Flagstar Bank, National Association (FLG) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to New York Community Bancorp's conference call and webcast [Operator Instructions]. Please note that this conference is being recorded. At this time, I'll turn the conference over to Sal DiMartino. Mr. DiMartino, you may now begin.

Thank you, Rob, and good morning, everyone. Thank you for joining management on short notice for today's conference call. Today's discussion will be led by Executive Chairman, Sandro DiNello; and President and CEO, Thomas Cangemi, along with the company's Chief Financial Officer, John Pinto. Before we begin, I'd like to remind you that certain comments made today by the management team of New York Community Bancorp may include forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements we may make are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in today's press release for more information about risks and uncertainties, which may affect us. And with that, I would like -- I would now like to turn it over to Mr. DiNello. Sandro?

Thank you, Sal, and good morning, everyone. Many of you know me. I'm the former CEO of Flagstar Bank and have been the Non-Executive Chairman of NYCB Bancorp and Flagstar Bank since December 1, 2022. As you saw in our recent press release, our Board made the decision last night to appoint me as Executive Chairman. In that role, Tom and I will be working together to strengthen every aspect of the bank's operations. We have obviously been dealing with a very serious situation since our fourth quarter earnings release. What I hope to do this morning is instill some confidence that this bank remains strong and will get itself back on the right track. To do that, we must acknowledge the tough work that lies ahead. You may know that when I became CEO of Flagstar in 2013, we were in a very difficult situation. We were under an OCC consent order as well as a Federal Reserve Bank supervisory agreement. We were a monoline mortgage company that had been decimated by the Great Recession. That was a difficult situation, but we successfully made our way through it by building the right team, building a strong risk and compliance framework and by building the right business model. I'm proud of what our team did. We took a company that was one of the most troubled in the midsize space from a safety and soundness point of view and turn it into a very strong bank, one that provided one of the best total shareholder returns amongst all midsized banks during my tenure as CEO. The challenge today is not easy, but this company has a strong foundation, strong liquidity and a strong deposit base which gives me confidence for our path forward. The topics I would like to focus on today are as follows. One, the process is one of the best stories I can share with you. I built the Flagstar branch network. These people know how to take care of customers. Since we joined with NYCB, I've become close with a number of NYCB branches. They also know how to take care of customers. And because of that, we have seen virtually no deposit outflow from our retail branches. Overall, deposits are up from year-end 2023 as all areas of the company have performed strongly, including our private banking and mortgage teams. The press release we sent out last night tells the story of how resilient our deposits have been. While we are already in a strong liquidity position, again, as set forth in last night's press release, we are committed to building liquidity further. Currently, our total liquidity position is over $37 billion, which well exceeds uninsured deposits, with a coverage ratio of 163%. Three, we will build a solid capital base. We will be focused on doing whatever it takes to build our capital ratios with special focus on CET1. We will build a financial plan that gradually builds capital, no ifs, ands or buts. We have already reduced the dividend to preserve capital, so that's a step in the right direction. If we must shrink, then we'll shrink. If we must sell nonstrategic assets, then we'll do that. We'll do whatever it takes. All this will be accomplished by being mindful of maintaining the earnings power of the organization. Fourth, we will continuously review our loan portfolio and take whatever steps that may be necessary to build a fortress balance sheet. We took a big step in the right direction in the fourth quarter with our provision, and we believe we are well provisioned as of December 31. We will enhance the processes that are needed to properly identify the inherent losses in the book going forward. We did that at Flagstar. We know how to do this, and we will. Here's one thing I can tell you. The bank has earnings power. Consensus estimates are that we can generate over $840 million of pre-provision pretax income this year. We'll allocate whatever we need to out of that to the provision. The rest will drop to capital. And because we will not grow the balance sheet, it will be accretive. Finally, we'll be laser-focused on reducing our CRE concentration as quickly as we can. We have some work to do to identify the tactics that can speed that up, and we have already started to explore those. We took a mortgage bank that was Flagstar, and we turned it into a commercial bank. We built the second largest warehouse lending business in the country that currently has no criticized assets. We built one of the strongest builder finance portfolios in the country that currently has no criticized assets. We built a strong C&I business that is showing little stress. And while we had some CRE, it was largely owner-occupied and continues to perform reasonably well. We will focus on building those businesses further going forward. In closing, I want to reemphasize the strength of our deposits, the resilience of our deposits and the strong liquidity level we have built. With that, we'll open the line for a few questions. Rob?

