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New York Community Bancorp (NYSE:NYCB)

Q4 2013 Earnings Call

January 29, 2014 9:30 am ET

Executives

Joseph R. Ficalora - Chief Executive Officer, President, Director, Chief Executive Officer of New York Commercial Bank, Chief Executive Officer of New York Community Bank, President of New York Community Bank, President of New York Commercial Bank, Director of New York Community Bank and Director of New York Commercial Bank

Thomas Robert Cangemi - Chief Financial Officer, Senior Executive Vice President, Chief Financial Officer of New York Community Bank, Chief Financial Officer of New York Commercial Bank, Senior Executive Vice President of the New York Community Bank and Senior Executive Vice President of the Commercial Bank

Analysts

Ken A. Zerbe - Morgan Stanley, Research Division

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Bob Ramsey - FBR Capital Markets & Co., Research Division

Bradley G. Ball - Evercore Partners Inc., Research Division

Richard D. Weiss - Boenning and Scattergood, Inc., Research Division

David Rochester - Deutsche Bank AG, Research Division

David S. Hochstim - The Buckingham Research Group Incorporated

Arjun Sharma

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Matthew Brandon Kelley - Sterne Agee & Leach Inc., Research Division

Moshe Orenbuch - Crédit Suisse AG, Research Division

Karti Bhatt

David Darst - Guggenheim Securities, LLC, Research Division

Operator

Good morning, and thank you all for joining the management team of New York Community Bancorp for its quarterly post-earnings release conference call. Leading today's discussion of the company's fourth quarter and fiscal year 2013 performance will be President and Chief Executive Officer, Joseph Ficalora; together with Chief Financial Officer, Thomas Cangemi. And also in the call are Chief Operating Officer, Robert Wann; and Chief Accounting Officer, John Pinto.

Certain of the 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 the number of factors, many of which are beyond control. Among those factors are: general economic conditions and trends, both nationally and in the company's local markets; changes in the 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 or its assets, including its investment securities; changes in the demand for deposit, loan and investment products and other financial services; and changes in legislation, regulation and policies.

You'll find more about the risk factors associated with the company's forward-looking statements on Page 7 of this morning's earnings release form and its SEC filings, including its 2012 Annual Report on Form 10-K and its quarterly report on Form 10-Q for the 3 months ended March 31, June 30 and September 30, 2013. The release will also include reconciliations of certain GAAP and non-GAAP earnings and capital measures which will be discussed during the 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 fourth quarter performance before opening the line for Q&A. Mr. Ficalora, please?

Joseph R. Ficalora

Thank you, Steve, and thank you all for joining us this morning as we discuss our fourth quarter performance, which capped off a year that once more confirmed our fundamental strengths: the quality of our assets, the vitality of our lending and, of course, the efficiencies with which we operate. Take, for example, our balances of nonperforming loans and assets, both of which improved dramatically year-over-year. Specifically, our nonperforming non-covered loans fell more than 60% to $103.5 million at the end of December, while the ratio of total non-covered loans improved by 61 basis points to 0.35%. Similarly, the ratio of nonperforming non-covered assets to total non-covered assets improved to 0.40% at the end of December, in contrast to 0.71% at December 31, 2012. Net charge-offs also declined year-over-year to a modest $2.4 million in the fourth quarter, representing a mere 0.01% of average loans non-annualized.

Total delinquencies, meanwhile, amounted to $212 million, reflecting a year-over-year reduction of $106.2 million or 33.4%. The quality of the loans we produce stems from 2 distinct factors: our conservative standards and our primary lending niche. Reflecting heightened activity in the New York City real estate market, originations of multi-family loans totaled $1.9 billion in the fourth quarter and $7.4 billion over the course of the year. As a result, our portfolio of multi-family loans grew year-over-year to $20.7 billion, representing an increase of $2.1 billion or 11.3%. While the multi-family loans we produce have long been our primary asset, we complement that portfolio with commercial real estate loans. In fact, commercial real estate loans represented $838.4 million of loans we produced in the fourth quarter and $2.2 billion of loans we produced in 2013 overall. All told, our portfolio of held-for-investment loans totaled $29.8 billion at the end of December, reflecting a $2.6 billion or 9.4% increase from the balance recorded at December 31, 2012.

Looking ahead, our total pipeline of loans is approximately $2.4 billion, with loans held for investment accounting for approximately $2 billion and loans held for sale accounting for the rest. While our multi-family and CRE loans contribute to the quality of our assets, so too do they contribute to our net interest income, which includes the prepayment penalties paid when such loans prepay.

In 2013, prepayment penalty income rose $16.5 million year-over-year to $136.8 million, establishing a new record for the third consecutive year. Included in the current 12-month amount was fourth quarter prepayment penalty income of $33 million, which in just about any other year would make for a standout quarter. But in 2013, year 1 prepays exceeded all previous levels. It was $6.6 million less than the trailing-quarter volume, and $6.3 million less than the volume recorded in the fourth quarter of 2012. As a result, prepayment penalty income contributed 32 basis points to our margins in the fourth quarter of 2013 as compared to 41 and 43 basis points, respectively, in the earlier 3-month periods. Primarily reflecting the decline of prepayment penalty income, our margin fell 12 basis points on a linked-quarter basis to 2.92% in the fourth quarter of this year. Excluding prepays, the linked-quarter reduction would have been 3 basis points. Notwithstanding the decrease in prepayment penalty income, our net interest income rose modestly, both year-over-year and linked-quarter to $297.3 million in the fourth quarter of 2013.

The increase was largely attributable to the growth of our interest-earning assets, which averaged $40.8 billion in the current fourth quarter as compared to $38.8 billion and $36.9 billion, respectively, in the trailing and year-earlier 3 months.

In addition, the rise in net interest income was attributable to a decline in our average cost of funds to 1.40% in the quarter, even as the average balances of borrowings and deposits rose to accommodate the growth of our loan and securities portfolios. While net interest income has long been our primary source of income, this was increasingly the case throughout 2013. As residential mortgage interest rates rose and refinancing activity faltered, the contribution of mortgage banking income to total revenues declined. Reflecting a substantial decline in rate-lock volume, mortgage banking income fell from $32.6 million in the year-earlier fourth quarter to $12.8 million in the fourth quarter of 2013. To some extent, the impact of the decline in mortgage banking income was also offset by a reduction in operating expenses as the quality of our assets improved and the cost of managing foreclosed in [ph] real estate properties declined. While the benefit of that decline was somewhat offset by a rise in Dodd-Frank Act-related expenses, we reduced our operating expenses both year-over-year and linked-quarter to $146.4 million in the fourth quarter of 2013.

