also contributes to our lower assessment as well. As well as other factors.

All right. Sounds good. Thank you very much.

David Hochstim, Buckingham Research.

A couple of things. I wonder, do you have any update on the outlook for an acquisition? I guess you're saying you're not going to over $50 billion until the second quarter; does that suggest that you don't expect to close on any transaction before then, or should I read anything?

I think it is important to note that we have been preparing to be over $50 billion since the end of 2011, and therefore our efficiency ratio has gone from the mid-30s to the mid-40s, and we've had years of interaction with all of our regulators and all of our external consultants and all of the people necessary to prepare us to actually be a SIFI. One of the main reasons that began at the end of 2011 was because we were going to do a very large deal, and one of the main reasons we are so diligent about our attempts to actually be prepared here, is because we want to do a very large deal.

In the best interests of everyone, our business model works best through consolidation, and we are actively involved in an environment that is demonstrating that there is going to be significant consolidation in the period ahead, and we will be a participant in that. However, there is no absolutely no certainty of the exact timing of such a conclusion, and therefore, we are prepared to manage our size to stay below $50 billion until the second quarter of next year, which gives us the consequential effect of being bigger than $50 billion in the year 2018.

Now, if we actually negotiate and announce the deal sometime before that, then the expectation would be that we would meet all of the requirements of being bigger than $50 billion at the close of such a deal, and of course all of that would have been vetted with our regulators in advance of announcing the deal, and certainly as part of the process that would evolve into the actual closing of the deal. So, definitely, this market is rich with opportunity. Definitely, we have been spending a great deal of time and money and interface with the respective regulators that will be involved in this process. And there's a very, very strong likelihood that we will manage our balance sheet as effectively as we can until such time that we are actually going to effectively close a deal.

Okay. Thanks. Is there any prospect of that $50 billion threshold increasing in the next few months, do you think?

I think the interesting thing there is that if we take the public positioning of the regulatory leadership from Tarullo through the Chairman of the OCC to the Chairman of the FDIC, they've all openly expressed a desire to have that bar moved to some number higher than $50 billion, and there is ample evidence that leadership in the Congress and in the Senate also would like to see that number moved. But the politics or the reality of the situation is that there is no way that anyone knows when there is a confluence of factors that brings together enough voting members of the House or the Senate so as to make that happen.

So do I think is going to happen? I think that it should happen. I think it is highly probable that there will be an effort to make it happen. But I have no way of knowing whether it actually will happen.

Okay. Thanks. And then Tom, could you just give us the components of mortgage banking revenue again?

Sure. So obviously in the quarter we had a substantial reduction in total revenue in mortgage banking, as reported this morning. The mortgage origination line item was down 29% from the previous quarter. $7.5 million was the reported number on origination. The total loan servicing fees that we recognized for the quarter was up approximately 4.4% to $12.8 million versus the previous quarter at $12.3 million. The MSR hedge had an adjustment of a positive $14.9 million; however the change in the MSR value had a substantial adjustment down $27.8 million, which nets you $12.9 million. So net-net, that gets you to the total mortgage banking revenues of $7.5 million.

Okay.

Just more commentary, just bear in mind, we had a significant adjustment in our gain-on-sale margins. We had about a 20% adjustment from our 97 basis points in Q2 versus 77 basis points of margin in Q3. So that was another down 20%, so that was also impactful to the profitability for the quarter on mortgage banking, as well.

And where is that margin today?

I would say it is around that level. We're hopeful and the good news is that if you go into Q4, we're hopeful that we can get somewhere back where we were in Q2. That will be a sizable adjustment going into the year-end, but we had a substantial MSR adjustment in respect to managing our hedge position, when looking at whether the five-year swap curve was trading at, and where the five-year Treasury curve was trading at, and hedging that was very challenging in the given quarter, specifically running up towards the end of the quarter, given that you had an inversion between the two components, which was something unusual. We'll call it an anomaly.

And maybe one last question if I might. Can you give us an update on pricing of multi-family and CRE loans in Q3?