[Operator Instructions] Our first question is coming from the line of Dave Rochester with Compass Point.

Sandro, you just mentioned reducing the CRE concentration. How quickly are you guys planning on doing that? And are you considering loan sales? Or can you get where you need to go through just natural runoff?

Well, we'll consider all those things, Dave. And as I said in my comments, we have work to do there to figure out how -- what tactics there might be that can advance that. But I think the important thing to note is we recognize that we do need to reduce that concentration level. And the team here has already done that very significantly. If you look at where NYCB was before the Flagstar merger, that's one of the reasons Tom did that deal, was to bring the CRE concentration down. And that came down further as we brought Signature into the organization. And we've really curtailed originations in the past number of months, so we're going to continue to think about all the opportunities to do that. I think the important thing to take away is that while we've come a long way, we're going to be focused on taking it further down.

Yes. Great. And then I've had a number of investors ask about this, this morning. Just on the reciprocal deposit capacity you have, you talked about in the 8-K last night. Could you increase that capacity if you wanted to? How easy would it be for you to do that to cover more deposits? And then how quickly can you apply that capacity if that's something that you want to do? And if you also have the deposit total at the end of yesterday, that would be great to hear, too.

Well, let me first start, and John will give you some specifics. I believe that we can increase that opportunity. I'm not sure that we're going to need to. As I said, our liquidity is very, very strong right now, and our deposits have performed so strongly that I have just a high level of confidence that, that's not going to be an issue. But that said, we know that, that's a tool that we have in the toolbox. And if we start to see the need to explore expanding that capacity, we certainly will. John, anything you'd like to add on that?

I agree, Sandro. And also when you look at deposits, as we put out in the 8-K, as of the fifth, the deposits as of the sixth were relatively stable to the fifth. So no significant change there.

Our next questions are from the line of Ebrahim Poonawala with Bank of America.

So Sandro, I guess, question is coming out of the fourth quarter results, speaking to investors, it feels like you may or may not be able to comment on this, but management's hand was forced by regulators to take actions that in normal course you may not have taken. I'm just wondering, do you feel confident?

Let me put that to bed right here, okay? What we did was what we needed to do, all right? We did the proper review of our loan portfolio. We made some changes in the way we risk weighted our loan portfolio and came to the conclusion that we needed to take action, and we did. And with respect to the dividend, if we're going to be a strong capital organization, then we have to be mindful of how much of a dividend we can afford to pay. So we took the -- we made the decision to preserve capital by cutting the dividend, and we're going to go forward with that. Those are two important steps that we're taking to build the foundation of this organization. So this speculation of why and when and who, look, we did the right thing, and we're going to go forward now.

And I guess you mentioned you -- consensus $840 million pretax pre-provision number for the year. Do you see where things stand today that it might be you can earn somewhere in that vicinity in terms of PTPP? What we don't know is just I think what investors are struggling with is the repricing, the PCG deposits or DDA outflows. If you can comment on that, that will be tremendously helpful.

Well, as I already said in my prepared comments, the deposit resilience has been outstanding. Our people are doing a great job in all areas, including in the Private Client Group. So right now, we feel very comfortable with that. But we are talking to our teams every day. They -- I mean, I know Tom and Reggie and his team have been talking to customers every day. And they've been effective in building confidence out there in the marketplace. And our people in the retail branches have just been unbelievably outstanding. So let's just understand that I can't imagine how it could be any better, frankly, given the circumstances here. So I feel good about that. And the first part of your question was -- sorry, I already forgot.