Operating expenses thus represented 1.27% of average assets in the current fourth quarter and contributed to an efficiency ratio of 43.56%. Reflecting these primary factors, our fourth quarter 2013 GAAP earnings were a solid $120.2 million or $0.27 per diluted share. Our cash earnings, meanwhile, amounted to $129.7 million and were equivalent to $0.30 per diluted share.

For the 12 months ended December 31, 2013, our GAAP and cash earnings were, respectively, $475.5 million and $515.3 million, equivalent to earnings of $1.08 and $1.17 per diluted share.

Reflecting the strength of our earnings and their capital contributions, the Board of Directors last night declared our 40th consecutive dividend of $0.25 per share. The dividend will be paid on February 21 to shareholders of record as of the close of business, February 10. I would like to point out that it's now been 10 years since we first increased our dividend to the current $0.25 per share level. The first time we paid $0.25 per share was in February 2004. The consistency of our dividend has, in large part, been due to that of our business model, which has served us well in the difficult time, as well as in the good times.

On that note, I would ask the operator to now open the line for your questions. As always, we will do our best to get to everybody in the time that remains.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is coming from Ken Zerbe from Morgan Stanley.

Ken A. Zerbe - Morgan Stanley, Research Division

If Tom's around, I would love to ask about NIM. On a core basis, so x all the prepays, it looks like NIM was down a couple of basis points, a little bit better than what we were looking for. But going forward, what's the outlook for NIM? Are you finally seeing some stabilization? I know we've been talking about stabilization for the last several quarters, or that it's -- eventually will happen. But just given where the rates are, given spreads, hope you can comment on the outlook.

Thomas Robert Cangemi

Yes, Ken. Well, obviously, last quarter, we got it down. I believe, it was 4 to 7. We came in down x prepays 3 basis points. So we did beat expectations slightly by a few basis points. Going into -- obviously rates have changed recently. But given what we see as far as visibility, we are very close to stabilization. My guess is that we're looking at a reasonable decline here in the current quarter, maybe down 4 to 8 or 5 to 8 basis points, similar to the previous quarter with the expectation that the pipeline that we have currently is at about a 3.79% yield. So when you look at what's rolling off on -- with the actual coupon in the multi-family book, which is up also 3.79%, we're getting very close to getting away from that yield to lead [ph] on the asset side. So it's reasonable to say that we're getting closer to bottom here. My guess for the quarter, down 4 to 8 basis points, 5 to 8 basis points for the quarter. And margins should over -- for the year, should be somewhere bottom between 245 to 250-ish. And it includes, Ken, x prepayment activity.

Ken A. Zerbe - Morgan Stanley, Research Division

Yes, yes, of course. Yes, all on core. And then just in terms of the expenses, it looks like if you -- you reported expenses were relatively flat at 150, I know you're looking for them to be down a little bit this quarter. What surprised you? Like what changed or came in different than expectations?

Thomas Robert Cangemi

I don't think it's a surprise. I think the reality was that during the fourth quarter, we were preparing very -- we're very razor-focused on moving forward to Dodd-Frank Act, expect that we have to absorb, so it's a full push ahead here to get ready for DFAT filing, which is going to happen as of March 31. And we've had some additional expenses associated with the regulatory, in particular Dodd-Frank.

Ken A. Zerbe - Morgan Stanley, Research Division

Is that something that's likely to decline as we go in the first quarter or early next year?

Thomas Robert Cangemi

I would say it's reasonable, too. We'll have a decline going into 2014. I think the reality is we've been giving up for the past 3 years. We've had elevated expense regarding our potential for growth strategies, different path for a bigger bank. So we've started taking on additional expenses, going back 3 years ago. We're hoping that we're at the point where we'll see some expense saved going into 2014. As indicated in the previous calls, we've taken some expense initiatives throughout the bank. We've also added a lot of personnel, as well as a lot of consulting fees to get through the regulatory hurdles that are required to be a larger bank.

Operator

Our next question comes from Collyn Gilbert from KBW.

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Could you just give your outlook for growth in terms of loan growth? And just, I guess, as we think about it like a year ago, your pipeline stood at about $4 billion. Now the pipeline is at $2.4 billion. Can you just kind of give us a little bit more color as to where you think that growth can go? Do you see it accelerating beyond, I think, your prior sort of low-double digit projections? Just some color around that.

Thomas Robert Cangemi

It's Tom. What I will say that we're very pleased with the current -- the previous quarter's growth we test during the beginning of the year that we have high-single net loan growth excluding the mortgage bank, excluding the covered portfolio. We grew 9.4%, and multi-family grew north of 11% for the year. So we had very strong growth given the environment and very early on in 2014. But we're expecting high single-digit growth again going into 2014. And that could be conservative depending on the level of prepayment activity and interest rate. So significant amount of activity out there, and we're very bullish about loan growth. And we're committed to building our core, niche product.

Joseph R. Ficalora

I think the good message is that the market is very strong, Collyn. And not only will we have growth, but other lenders in this market will have growth. We'll be more selective than some, but certainly we'll have the opportunity to participate in a very rich market.

Thomas Robert Cangemi

And, Collyn, bear in mind, we had a record year of prepayment activity. And we also grew our net loan book for multi-family 11.8%. So despite the fact that we had significant amount of prepayment activity, which some loans do trade away, we still grew the book in double digit. You have to bear in mind we had a substantial decline in mortgage banking. That was over $1 billion of held-for-sale portfolio declining. So that's -- you have to take into account. So it started close to 0 going into 2014. So my guess is that you're not going to go much lower than we are today in mortgage banking with respect to the held-for-sale portfolio. So we should see some good growth to 2014.

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Okay, that's helpful. And then just one quick follow-up. As you guys kind of look at your -- the investments that you've made over the last 3 years, Tom, that you spoke about in terms of getting prepared for the regulation and look at other banks' platforms, I mean, do you feel -- is encouraged by what may ultimately fold into your franchise through another acquisition through...

Thomas Robert Cangemi

Yes, yes, I will tell you that we're very pleased on management, the team putting the effort in, the expenses that we've outlined, partnering with our regulators. We brought them in very early. They worked with us. They gave a very strong guidance to what's expected of a bank of our size. And we've expended a lot of money over the past 3 years. I would say that a lot of banks that are smaller than us could be taking that expense now. So being close to $50 billion in -- $10 billion to $50 billion range, we have significant obligation that has to be taken into account going into the first quarter of 2014. And we're very much ready for the challenge.