Pricing has been very, very strong. We've been holding our sales long on 3%. As indicated in the conference call, we had a very sizable portfolio, north of $3 billion in total portfolio, coming in to investment. The average yield on that portfolio, I believe, was about it 3.485% coming on.

What is interesting is that the average yield on the multi-family book, the coupon as of the third quarter was 3.34%. If you take that and look at what paid off in a given quarter of 3.82%, we had about 48 basis points of bleed in respect to the current environment; that's the lowest we've seen in a while. Three years ago, that number was 150 basis points. So going back to our thinking that margins appearing to be stabilizing, given the current environment, where our coupons are in the portfolio.

Okay. Thanks a lot.

Dave Rochester, Deutsche Bank.

Just back on the $148 million in expense guidance. How much of that franchise tax benefit is expected to be in that 4Q, and it sounds like you're saying that it's going to roll off in 1Q. Is that right?

Yes. I would say about $1 million benefit.

Okay. Great. And then regarding the prep for LCR, is there anything left to do there? I know you were testing systems recently, and then, I guess, just outside of the deal scenario, when do you expect to see you guys start to build that HQLA, and by when would you like to have that completed?

We're very pleased to be where are with respect to the system, the consulting work that was performed, The people that have been hired. We are in a position now to implement the actual asset build, and when we ultimately cross, as indicated in Mr. Ficalora's commentary, we expect to cross in the second quarter of 2016. Therefore, I would guess by third-quarter, you'll start seeing the build-up and we will be compliant by Q3 2016.

Okay. So you would have to be fully compliant by 3Q, then? You're still on that glide path.

I think it's 90%.

Right. Okay.

So just to be clear, that would be again, contributing to additional asset growth on top of normal net loan growth that we expect to have next year.

Yes. Got it. Okay. And I know you have some lumpier securities calls coming up in 4Q. Can you talk about the amount of those and the rate, and then is the plan to keep the securities book stable by replacing those, or should the portfolio shrink?

Where we are today, we have been calling out around $400 million, and average yield is 2.50%, which will help the margin. And that's given the current environment. We have the environment flat, and rates not go materially lower from here, we don't expect to have significant calls from that $400 million, but in the event we have a sizable adjustment downward, on we'll just say the ten-year Treasury, you could potentially see more calls at lower yields coming into the bank. There will be a point in time where we will have to put certain securities on in order stabilize the general requirements for liquidity, as well as our margin requirements for our portfolio. I would say $400 million is very manageable, and that is already expected to happen in October at the 2.5% yield.

Got you. So it sounds like you'd aim to keep the securities book relatively stable then for 4Q.

Yes. Again I don't envision adding securities to the Company until we have to be LCR compliant. Unless we have a sizable change in the yield curve, which allows securities cash flows to accelerate, and we have to replace them, just for collateral reasons.

Got you. Great. Just one last one, a quick question for you on Stuy Town. Is there any interest on your part for getting a piece of that?

What was that? Oh, no.

No.

There's a lot to go around, sure.

That is a very, very big loan but that is not structured at all the way we would lend.

Okay.

I think private equity investors are predominately in that structure. I don't see us involved.

Got you. Great, thanks.

Steven Alexopoulos, JPMorgan.

Assuming you cross the SIFI in the second quarter, you wouldn't be subject to CCAR until 2018. We get that, but could you walk us through the new compliance areas in addition to LCR that you will be subject to, once you actually cross the line?

Steven, the biggest issue is dealing with 2018, is filing your capital plan, which we internally have filed capital plans. We have done this exercise for numerous years now, and the big adjustment will be putting on the LCR assets to comply, and so it's not on the CCAR, that's just on being a bank north of $50 billion, under the DFAST rule. So absent all of those exercises, we have been in a place where we are at a position of SIFI readiness as of today. So we feel pretty confident that if we bridge the gap, we're comfortable, or we wouldn't be targeting to the second quarter 20165 to cross over. So we're very comfortable, based on crossing over in 2016, on a SIFI readiness perspective.

Okay. Got you. And Tom, what's the estimated size at this point of each HQLA portfolio that you think you'll need to build, and could you talk about how you plan to fund it?