On the consensus, PTPP, you referenced $840 million.

Yes, yes. Okay. Yes. So we don't give guidance on earnings, and we're not going to start doing that today. So we're using the numbers that you all think are reasonable. But look, whether it's $700 million, $800 million or $900 million, the answer is still the same, right? It's enough to outrun any provision need we might have, and whatever we don't need will flow to the bottom line and build our capital position.

The next question is from the line of Mark Fitzgibbon with Piper Sandler.

First, I wonder, Sandro, does your plan to increase CET1 contemplate raising any capital?

Well, that's another option for us. I don't know whether we'll need to do that, but it's certainly something that we will consider with all other ways that we can strengthen the capital level. So we have no plan to do it right at the moment, but it's certainly something that will be on our minds going forward. And I believe that we could if we needed to. But at this point, we haven't made any decision on that.

And how often should we expect that you'll sort of provide liquidity or deposit updates going forward?

Go ahead, John.

I think our -- what our plan is right now is as we see changes in deposit base, we'll put out information to ensure that what we're seeing is out in the marketplace.

Our next question is from the line of Chris McGratty with KBW.

The reference to the Moody's downgrade in the 8-K this morning noted no real direct impact on deposits, and your deposit or ratings are all investment grade. Can you remind us what, if any, I think I'm getting questions on like the mortgage escrow. Like is there a level of rating that you would need there and also the size of that deposit base?

So on the mortgage escrow side, agency escrows, we'd have to be considered not prime rated. So that would be another 2-notch downgrade.

And how many -- how much -- what's the level of deposits related to that business today?

It's quite variable throughout the month, depending on when payments come in, when remittance are made. So it fluctuates. John, do you have a range on that?

Probably $6 billion to $8 billion.

The next question is from the line of Manan Gosalia with Morgan Stanley.

Given the events of the past few days and your comments on reducing CRE concentration, can you talk about how comfortable you are with the $2.8 billion to $2.9 billion NII guide and what the risks are there?

I'll let John answer that.

So yes, depending on the measures that we take, we're comfortable with what the PPNR guide that Sandro talked about in his opening comments. We're confident in that number, given what we're seeing so far, the absolute strength that we talked about on the deposit base. So as of right now, yes, we are.

Okay. And how important is selling assets to hit your CET1 goals? You mentioned selling some nonstrategic assets, reducing the CRE concentration. Would you limit asset sales to those with gains or maybe a neutral impact on capital? And will that weigh on your NII guide?

Well, let me start kind of at the beginning, right? We're at 9.1% right now. And if you look at what we believe earnings will be and consider the capital preservation through the dividend cut, that gets us close to 10%. So we do have noncore assets that we could sell, and we'll be considering those sales. But we will be mindful, as I said in my opening comments, about the earnings power of the organization. So there's a balance between selling assets and preserving the earnings power of the organization. So we will make sure that we do that analysis and that we don't help one at the harm of the other, if that makes any sense.

Got it. Okay. And just a quick follow-up is that 10% CET1 target is still a target for the end of 2024, even if you reduce your CRE concentration?

Yes. I think that's aspirational. We want to get there, and I think we can. But I think the most important thing is the commitment to growing capital, and we do that on a consistent basis over time. And it doesn't mean that when we get to 10% we stop either, by the way. So this is -- the plan here is just -- is to be focused on building capital right now as opposed to growing the company, right? You can do one, you can do the other, you can -- in a perfect world, you do both. But the focus is going to be on growing the capital base.

Our next question is from the line of Steven Alexopoulos with JPMorgan.

So I want to start, Alessandro. So moving into the executive chair role, was this plan last week when all the strategic actions were announced? Just surprised it's coming a week later.

Well, look, I'm not going to talk about what discussions we may have had internal. I don't know why that matters when that decision was made. The fact is we made the decision and here we are, and we're ready to answer any questions you have about our plans for the organization going forward.