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Okay. And even outside of regulation, I guess just thinking about First Niagara's comments about reinvesting kind of in the bank over the next couple of years, like there's been a couple of other banks that have kind of stalled growth and said, "We've got to..."

Thomas Robert Cangemi

We've always been investing in infrastructure. We're an acquisition company being at $1.9 billion from our history, going to as almost as large as $50 billion through acquisition. We made significant investments over the course of a decade.

Joseph R. Ficalora

Yes. And Collyn, we've proven time and time again that we integrate banks extremely well. And systems is one of the places that we really are outstanding. We find every single time we do a deal that we provide significantly better priced, better performing systems than the banks that we acquire. That's a very, very strong part of what makes us so efficient on a go-forward basis.

Operator

Our next question comes from Bob Ramsey from FBR.

Bob Ramsey - FBR Capital Markets & Co., Research Division

I was hoping you could talk a little bit about the securities purchases in the quarter. Obviously the securities book is small, but it has been growing. And I'm just curious if the plan is to continue to add to that portfolio or if it was the right environment that prompted the buys this quarter? Just any color you could give there.

Thomas Robert Cangemi

Yes, Bob, there's a lot of moving parts. We've been very public over the past 3 years that we were shrinking our portfolio given the environment. Up until probably the second quarter of 2013, markets have changed. We wanted to replenish where we were on a percentage of assets basis. So our range, we'd give guidance in the previous years of a 17% to 20% range of total assets. Right now we're at the low end of the range at 17%. Markets are not ripe to be reinvesting right now, but we've put assets on starting in October. I think the last time we bought a bond was in October. So we've been out of the market for quite some time. But we have put some assets on. Predominantly, I'd say 95% of our purchases were agency DUS paper, multi-family DUS at an average yield around 3.50, all backed by government-backed securities.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Okay, that is helpful. And then I was hoping you could talk a little bit about prepayments. I mean, I know you never really know in any quarter where that's going to go. But what was, if you look at just the multi-family book, prepayments feeds in 2013 and sort of how are you thinking about the prepayments, the pace of prepayments in 2014?

Joseph R. Ficalora

I think the idea that we are in a period of robust prepayment is very, very evident from the numbers that we've been producing quarter after quarter after quarter. The reality is that the marketplace has become extremely rich in pricing. So a lot of the people that we lend to, and we're very consistently a cash flow lender, and others obviously are intent on doing market deals. So a lot of our people have the opportunity to sell their properties in the period ahead. And at this point in the cycle, we see that often, where our people are selling, and we're getting paid prepayments very, very attractively because they're getting paid huge profits on properties that are in the marketplace actively being traded at very rich pricing. So I think the good news for us is that the period ahead should see continued pricing activity, pricing driving that activity. And as has been the case in the past, our guys sell very high and then they do 1031 Exchanges and they buy into like-type, multiuse properties, and they wind up being in the best position during the next cycle turn, whenever that may be. So I think that we should have a lot of activity in the year ahead.

Thomas Robert Cangemi

Bob, I would just add to the fact that we had a nice mix over the past 3 years between multi-family commercial real estate loans that are prepaying. But the reality is the commercial real estate book could see a sizeable amount of sale activity, no question about it. We have some nice credit there that are ripe to be sold. And I think they're in the conversation to be sold. So that could be interesting as far as additional added value of prepayment activity adds more towards the commercial side in 2014, which could also be a very positive catalyst with this activity. Remember, back in '07, the funding was different. The funding in today's environment, there's real equity funding for transactions, where when the market was overheated, the overall transactions were, in my opinion, very structured risk -- there's a very risky type of structure versus a pure equity structure that we're seeing today.

Joseph R. Ficalora

So in essence, what Tom is saying there is the pricing today is as rich as it was, but the funding is more restrained than it was. So therefore, there will be better deals, but there'll still be very good deals for the seller.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Okay. Let me ask, too, as I think about the prepayment penalty structure, obviously the younger a loan is, the bigger the fees are. I know you all have talked in the last year or 2 about the life of your average loan being longer than it had been historically as there had been less activity, which now seems to be picking up. I'm just curious if you could tell me, give any color about the average life of loan on your books today versus a year ago to give some sense of what the prepayment opportunity may be?

Joseph R. Ficalora

It's about 3 years is what it's running, which is really at the low end of the scale. So over the course of 40 years, we've been running between 3 and 4 years, and we are at just about 3 years right now. So I think that that's very consistent with this end of this cycle. And certainly, we don't expect it to change dramatically.

Thomas Robert Cangemi

Yes, Bob, typically, the commercial real estate books a little bit longer, as Joe indicated, between around 3 years in average. But the multi's around 2.9 and the CRE books about 3.3 years average.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Okay. And that is the average of the existing book or the average of expected of originations this quarter?

Thomas Robert Cangemi

[indiscernible] the existing book. I will tell you, when we try to model prepayment activity or behavior, mentality of the portfolio, very difficult to model. It's -- I would say we've been getting to 50%, which is close, but the cash flows are very robust. And you see that in the portfolio. We've grown our loan book. Like I said previously, 11.8% multi-family are significant prepayment activity. So we are originating significant amount of activity, but we're also up to the challenge of loans paying off.

Joseph R. Ficalora

I think the good news is that we have a significantly larger portfolio. And therefore, there's going to be billions and billions of dollars available to trade.

Bob Ramsey - FBR Capital Markets & Co., Research Division

Great. Last tiny housekeeping question, and I'll let you guys go. But do you have the average balance of loans held for sale in the quarter? I think you all had given that in the release last quarter, and I couldn't find it this quarter.

Thomas Robert Cangemi

I would say, again, we could probably talk offline specifically, but my guess is probably about $240 million, in that range, small number.

Operator

Our next question comes from Brad Ball from Evercore Partners.

Bradley G. Ball - Evercore Partners Inc., Research Division

Just a couple of clarifications. Tom, if we're going to have the NIM x prepays bottom in the 245 to 250 range, so that's about 15 basis points from here. Do you think that we really have about 2 more quarters of compression and then we start to see stabilization in the second half on the NIM?