In a perfect world, our best expectation would be that we announce the transaction and we fund our HQL through a restructuring of the combined entity, the target. That is obviously what we have talked about for multiple years, but absent that, we would look to either treasuries and/or Ginnie Mae securities that are qualifying assets to fill the hole, and we haven't publicly put out a number, so I'm not going to give a specific number, but it is a number that we have to evaluate both on a liability side, and on the investment side. We have other securities that could either be sold into the market or removed to solve for LCR. So at this point in time, a very simplistic exercise would be a gross-up of the balance sheet, and we would have to fund it probably with a slight mismatch of duration through FHLB borrowings and deposit growth at the time.

Got it. Okay. And then just quick on the loan side, given the plan to cross SIFI in Q2, so you'll have to continue constraining growth. Is the right way to think about this just until the first quarter, and then you won't need to constrain loan growth.

Here's how we would think about it. The interesting point is that we're getting much closer to that second quarter of 2016, so where we stand today, if we were to grow $5.4 billion in the fourth quarter, we would trip over SIFI. We don't plan on putting on $5.4 billion in Q4. However if we add $1 billion a quarter for the next two quarters, we would be very close to tripping over it in the second quarter of 2016.

So the fact that we have a potential of $1 billion asset growth in Q4 and another $1 billion asset growth in Q1 of 2016, the growth is starting to accelerate as indicated in the previous quarter. If you look back at Q2 versus Q3, our loan book has grown, however in the previous quarter it declined through actual asset sales. We will continue to review asset sales from time to time, given market conditions. I think I said this morning, if you look at where our rates are, it's very attractive given the desire for numerous banks to acquire assets at reasonable yields and the yields in this environment are very attractive, given our product mix. So we're looking at all assets for that, but clearly as I said in Q2, and I'll say it again on the Q3 call, we are going back to growing the net loan book going forward.

Very helpful. I appreciate all of the color.

David Darst, Guggenheim Securities.

Great. Just on the building you referenced, you're looking at $1 billion of core loans net of run-off in the outlook, and then you could even fund some of that with securities calls in the fourth quarter?

That is right.

Okay. Got it. Joe, you mentioned the terms of the participation agreements. Where does the prepayment income go and what are we looking at?

So David basically, as we have always said in the past, we are servicing the asset, we control the asset, the prepayment are shared pari passu with the participants.

That's a negotiated aspect of every transaction that we do. And although there are nuances between the transactions, not every one is exactly the same, but there are things that are common.

So theoretically, if I told you 50% participation, and $1 million comes in, we both enjoy $500,000 of income.

Okay. Got it. And then what happens, and I appreciate your confidence in getting an acquisition done, but if you don't have an acquisition by April, should we expect to see some type of balance sheet restructuring and capital raise independent?

It would obviously depend upon the environment at that time. But it seems to me that it would be highly improbable that we would go that far without there being some better clarity as to what we would be doing in the environment that actually exists at that time.

Okay.

In other words, as Mr. Ficalora indicated, we expect to cross over sometime in the second half of next year, but the M&A environment is very fluid right now, and we're somewhat optimistic that things could be very opportunistic in the short term.

Okay. Then in your mortgage company, with a lower volume outlook, do you have an opportunity to take some cost out of the mortgage business, and redirect that into the spending that you need to keep building up the base?

That's a tough one, and where we are today, obviously we're disappointed in the actual results for the quarter regarding mortgage, but it has a long history of a lot of success. So over time, this business added pretax income to the bank of $440 million--after-tax of $271 million--to the Company since inception, and this was probably the worst quarter we've seen. But again, I think we're geared up for low volume right now. We had some downsizing a few years back, we had $3 billion pipelines on a monthly basis coming in, and it shut down. So we're not in that position.

We're dealing with obviously enhanced regulatory aspects in respect to residential, so we're beefing up there as well. But I think the cost structure is relatively lean. We're going to manage through this. We hope to get some of this devaluation back in the next, in the fourth quarter, if we get some of that back, it's a sizable improvement from the previous quarter. We're pretty confident that, given the anomaly between where we were on hedging, hopefully we will not have a repeat in Q4.

Got it. Okay. Thank you.

Collyn Gilbert, KBW.