Okay. On provision, on the call -- the earnings call last week, I thought the message was reserves were being built, maybe pulling some reserves and provision basically into the fourth quarter. You mentioned provision a few times here and having enough pretax pre-provision to pay for provision. Are you signaling more of a need for provision expense in 2024? Am I reading too much into that?

No. I don't have any idea of what that need might be because the only thing I can tell you is that at 12/31, we were in the right place. I don't know what the economy is going to do. I don't know how the portfolio is going to perform, but using the estimates of The Street, that's the only thing that at this point, I have to have something that I can use as I talk about it. But again, I think the takeaway here is that we will have, we will build the fortress balance sheet, and that's extremely important. You got to have that in order to go forward. And we think we're there now, and we think -- we know that we have an earnings engine here that will give us the flexibility to build that balance sheet with more strengths should it be necessary.

Got it. And maybe one final one. And now moving to the executive chair role, what's your assessment of the risk management infrastructure at the company today and relative to where you need to be as a Category IV bank?

Well, of course, as you grow as an organization, you have to continue to strengthen your risk and compliance framework. It's a hallmark of mine. You may not know this, but I started my career as a bank examiner. So I have a high respect for not only the regulatory process, but the way the world thinks about the importance of risk compliance and having the right infrastructure. Because if you don't have that, if you're not in a position to properly identify the risk that you're exposed to, then you're not going to be ready for them if they come to pass. And so we're probably never going to be totally satisfied with it. But -- and look, we're in a position here where we've got -- I think we can announce a very strong new CRO in the very near future. We're getting that wrapped up. And that person will come in and assess it better than probably I can right now and make sure that we are -- if we need to improve it or how we need to improve it, that we do it. And we are absolutely committed to that.

Our next question is from the line of Bernard Von Gizycki with Deutsche Bank.

Alessandro, you mentioned wrapping up the CRO higher. Just looking through that Moody's downgrade, one rationale behind it was its views that New York Community Bank was facing high governance risks from its transition in the Chief Risk Officer and the audit roles. Could you just -- and obviously, in the press release, you mentioned you do have people there on an interim basis. Could you maybe just address it like why did they flag that as a risk? It seems like you had people in the role, and just anything you can update us on that specifically.

Yes. I suppose you should ask Moody's why they said what they said. But what I can tell you is that we believe, we understand where we're at and where we need to go. And we believe that this organization is a great place to come and work, and that's evidenced by the high quality of people that are interested in joining this organization. And we're -- as I mentioned, we're close to bringing the CRO on board. We've got a great interim audit executive in place. We've got a great permanent solution that we're wrapping discussing around here in the next few days. So look, people are looking at this organization despite the challenges that were faced, we're facing and they want to come here. And we already have a great team here. We have a lot of really good people here. We have a strong executive team: Lee Smith running the mortgage business; Reggie Davis running our banking business; John here as CFO; Julie Signorille-Browne, that's our COO. These are very strong people, and we're going to make sure that we have additional strength into this organization. And look, we look to the outside to provide good advice for us in terms of what the right steps to take going forward.

No, I really appreciate that color. That's really helpful given all the news that was out there on that. And then just second, just you talked about enhancing or building the risk management infrastructure. Just curious in the full year guide, expense guide, is that kind of already kind of built in that you have expenses maybe post 12/31 and what's happened recently? Do you think there's going to be some additional pressure there? Just trying to get a rough sense.

Yes. The short answer is yes, but John will be more articulate.

Yes. Yes, we did keep that in mind as we were coming up with our guide. So yes, it is included. We have seen expenses increase. So yes, it's included in the guide, and it's what we anticipated so far.

Our next question is from the line of Christopher Marinac with Janney Montgomery Scott.

There's been a business model change that's been happening long before these recent events. And so can you just kind of walk us through maybe one more time, Sandro, about where the concentrations can go? And perhaps how C&I can be higher and mortgage can be higher? And maybe John can remind us on the yield improvement that can happen as you continue to change the weights of the loan portfolio.