Thomas Robert Cangemi

I think it's very reasonable to say. I think that the reality of rates has backed up here a little bit. So going into the beginning of the year, rates, we're looking at around 3%, 10 years. Things have come in coming a little bit. So we're conservative in our guidance. We hope to continue to be conservative given the outlook. Until we see rates really start to spike, we'll give you a little bit more bullish on markets going up. But it was so close to stabilization given the environment. But obviously, you could see where the bomb was trading [ph] 5 years like 154 right now. So if we're getting around 200 basis points spread, 220, 215 on multi, you're in that mid-3 level. So we'd like to see that higher, as indicated on multi-family coupon at 3.79. That's the current coupon. We're down 7 basis points linked-quarter. That's what we're offering currently to our customers. So we're at a point now where we should see stabilization, albeit there's been a somewhat change in the marketplace. And again, I know it's an early discussion about interest rates in January, but if rates do start to rise, watch [ph] can go up from there.

Bradley G. Ball - Evercore Partners Inc., Research Division

Okay. And you also mentioned on the expense question that there is room for expense improvement in '14. Would you care to give us a number for the first quarter and...

Thomas Robert Cangemi

I'd say for the first quarter, $144 million, maybe down $2 million from the linked -- from the previous linked-quarter.

Bradley G. Ball - Evercore Partners Inc., Research Division

And in that range quarterly throughout this year?

Thomas Robert Cangemi

Yes, pretty flat. We don't see significant increases there. And we're not focused on cost containment. The mission here is to make sure that we continue to partner with our regulators, make sure we are tight on Dodd-Frank and ready to do -- go through our DFAT process. And we're excited about it. We spent a lot of money, and we have some great partners outside of the bank that are working with the company. And we feel that we're putting very strong effort to get ready for this very important process for the bank.

Joseph R. Ficalora

It's also important to note that we have expensive, but highly qualified people on the staff that are going to be with us right through this entire period.

Bradley G. Ball - Evercore Partners Inc., Research Division

Got it. And then on mortgage banking, what was the gain on sale this quarter? And are you retaining more of your originations on balance sheet as opposed to HFS?

Thomas Robert Cangemi

No, we've been very consistent with the strategy. We went in 2 years ago with the AUM, the hybrid AUM book. And it's doing very nicely for us, although we're not hitting our targets as far as expected growth of $50 million a month and probably putting on around $30 million, $35 million. The AUM market is very competitive. But right now, we have about $0.5 billion of AUMs, and we haven't had 1 loan that went 30 days. So very proud of the underwriting standards. The gain on sale margins has tightened. As we all know, the industry is very challenging right now. So we're running between 65, 75 basis points being the high end of the range, 60 being the more realistic given the competitive environment. But we are seeing some benefits on the servicing side. So for example, loan servicing fees for the quarter was $13 million. After you take -- net out the hedging activities, we netted $10.7 million in servicing income for the quarter, and we had about $2 million in origination. So we're suffering a little bit on the origination side. You're dealing with some seasonality, but we're hopeful going into Q2 that the purchase season will start to pick up. And hopefully, Q1 should be the, hopefully, the bottom for mortgage banking income. I will say mortgage banking income, gross income for the quarter should be down another 20%, similar to the previous quarter. Bear in mind, we gave guidance in Q4 down 35. So we came in better than expected predominantly on the servicing side.

Bradley G. Ball - Evercore Partners Inc., Research Division

What's your servicing book now? How many billion are you servicing?

Thomas Robert Cangemi

Right now, we have 20.4 billion of unpaid principal balance. And we'd have a -- it's actually a counterflight [ph] of 4.65 multiple or 1.18%, which is $240 million on the books.

Bradley G. Ball - Evercore Partners Inc., Research Division

Excellent. And last question on the C&I business, how is that going? It looks like you ramped from obviously a small base, but you ramped up pretty heavily in the quarter. Any comments on C&I?

Thomas Robert Cangemi

We're very excited about our new group up there in [indiscernible]. They're doing a great job for us. We will see good growth there. Again, another great portfolio, 100% performing, no delinquencies. We're very proud of the deals that we see. We're very selective. We probably turned down about close to 90% or 97% of the deals. So the deals that we do, we're very pleased with the highest fee income base business, which goes to the margin. So we're looking at a yield that's higher than our current CRE and multi-family yield, it's just south of 4%. And we're looking at a business that should -- we should see doubling-type growth. So for example, at year-end, we were close to $200 million. We could easily be $400 million, $500 million in the next 6 months from here. So it's growing, but again, we're very selective on the credit that we put on.

Operator

Our next question comes from Rick Weiss from Boenning and Scattergood.

Richard D. Weiss - Boenning and Scattergood, Inc., Research Division

Joe, could you guys talk a little bit about asset liability strategy and what you're doing to protect against interest rate risk?

Joseph R. Ficalora

The idea that we'll be protecting against interest risk, I'm not sure exactly. If you're talking about the liability side, obviously, we are...

Thomas Robert Cangemi

Yes, Rick, what I would add to that statement is that right now, we're positioned for 2014 to look at the deposit market as a great opportunity for us. We have great branches throughout the country now in selected markets that we can reasonably price. Our additional liability is coming back to the company for strategy for growth. Obviously, it's very fluid in the marketplace for liability. So we feel fairly confident that we can grow our liability base in the deposit marketplace. But bear in mind, the multi-family CRE book has so much intense cash flow. So when you look at -- looking at our balance sheet, despite the fact that we have a very large wholesale liability book, we have a propensity to see significant cash flow from the loan book. So with that being said, you have that general characteristics, which helps dramatically to mitigate interest rate risk, given that you have constant investment of the multi-family and CRE book. So net-net, the rate environment is very, very challenging, as indicated previously. We have a rate environment that should've been higher for multiple years. Everyone's struggling there. But the reality is that we have a very low interest rate environment on the short end of the curve. And we're lending within the belly of the curve.

Richard D. Weiss - Boenning and Scattergood, Inc., Research Division

Okay. So like on the borrowings that you're putting on over the quarter and with the -- are you kind of like matching the durations of the borrowings with the investment securities that you're putting on? Or are they shorter than the investments?

Thomas Robert Cangemi

Not entirely. I think the strategy would be 2014 to see a real deposit growth effort. Our goal is to transition from wholesale financing to retail. At the end of the day, we have the opportunity here to -- rates are low, and we believe rates will stay low for a reasonable period of time, but eventually, they will rise. And when that does take place, we feel very confident that we could transition into a more stable source of fund.