Joe, just want to go back to your comments, and obviously you, too, Tom, on your confidence on the loan side and the origination side. Just trying to put that into perspective. If we were to look at, you did $9 billion of originations year-to-date, you back out the $1.5 billion that you've sold, $7.5 billion, but your net growth in those nine months was only $840 million, so it's suggesting obviously significant paydowns. What do you see changing as you look out over the next few quarters and into next year? Is it that your origination volumes can increase, or do you see paydowns coming down?

The only thing that we actually control is originations. I think historically, and this has been proven time and time again over the years, when in fact we have reason to grow our portfolio significantly, our niche has the capacity to provide 40% CAGRs in the growth of our loan portfolio, and how is that? Some of the very largest participants within our niche have extraordinarily large portfolios. So when the opportunity presents itself for us to take larger share of the market, we have a built-in opportunity with people who actually have a very common business model to ours, that in fact we are the likely closer on their portfolio.

So the ability for us to gain share of the market is often driven by the capacity we have to actually grow our book. So as has been the case in the last few years, we have been growing our loan book more rapidly than most, and although there's been a discussion about the inability of some to actually grow their assets and so on, there hasn't been much discussion about the fact that we do grow our loan book more rapidly than others. And in this unique environment, we're participating a share of our growth in the market share. So the reality is that we have every expectation that, given the opportunity, to restructure a combined balance sheet, we will grow our loan book at significant numbers.

Okay. And I can probably find a way to back into this, but you might know this number offhand. The $9 billion or so, and if we break that down in the multi-family originations, do you know sort of what percent of that is of the overall multi-family originations in the New York market? Do you segment that?

No. We don't know. I think that as best as we can tell, and again the New York City market is much larger than our niche for the component of the market that we would actually participate in. But our guess has been, and there's no full way to understand this or actually develop this, we think we have about 20% or so of our niche. That's not 20% of the New York market, that's 20% of our niche.

Okay. That is helpful. There's just one question tying into that. How should we think about the provisioning as you start to put on some of this new loan growth, and maybe you can give us some color as to what you are currently providing with each new loan origination?

I think the important thing to recognize is that we've had decades of consistency in how we actually perform, with regard to our niche, and our niche has not changed. New York changes in cycles and the reality is that the changes during the course of a positive cycle represent market value trade. We're not a market value lender. We don't lend on properties that are at market value. We lend on cash flows, that are in many cases, fixed.

So these differences make it possible for us to be very, very consistent through the cycle. And our share of what is available in our niche has consistently been growing, because the people who could make the decisions go to us, go to someone else, often make the decision--when in fact we are available-- to go to us, because they are cycle players and we are cycle players, and their familiarity with our business model, and our familiarity with their practices, is such that it is very easy to bring us together, when it's mutually beneficial.

So Collyn, we went out on a limb early on beginning of 2015 with the expectation that there wouldn't be any provisions in 2015, assuming nothing comes out of the ordinary that we're not prepared for. And we still feel consistent to that approach for the rest of this year. And as far as we go into next year, we will deal with that as we get into 2016, but for 2015, nothing has changed.

So it's a different metric, just so you have this Collyn, our over time charges represent 0.4%. Our reserve would cover many, many, many, many, many, many years, based upon those historical charges. During a cycle, when in fact things are negative, we obviously would lose more like everyone else. And during a cycle when things are positive, we may lose nothing.

So as evidenced by the last many quarters, we're actually returning money to the reserve. Our reserve is growing. We're not charging our reserve. Our reserve is growing because we're disposing of assets at values greater than we were carrying them at. That's rather unique.

Okay. All right. Thanks.

Thank you, and this does conclude our question and answer session. I would now like to turn the call back to Mr. Ficalora for closing remarks.

On behalf of our Board and management team, I thank you for your interest in the Company, our strategies and our performance. We look forward to discussing our fourth-quarter and full-year performance with you in the new year. In the meantime, we wish you and your loved ones the best of the holiday season. Thank you.

Thank you. This does conclude today's third-quarter 2015 earnings conference call with the management team of New York Community Bancorp. Please disconnect your lines at this time, and have a wonderful day.