Yes. I don't know if we're prepared to answer that last part. But in terms of the first part, as I said in my prepared comments, from my experience at Flagstar when we were changing from a mortgage company to a bank, we were very opportunistic in the actions that we took to gradually build a real safe and sound commercial bank. And those businesses -- one of the reasons that this transaction with Flagstar and NYCB took place was to give more runway for those to grow those businesses. And that was Tom's vision in bringing these 2 companies together was the diversification. We -- everybody has known that being a multifamily lender exclusively was not a long-term strategy any more than back in my early Flagstar days that being a mortgage monoline was a good long-term strategy. So the plan to change the makeup of the assets of this organization started a long time ago. And what the Signature situation did was take what we already were working on, on the asset side and brought some liabilities in that matched up well with what we were doing on the asset side and took a liability-sensitive company and actually turn it into an asset-sensitive company. So look, you can be critical. People want to be critical about where things are here. It's not perfect. But there's a lot of good work that's been done over the last 2 years to change the makeup of NYCB and then the new Flagstar, I'll call it, if you will. And that's where we're at, and we're going to keep moving in the right direction. And we've got a couple of tough punches to the gut, but we're strong. And as I said, look, look at the deposits of this organization. I mean does anybody think that they could be higher today than at the end of the year, given what we've been going through here? I mean come on, that's -- if that doesn't tell a story about the strength and resilience of this company and the people that work here, I don't know what does.

I appreciate that. And John, my question on deal was more kind of directional and there is a yield pickup that you have as you sort of reposition. Is that a fair impression?

Yes. Yes, it is. And as you know, the multifamily and CRE loans that are coming off are at extremely low yields. So as those do pay down, as the market starts to change and as we could take those into different types of loan categories, there will be a yield pickup, no doubt.

And I keep harkening to my Flagstar experience because I think that's one of the great benefits that I bring to the table here as I joined the management team. When I became CEO of Flagstar, our NIM was under 2%. When we brought these companies together on December of 2023, I think we were around 4% at Flagstar. It took a long time. It took 10 years to do that, but we got it there. And if you do it the right way, you do it gradually, you don't try to do things too quickly, you keep safety and soundness in the forefront, it can be done.

Last question for me just goes back to kind of the big picture of moving deposits from your Flagstar relationships. I mean there's still a lot more to transition from that. So that still is runway for you on deposits ahead.

Yes. Look, we've got 400 retail branches out there. Reggie Davis has been -- from before we even started talking to NYCB and Flagstar, started building the foundation of a truly strong and elite deposit-generating organization. That's where the core of this organization will be built around is that brand system, and there's a lot more that we can leverage with growing relationship core deposits. And I love it at some point to bring Reggie into the picture here where he can really articulate with greater detail than he's ever had the opportunity to do the data analytics that we're using to put our strategy together and the successes that it's showing. It's something that hasn't been probably touted enough here, but we're going to going forward.

Our next question is from the line of Brody Preston with UBS.

I've got a handful of questions here. I wanted to know if you could clarify if you tapped the discount window or BTFP to help increase the cash on hand, Sandro?

John?

So as we put out in the release last night, you see where our availability is. And as we talked about on the call, we've used the Federal Home Loan Bank to continue to build that liquidity. So that's been the majority of the build as we talked about. It's the process that we started at the end of December and has gone into here in the first quarter to build our liquidity buffers through the Home Loan Bank.

Okay. Got it. I guess people have asked a lot of questions about the balance sheet and the size and how you get to the 10% CET1. I guess I just have a couple of follow-ups. The markdown that you guys took on the held-for-sale loan from this quarter, it kind of implies like a 30% to 50% loss from -- just from a rate mark alone. CRE is obviously the biggest asset you have on the balance sheet. Do you run that off? Are there more sales to come in the CRE specifically? And if there are, how do you kind of get to a 10% CET1 with that as the backdrop of the size of the write-down that you'd be taking in a CRE loan sale?