Joseph R. Ficalora

Rick, you know us for many years. Our business model is to grow deposits by acquisition, not to grow deposits in a way that other banks spend a great deal of effort doing. So I don't think that you should be looking for us to do something materially different in the period ahead than we've done in the past. Our traditional means of growing deposits is by acquisition. And certainly, that would be our expectation in the future as well.

Richard D. Weiss - Boenning and Scattergood, Inc., Research Division

Okay. Joe, in terms of acquisitions, are you still looking for a larger one versus...

Joseph R. Ficalora

I think the environment is such that it's pretty clear to us that we are today spending the money and time doing those things that would literally, with our regulators, put us in a place where we're over $50 billion in any event. So whether we go over $50 billion by $2 billion or we go over $50 billion by $25 billion, it doesn't really matter. We're going to be basically doing the same kinds of things in the period immediately ahead whether we do a really big deal or a small deal. So the big question is, do we want to be involved in a small deal that precludes us from doing a large deal? That may not be the case. We could conceivably do a small deal and a big deal down the road, not tomorrow obviously. But the important thing is that we're preparing ourselves for the opportunity to follow our business model, which is to grow by acquisition.

Thomas Robert Cangemi

And Rick, just to go back to your initial point on asset and liability management, in the event there would be a transaction in place, we would definitely deal with restructuring our liability book in conjunction with the expectation of the rates being higher in the future.

Richard D. Weiss - Boenning and Scattergood, Inc., Research Division

Okay, got it. And then one kind of cleanup question, when you're talking about your loan pipeline, what percent is that would be multi-family?

Joseph R. Ficalora

Oh, it's 70-odd.

Thomas Robert Cangemi

I would think about 80%.

Joseph R. Ficalora

Yes, but it depends from quarter-to-quarter. But specifically, the portfolio is reflected in what we do on a perspective basis as well. I mean, from time to time, we get a very, very large commercial loan that changes the ratio for a particular quarter. But over the course of time, you don't see a major change in the ratios. So over the year ahead, the period ahead, it will be roughly the same as it's been in the year past.

Operator

Our next question comes from Dave Rochester from Deutsche Bank.

David Rochester - Deutsche Bank AG, Research Division

You mentioned this earlier, but I think I missed the number. Was just wondering what that MSR valuation adjustment was this quarter and then the net hedging gain or loss, whatever that was this quarter.

Thomas Robert Cangemi

Right. The change in MSR value was $5.5 million positive, and the net loss of hedging was $7.8 million. So when you net that against the $13 million of the servicing fee income. We booked a $10.7 million revenue stream from servicing. That's the reconciliation.

David Rochester - Deutsche Bank AG, Research Division

So it's actually a net hit of $2.3 million?

Thomas Robert Cangemi

Yes.

David Rochester - Deutsche Bank AG, Research Division

Got it. And was just wondering, with your guidance on operating expenses of $144 million kind of going through being pretty flat through 2014, should we take that to assume that you guys think you wouldn't have to spend any more to prepare for an actual CCAR exam versus the $10 billion to $50 billion stress test?

Thomas Robert Cangemi

Let's get to DFAT first. I mean, CCAR is a different situation. We're focusing on our responsibilities as a sub-$50 billion bank. But obviously, the regulators have been partnering with us, have been giving us significant guidance, and we're very pleased where we are as a company. But that's -- when we're over $50 billion, we'll deal with that when we get there.

Joseph R. Ficalora

But I think the important thing to know is that we have to be prepared for that. You can't consider doing bigger deals unless, in fact, you're contemplating what is the impact of that.

David Rochester - Deutsche Bank AG, Research Division

Got you. And just one last one. Any concerns -- you mentioned pricing driving the market and volumes for next year. Is there any concern that there could be any local policy shifts with the new mayor that might impact any of that?

Joseph R. Ficalora

No, not really. I mean, the new mayor has many different things that he says, but the market is so well established that it's highly improbable that the mayor or anybody else will do something material that would adversely affect real estate in the New York market. The last thing the mayor wants to do is destabilize the New York City real estate markets.

David Rochester - Deutsche Bank AG, Research Division

If we were to see the 5-year shoot up meaningfully over the next 6 to 12 months, call it, maybe through 2%. Maybe that's not meaningful enough, maybe 2.25%. Do you think that, that would -- could potentially spur a another refi boom in the market?

Thomas Robert Cangemi

Yes.

Joseph R. Ficalora

Yes, yes.

Thomas Robert Cangemi

No question about it right now. We saw the surge going towards the end of the summer. We gave you the activity we had in Q3, which is typically unprecedented for the company. And we ran through Q4 additional activity. That was driven off of a real movement in interest rates. We went literally 100 basis points from the beginning of summer towards the end of the summer on the 5-year treasury. Right now, we're hovering around 150. That goes to 2%. My guess you'll see some real activity in my opinion.

Operator

Our next question comes from David Hochstim from Buckingham Research.

David S. Hochstim - The Buckingham Research Group Incorporated

Just wondering if you could talk a little about pricing and the competitive environment in multi-family and then in, I guess, commercial and...

Joseph R. Ficalora

I think there's no question that the marketplace is highly competitive, certainly more competitive than it is with regard to one-to-four family. The reality is that we are getting bigger and bigger share of our niche. That's the important thing to us. It will likely be that in the period ahead, additional players come into the marketplace. When you think about who was here 3 years, 5 years ago, they were not some of the banks that are here today, but they were in fact replacing -- the banks today are replacing significant structured debt lenders who were taking greater share of the marketplace. So there's more there for all of us to share because those big players are not there. And that in the end just creates a better market. And certainly, we'll get a bigger share of the whole market, and that's evident from our numbers and our expectations for the period ahead.

David S. Hochstim - The Buckingham Research Group Incorporated

And is there any update on consumer loans, on Jumbos?

Thomas Robert Cangemi

I would say that we updated that our forecast is trying to put on $50 million per month as a strategy. We've been slightly south of that, around $30 million, $35 million. It's been challenging because it's very competitive. It's an asset class many that many banks are focusing on, but our underwriting standards are much tighter. We had indicated in the previous question, we have -- we only have one loan that's been past 30 days delinquent. So we have a $500 million book approximately where 100% is performing with our one 30-day delinquency. The goal is to continue in that strategy, but the reality is that our underwriting standards are more conservative. So we're comfortable building at that level. And if rates do spike, my guess is that you'll see more activity on the hybrid AUM [ph] book, which will be helpful for balance sheet growth.

Joseph R. Ficalora

I think the good news is that we'll spend less carrying that portfolio than others might because of the stellar way in which it performs.

David S. Hochstim - The Buckingham Research Group Incorporated

Okay. And then just tell us on the C&I book, is that all being originated in the New York area or is there some [indiscernible]?

Thomas Robert Cangemi

That's the -- our new business model would be -- especially financial, it's all over the country. But again, selectively, it's a credit buy-out shop that we take small positions in very large household-name type companies where we are very selective on those types of credits, and we're very comfortable on building that book and of -- the guidance there is going to be significant growth portfolio. And my guess is that you're going to see a couple of hundred million dollars in probably Q1 and maybe another couple hundred million dollars growth in Q2. So we're going to see a nice quarter-over-quarter growth. That will be a growth business for the company, but again, a very manageable business.

David S. Hochstim - The Buckingham Research Group Incorporated

Right. And are many of the commercial real estate loans now being made outside New York?

Thomas Robert Cangemi

No, David, the CRE loans are all predominantly in the New York Metro region.

Joseph R. Ficalora

Yes, most of everything that we did in 2013 was in the New York market.

Thomas Robert Cangemi

The entire book, the entire held-for-investment portfolio, I believe, is around 97% in market, maybe 3.5% out of the market.

Operator

Our next question is from Josh Levin from Citigroup.

Arjun Sharma

It's actually Arjun Sharma on for Josh. Just wanted to find out where do you guys stand on the LCR as it's currently proposed?

Thomas Robert Cangemi

We're evaluating it. There's obviously different draft [ph] format. But that doesn't apply to us yet with our $50 billion plus. But we are evaluating it and it's part of our monthly outflow [ph] discussions and we evaluate it.

Arjun Sharma

Okay, I got it. And just, I mean, any color in terms of -- I understand you guys are evaluating it. But let's say you did have to comply with it today, would you -- in that hypothetical, would you have to meaningfully manage your balance sheet in a different way?

Thomas Robert Cangemi

I would say that I would have not -- I would have a public disclosure yet because that doesn't apply to us. But in the event we were to grow, let's say, through an acquisition, we would factor that into our pricing model than acquisition. Until we get over that level, we are evaluating it. We have no specific comment publicly to address that.

Arjun Sharma

Okay, great. And then just one last one. On the TE/TA ratio, just noticed that, that dropped a little bit quarter-over-quarter. Can you give us a sense of what level you guys are comfortable running at from that perspective?

Thomas Robert Cangemi

Could you repeat the question? What was the...

Arjun Sharma

Sure. On the tangible equity/tangible asset ratio.

Thomas Robert Cangemi

Yes, yes. We have a very low-risk business model. So tangible capital has never been an issue for the company. As you know, historically we've grown the capital base via acquisition. We're very comfortable with our capital levels. We're very comfortable with our growth expectations. Obviously, we're a growth company through acquisition. We haven't had a deal in a few years, but at these levels, we believe we still have some good room to grow x acquisition and x capital ratio.

Joseph R. Ficalora

I think something that people often miss is that over the course of decades through multiple cycles, we've never had to charge to capital our principal asset losses. And that's something that a very few banks could ever say. We've never charged to capital losses on our principal assets. So when you think about the need for capital, we do not use capital to accommodate losses and have not over the course of the elongated period, which covers many different cycle turns. And that's a fact, by the way. That's not an assumption or something. That's a fact.

Thomas Robert Cangemi

I would just add one other point. I mean, going through this stress test process and the DFAT and we're getting prepared, we're very confident on capital levels. We're very comfortable whether it has stricter level. So where we stand today, given our low-risk profile, we're pleased to go through this process. Again, I'm going to mention, once again, we work with our regulators. They understand our business model. We spent a lot of efforts in articulating that to third parties, and we're very confident that we have the ability to withstand very challenging environment without any, as Mr. Ficalora said, charge to capital.

Operator

Our next question is from Steven Alexopoulos from JPMorgan.

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Joe, there was a lot of talk in 2013 about your desire to do a larger transaction that obviously didn't materialize. As you look back on the year, did the sellers you were expecting not put their hands up, or pricing expectations too high? What essentially happened?

Joseph R. Ficalora

I think there are many reasons why deals do not occur. And in '13, I think there was a huge amount of uncertainty as to what the environment was actually going to be. So boards were not in a position to actually decide that they would, in fact, go forward with the deal because they weren't sure of what the outcome might actually be. So I think when we talk about the period ahead, all the players that were there in '13 are still there. And the opportunity to do deals will be very real. As we go further and further down the road, the greater likelihood is that deals will occur.

Thomas Robert Cangemi

I would just add, obviously a few years ago, a very large end-market deal was announced that hasn't yet closed. So that is a very unique telling tale [ph] of what's going on in the industry and everyone is mindful of that. So obviously, going back to the process of making sure that we're in a very good position, jumping into a transaction and not being able to a close transaction is not where we want to be.

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Okay, that's helpful. One of your local competitors booked some nice-sized multi-family loan packages in the fourth quarter in roughly $200 million range each. Did you guys get a look at any size credits in that range and maybe can you talk about some of the larger credits you booked in the quarter?

Joseph R. Ficalora

Yes. I think the reality that there are some large plays that have occurred is indicative of the absence of the structured debt lenders and the ability of those banks that are rapidly or readily tracked by you to have activity that sounds impressive, and certainly it's there. We will do deals when in fact they meet our criteria. And as is indicated, we grew -- our principal loan book grew by over 11%. That's a very attractive growth record in a year in which there were lots of other people that were also doing active lending.

Thomas Robert Cangemi

I would just add that the reality of some of those transactions were probably from our portfolio that were failed transactions that we would not finance given the levels of financing. So we probably had a shot at them, but just didn't work for our underwriting criteria.

Joseph R. Ficalora

I think the good news is that the marketplace is extremely rich, and we can be selective as to what we choose. Doesn't mean that we're not going to take things that are otherwise qualified for our portfolio. Each deal represents itself differently. We're in a very good place today and very optimistic about the kinds of opportunities that the period ahead holds.

Thomas Robert Cangemi

And for the quarter, it was very granular. Average balances were typical for the bank. They weren't any large one-off transactions. Means a lot of just -- lot of great activity.

Steven A. Alexopoulos - JP Morgan Chase & Co, Research Division

Okay. And if I could, just one follow-up. Tom, I didn't understand your answer to the question on the wholesale borrowings. What was the term of what you added in the quarter and what did you -- what are you paying for those borrowings?