Well, first of all, with respect to the one loan you mentioned, that was an extremely unique situation and is not representative of any other situation on the balance sheet. So we got to put that one aside and then think broadly about the rest of the portfolio. As I've already mentioned, we feel like we're well provisioned as of 12/31/2023. I don't know what the future is going to hold. But we are in a position, given the earnings power of this organization, to outrun any provision need that we may have. And so if you want to take any bank and hit it for an interest rate mark, well, good luck with that. What's important is what's the overall situation. And overall, we're in a position where the earnings power of the organization is strong and our ability to appropriately deal with any provision needs that may come is there.

Got it. In terms of the TLAC and the long-term debt just being above $100 billion, how challenging would it be to kind of -- like how are you going to kind of meet those requirements just with the rating downgrades that have occurred? Or would the plan -- or would there be an option where maybe you shrink the balance sheet enough that you're not a $100 billion organization anymore and maybe you don't have to worry about long-term debt ratings for the short term?

Well, I don't have a view on that just yet. I think we've got to deal with what's right in front of us now, and that's what we're focused on. But certainly, the management team here has been thinking about that situation. And I think they feel like they've got options that are in place that we can utilize in order to meet whatever requirements we may have. Shrinking below $100 billion, I don't know. I suppose that's something we can -- that will be part of what we consider. But we certainly haven't made any decision to do that.

Okay. Do you happen to have what the deposit mix looks like today? I guess as of 2/5, noninterest-bearing, just kind of given the moving pieces that happened, it looks like what happened between the uninsured versus insured deposits. I wanted to get a better sense there.

So you see some of the increase in the insured. A couple of things in that. Of course, we've excluded the internal accounts, as we noted in the press release. That's one of the bigger changes that we've seen so far. And then we have seen the growth, as we talked about in some of the escrow deposits as well throughout the quarter. So those are the big mix shifts there that we've seen.

Okay. And the stuff that went from uninsured to insured, was that just getting insured via ICS, John?

That was a pretty small number there that we saw move, but we still have over -- as we noted, over $10 billion in availability with our reciprocal deposit providers. So there is a small piece of that, that we've seen so far, and we continue to monitor that usage.

Got it. And last one for me. Just given how the stock is trading, given those questions about the ability to get to 10% CET1, would you guys consider just taking the dividend to $0 at this point?

Not something that we have any plan to do. We're at $0.05. We think that it's a big step towards preserving capital, and we'll, of course, assess that as we go forward.

Our next question is from the line of Steve Moss with B. Riley Securities.

Just -- most of my questions were answered, asked right there. Just want to follow up on the -- it sounds like the new CRO, you expect to wrap up discussions with them in the next couple of days. And I'm just curious what's the status of the audit executive search.

Well, as I said earlier, we're in final discussions with our top candidate, and we hope to put that one to bed in the very near future. I can't predict though whether it's 2 days or 7 days.

And that's for the CRO or that's for both positions, I'm sorry.

No, no, no, just for the audit executive. The CRO is going to be announced in the very near future. And just to be clear, we have a very strong interim audit executive in place. So that situation is not really problematic right now.

Our next question is from the line of Matthew Breese with Stephens.

I just wanted to go back quickly to the deposit growth year-to-date. You had mentioned escrow deposits, but I was hoping you could address changes in the seasonal government deposits. And then to the extent you've used additional brokered deposits, what has the change been there?

On the government deposit side, not a lot of movement. We have seen, as we've talked about in previous calls, the rundown of some of the government programs. We haven't had any new government programs hit in the first month or so here in 2024. And then when you look at the brokered market, we did increase some brokered CDs as of 12/31 as part of the balance sheet liquidity build. That continues as we have brokered CDs maturing, and we're issuing to meet those needs here in the first quarter as well. So it's a little bit of both.

Okay. And then you've addressed it somewhat, but one of the things I still think is bit unclear remains to me one of the most substantial issues is the CRE concentration. So the new $100 billion to $250 billion peer group, the median CRE to total risk-based capital ratio was around 100%. The highest within that group is 190%, and you're at 470%. So my question is, and this includes multifamily, can you operate as a plus $100 billion institution with the CRE concentration that is well through the regulatory 300% threshold and is well ahead of your peers? Or where does it need to go, sub-300% or is it into that peer group level?

Well, the way I look at it is I separate the true CRE from the multifamily, first of all. And if you look at the true CRE without the multifamily, it's at a very reasonable level. And as I said earlier, the company has reduced the multifamily concentration substantially over the last 24 months. Now can we make that same level of progress over the next 24 months? I don't know. But we -- all I can tell you is we realized that we're an outlier there, and we will, with prudence, reduce that going forward.

You discussed lowering the CRE concentration. Can you give us some idea of where you want it to be?

I think the way to look at that is to gradually reduce it, and I don't have a number that should be $100 million or should be $200 million. I don't have an answer to that, but we're going to reduce it, and it's going to be done in a very methodical and smart way.

Okay. You also discussed potentially selling some nonstrategic assets, and I was hoping you could expand upon that. What areas are, in fact, under consideration? I'm asking because it feels like the CRE multifamily book are probably most likely what you'd like to get reduced here, but it's also most likely an unrealized loss position. So I'm curious if it's C&I or CRE that you're looking to dispose of.

Yes. Look, you got to have the right cost benefit with any asset that you sell. So I don't think there's any one thing that we would or wouldn't sell. And I don't know that we're going to need to do that. So as I said earlier, we're at 9.1%. With the earnings of the organization and the dividend cut which preserves capital, we can get pretty close to 10%. So it's not like we have this massive amount of assets we have to sell. We don't see it that way. But to the extent we might have to strategically do that, then we'll figure out what the right thing to sell is, and we'll sell it and we'll move on.

Okay. And then there's clearly a fear that the rent-regulated multifamily portfolio is going to face some stress as values are down and bottom line income for these property owners is down materially since the 2019 rent loss. Nobody is closer to this business than you all. What is your estimate on the change in property values from pre '19 until today? And how did you underwrite it knowing that these changes have happened, right? Did you underwrite to a higher cap rate and now the adjusted -- the new cap rate is maybe we're looking at it the wrong way? Or could you give us some idea of how you're underwriting this asset class?

Well, look, I wasn't here, so I can't speak to that. And I'm not sure looking back on that does us a lot of good right here. I think that we have the portfolio. We have the loans and now we go forward, and that's what we're doing.

All right. Last one for me. Just could you remind us of the breakdown of deposits received from Signature in terms of insured and uninsured? And how much fluctuation in that deposit base have you seen overall, but especially over the last few weeks since this disruption began?

I don't know the detail on the makeup, but the deposits have held very strong. So we're very, very pleased with the way they've performed.

Our next question is from the line of David Smith with Autonomous Research.

It was good to hear deposits were relatively flat yesterday despite the move in the stock. Can you put a finer point on that and give us an actual dollar amount versus the $83.0 billion figure for Monday?

I don't know what it is, but I looked at some summary reports late last night and the change was very insignificant overall.

So higher than year-end still?

Yes.

Yes, yes.

Okay. So like very de minimis, it sounds. And...

I'm not trying to dodge your question. There was just nothing there yesterday that was a concern.

Okay. And in terms of the, I guess, $1.6 billion or so increase from December 31 through Monday, can you break out how much of that was in noninterest-bearing versus interest-bearing deposits?

I don't have that information.

And lastly, I appreciate the confidence on the PPNR being able to cover any provision need that you see in the book today. Can you just give us your expectations for net charge-offs in 2024? I know the reserve build is tough given CECL, but where you see loan losses based on what you can see in the book today?