Thomas Robert Cangemi

Right now, anything that we're borrowing on wholesale markets are considered short-term borrowings. So it could be a range from 30 days to 120 days, anywhere from 37 basis points to 55 basis points.

Operator

Our next question is from Matthew Kelley from Sterne Agee.

Matthew Brandon Kelley - Sterne Agee & Leach Inc., Research Division

I was wondering the loan-to-deposit ratios picked up a little bit. And Tom, you had mentioned earlier for Rick's question, you're working on some deposit strategies, it's going to be a big focus. Excluding deals, where would you like to see the loan-to-deposit ratio go over the next year?

Thomas Robert Cangemi

Matt, again, the deposit strategy is, absent an acquisition, the company is going to grow its balance sheet. We grow typically 4% to 7% a year for multiple years depending on market condition. So if you want to run a reasonable model, let's say, 5%-type asset growth for the next 2 years or the next year, we would like to go into -- because right now, you can fund literally pretty close to where the homeowner [ph] bank is to the deposit market. So we could be reasonable in the Arizona market, the Ohio market or the Floridian market to bring in some of that funding, and it would not cost the bank significantly to its cost of funds. So I think there's going to be unique mix going into 2014. In addition, I think we had a great opportunity to bank our customers on the multi-family side, and that's going to be real push for the company. But I think there's going to be a general shift to -- from -- some more retail and wholesale.

Joseph R. Ficalora

Matt, it's been the case for the decade that we've been public. We in fact grow the deposit base when we do deals. And we in fact have a very, very high ratio of loans. So our loan-to-deposit ratio is always very high because our principal asset is in fact conservative loans that perform well in all periods. And therefore, the likelihood that we have a high deposit -- I mean, a high loan-to-deposit ratio is our business model. That's not inconsistent with who we've been for the 20 years.

Matthew Brandon Kelley - Sterne Agee & Leach Inc., Research Division

Got you. So I guess, bigger picture here, you've got cash down using that excess cash to buy securities, loan growth up, medium-term duration securities up and then funding short. What are the thresholds you'd like to maintain on your plus-200 basis point parallel shift NII sensitivity? I mean, September, it was negative 5%. What's -- where would you like to maintain that?

Thomas Robert Cangemi

I would say between -- worst case, 8% to 10%. But that would be reasonable, 5% on both sides, 5% to 10% up, 5% to 10% down, but worst case 10%.

Matthew Brandon Kelley - Sterne Agee & Leach Inc., Research Division

Okay, got it. And then what was the average duration of the -- the DUS bonds that you've added during the quarter?

Thomas Robert Cangemi

Of the vast majority, the average life is probably 7.7 to 8.2 years of average duration.

Operator

Our next question is from Moshe Orenbuch from Crédit Suisse.

Moshe Orenbuch - Crédit Suisse AG, Research Division

Most of my questions have been asked and answered. Just wanted to kind of talk briefly about the mortgage bank and your thoughts. I mean, you had pointed out the low level of origination income and possibly another notch down in the first quarter. What steps can you take to kind of make that business -- more competitive market share products? I mean, can you talk a little bit about that?

Thomas Robert Cangemi

I think the big picture here, we're running off the MBA's statistics for 2014 and '15 and they're down. I mean, obviously they're predicting a 35% decline and broad base of financing for 2014. We're going to model off that. But the reality is we do not do significant amount of lending at the retail level. We have that opportunity. So it's wide open for the company. We've made some slight inroads, that could be a catalyst for the company over time. We believe that we're going to see in a rightsizing of the cost structure. We've already taken some initiatives going back to August 2013. So we're profitable every month. The goal is to be profitable. The goal is to start seeing some purchase activity build up into Q2, and then we'll reevaluate. The reality is they may service a significant amount of all loans and we have a unique platform. And in the event that we're consolidating the industry, we have a huge infrastructure to benefit from. So we're well positioned in '14. Again, I feel like we're close to the bottom here. Again, Q4 was a tough quarter, but we outperformed based on management expectations, down 20 versus down 35. We'll probably see similar declines of down 20 again in Q1, but hopefully, that could be the bottom for the run rate for the company on the mortgage banking on, and hopefully we'll see a pickup from now as activity picks up. But meanwhile, the retail platform is wide open for the company. So there's no question we have that potential. We've made some slight inroads, and we could do a lot better job there.

Moshe Orenbuch - Crédit Suisse AG, Research Division

So what actually has to happen for that...

Thomas Robert Cangemi

It's going to be a gradual build-out, picking the right people, the right managers by region and really thinking about structuring the ability to bringing loans from the retail platform versus the wholesale market. We're a wholesaler. We're not a retailer. It's probably less than 3% of our volume on the retail side. We have a wide-open opportunity. We have a significant presence in these markets and we're not lending at the branch level. So there's no question that can help. And also bear in mind, we're also committed to the hybrid AUM portfolio and its very conservative underwriting standards. That book of business is being originated by our residential guys, and they're doing a fabulous job with that.

Operator

Our next question is from Kenneth Bruce from Bank of America Merrill Lynch.

Karti Bhatt

It's Karti Bhatt on for Ken Bruce. Just back on the funding cost, just it looks like, I mean, you got some good benefit this quarter. I guess, looking forward x an acquisition, do we still see room for lowering the funding cost ahead?

Thomas Robert Cangemi

I would say in a short term, only on the wholesale liability side, not so much on the retail side. But we're probably pretty much on the low end of the spectrum for a thrift [ph]. When you look at the commercial bank arena, we have that opportunity to regionally price some of our commercial bank opportunities, in particular the multi-family New York market. If we do take liabilities from, let's say, the monetary banks [ph] from our customer base as a push towards bringing in liabilities, that could be helpful. But the reality is if you compare our cost of funds on the deposit side, compared to thrift [ph], we're on the low end of the spectrum.

Karti Bhatt

Got it. Okay, and then, I guess, I mean, looking at the borrowed funds, the decline in the quarter, was that just because the shorter duration, so that's where you continue to see the benefit ahead?

Thomas Robert Cangemi

Yes.

Karti Bhatt

Okay. And then just real quick, I guess, in the noninterest income, it looks like the other income was up $2 million or so quarter-over-quarter. Is there -- was there something going on there?

Thomas Robert Cangemi

Probably some of our investment advisor. We had a very strong [indiscernible] markets are up materially, so we do manage a $2 billion asset portfolio for high-wealth individuals and that's -- we had a stellar year. We actually outperformed the S&P 500. So we have 30% plus year [ph] up that obviously, we realized more fees.