I'll just repeat what I've said a few times, and that is that we're well provisioned as of 12/31, and we have the earnings power to provide any additional provisions we may need. I don't know of any losses that we haven't accounted for. We're accounting for losses as we should. And so that can give you a number. I don't know what it might be. That's why we're trying to use consensus so that we have something to lean on in terms of showing that we've got the earnings power to overcome what the general consensus is of what we might need, but that's not a number that we necessarily agree with. We just don't know.

The next question is from the line of Jon Arfstrom with RBC Capital Markets.

Are all the branches and deposit products branded as Flagstar, that's all done, so people see Flagstar?

Let me let Tom answer that one. He's been working passionately on that, and I think he can give you a good update there.

So obviously, we have a lot of work going towards integration and we're getting close to launching our full conversion. So when that happens, everything would be on one platform. So we're excited about the team in getting the conversion complete. And we will be one brand, one bank, one platform, and we're super excited about putting legacy NYCB and legacy Flagstar to creating Flagstar. We still have the Signature customer deposit books, which will come after that, hopefully shortly thereafter as we go into early '25. But clearly, a lot of great effort has been done from a significant amount of energy within the entire organization, and we're proud of the team and the effort and we're excited to get the conversion done. And the signs will be once we get the conversion done, we will have new Flagstar.

Yes, it's in the works. So everything -- if you drive by any branch, you'll see that the banners are coming down, the new signs are going up. It's a big process, but it's underway and will be done in the relatively near future.

Okay. I'm just -- I asked because of some of the headline risk. Fair or unfair, but that's why I asked. Another way to ask the charge-off question, I guess. You kind of said this, but you view the fourth quarter charge-off level as really an aberration. Is that correct? I know it's hard to be...

Well, I don't think I'd use that term aberration. I think the fourth quarter, there were a lot of factors that played into why we did what we did. And I believe there's a slide back in that earnings deck that shows the waterfall of the ACL from 9/30 to 12/31. And you can look at how much of that we think is this factor versus that factor. So whatever the causes were, I mean, I think the important thing that I've said many times this morning is we're very comfortable with where the provision is at the end of December.

I asked the question because if you run the same level of charge-offs and you match that with provision for the full year, every quarter, you still cover the dividend or you're down close to covering the dividend. So that's why I'm asking the question, if you view that fourth quarter provision -- or not provision, but charge-off level is much higher than usual. I know it's difficult, but that's why I ask it. Any more deep dive work to do on multifamily? You had the step-up in office reserves in the fourth quarter. Maybe there's nothing new on multifamily, but can you help us understand that? Is there any more deep dive work going on that's unusual in that book?

I wouldn't say there's anything unusual going on. I think that we've put a process in place to stay very close to that activity and the pressures that might be in that category. And we're -- every quarter, we're going to update it based on the newest information that we have. So that's all I can tell you.

And then more near term, what do you want to present to us with second quarter earnings? Maybe what are your top couple of priorities that you feel need to get nailed down right now before we go through this again in 3 months?

Well, I think the clear thing right now is building confidence in The Street that the company does have a strong bones here to go forward. And I think the deposit situation, the liquidity situation is evidence that we do. And so we've got to get through this so that we can move forward. And then we'll start to think more about providing an updated guidance and all the information that you will want. So right now, we feel very pleased with the position we're in. And we -- I think the information that we put in that 8-K last night tells an important story about where the company stands right now.

The next question is from the line of Mark Fitzgibbon with Piper Sandler.

My question was asked and answered.

We've reached the end of the question-and-answer session. I will now turn the call over to Sandro DiNello for closing remarks.

Thanks, everybody. And we caught you off guard with a real short notice, and appreciate so many people joining and appreciate all your questions. I hope we gave you some transparency here that's helpful to you. I want to close by just reiterating that the deposits, the liquidity of this company are really strong. The people in this company are very strong. I want to thank all the people in this organization for all the hard work that they're doing. I look forward to working with Tom and John and the rest of the executive team here to build a truly, truly strong organization and one that our shareholders will be proud of.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and log off the webcast. We thank you for your participation, and have a wonderful day.