Operator

Our next question is from David Darst of Guggenheim.

David Darst - Guggenheim Securities, LLC, Research Division

Joe, as you talked about your types of deals you've done in the past, you've reemphasized that they were done for funding purposes. Should we expect that type of transaction in the future? Or are you really going to think about or do something that really diversifies the company?

Joseph R. Ficalora

I think there's always diversity in choice, depends on the deal where it may be. Obviously, we could do a deal anywhere in the nation. The question is when and what would be the driver of the deal. Fundamentally, the deal has to be accretive to earnings. It has to be accretive to tangible and then everything else just falls into place. So we could have different choices. One could be a very local deal and have attributes that are on the liability side, and another could be very distant and have attributes that are on the asset side, either what we're able to dispose of quickly or asset classes that we want to be in for some good reason. So each and every opportunity presents itself differently, and it'd be very hard for us to say what will drive the next deal. It may be down the road and driven by totally different things than the last deal we did. Remember, the last deal we did was at the end of '09, and that was driven itself by very different dynamics than the deal that we did immediately before that. So I think there's all kinds of opportunities out there. And exactly when and what we do will depend on the facts and circumstances at that time.

David Darst - Guggenheim Securities, LLC, Research Division

It sounds like you're making some suggestions about developing your retail platform out a little bit more. Is that something you're willing to take on in an acquisition?

Joseph R. Ficalora

I think the good news there is retail for us has never been a problem. We integrate banks into our systems extremely well, better than the biggest banks in the country. We do that not only cost effectively, but systemically, it works out extremely well. So our people in Arizona are able to do the exact same things that our people in the Westbury can do. The reality is that the ability for us to bring retail to a platform that works no matter where it may be is something that we're very proud of and have had great success in.

David Darst - Guggenheim Securities, LLC, Research Division

But does that including like developing more of a sales culture in a larger product set or...

Joseph R. Ficalora

Again, if we're talking about getting a bank that's next door, everything is going to be basically the same. The culture will be identical. If we're talking about getting a bank that's in a state that's far removed from here that has a long track record of interfacing with their customers differently than we do, we could still do that with the systems that we have available to us in a way that makes them highly competitive and certainly does not present either regulatory or operating issues to us. We've proven that. How well we've integrated, for example, very different markets. Ohio, Florida and Arizona, very different markets, and they were integrated extremely well. On the retail side, that's working out extremely well.

David Darst - Guggenheim Securities, LLC, Research Division

Okay, great. Just on the commercial real estate comments you made and the origination volume growth we saw this quarter, should we see more commercial real estate growth relative to multi-family from you this year?

Joseph R. Ficalora

I think that varies. Commercial -- the commercial opportunities sometimes are very large. So in a given quarter or maybe even in a 4-quarter period, we might grow our commercial book rapidly or we might actually pay down large segments of our commercial book. When you look back over the last 12 to 24 months, we've had some very big deals come into our portfolio and leave our portfolio. At the moment that those transactions occurred, they changed ratios a little bit. So the reality is that in the period ahead, we can have these little shifts, but they're not driven by an intent.

Thomas Robert Cangemi

It's Tom. I want to say that, as previously discussed about prepayment activity, the sales opportunity in the New York markets are very real. You can have large commercial real estate loan on sale, and they could be putting on some decent growth. That will offset the growth. So the reality is that we have a lot of cash flows coming from multi and CRE. But last year, it was more driven off of multi. So we have this opportunity in front of us on the property sell [ph] transaction. So despite the activity that we'll do in our origination, we're still going to be challenge with property transactions. And depending on the financing of these property transactions, I know one of the analysts today had raised the question about larger deals in the market going to different players. We are very conservative underwriters. So if it doesn't meet our underwriting standards, we just won't do the loan. We'll collect the prepayment fees on the way out, but if someone else is buying the building and they're going to finance it -- add to part of [ph] our standard, it'll move on to another portfolio.

Operator

And we'll take our final question from Collyn Gilbert from KBW.

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Just really 2 quick follow-ups. Joe, I just want to make sure that I heard you correctly when you talked about acquisition appetite. And before you were commenting on the economies to go well above $50 billion but that could change. So you could do a deal that would take you only modestly above $50 billion.

Joseph R. Ficalora

Yes, I think the idea that we could do a smaller deal is definitely possible. The reality is that we're growing very, very quickly to a $50 billion mark in any event. So whether we do a deal or not, it's going to be driven by the nature of the opportunity, not by whether we pass $50 billion or we don't pass $50 billion. We're doing a lot of work to be ready to be over $50 billion because even without a deal, we could cross over $50 billion in the not-too-distant future.

Thomas Robert Cangemi

It's Tom. I'd just add that the possibility of doing a deal keeping us below $50 billion is also very real, given that our desire to look at our liability opportunities in the marketplace where potentially rates can go up in the future in small transactions [indiscernible] under $50 billion is also a possibility.

Collyn Bement Gilbert - Keefe, Bruyette, & Woods, Inc., Research Division

Okay, okay. And then just a final follow-up to that. So you guys have been clear in commenting on sort of the external environment, which has kept you from getting a deal done. Is there anything internally that has kept you from doing a deal to this point?

Joseph R. Ficalora

No.

Thomas Robert Cangemi

I would say, again, partnering with our regulators is very important in this environment. As you can see there's been transactions that has been announced and closed. They are critical going forward, and we've spent significant dollars, effort and time, hire many people to be positioned to benefit for this change. We're excited about the March filing, we'll move on. That will be one step towards our growing the balance sheet, growing the company and being positioned to the, hopefully, in the future acquisition opportunities down the road.

Joseph R. Ficalora

I think there's no question that the March filing is extraordinarily important to the positioning of an institution such as ours to actually be able to do deals. That filing is very, very, very important, and certainly we're spending a lot of time and effort in being prepared to do that properly.

Thomas Robert Cangemi

This has been a 3-year effort for the company, so we're very proud of where we are, and we're very proud of partnering with our regulators to help us along the way.

Operator

This does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Joseph Ficalora for any closing remarks.

Joseph R. Ficalora

Great. Thank you. 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 chatting with you again in April when we report our earnings for the first quarter of 2014. Thank you.

Operator

Thank you. This does conclude today's fourth quarter and fiscal year 2013 earnings conference call with the management team of New York Community Bancorp. Please disconnect your lines at this time, and have a wonderful day.

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