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Executives

Ilene Angarola - EVP and Director of IR

Joseph Ficalora - Chairman, President and CEO

Thomas Cangemi - SVP and CFO

Robert Wann - SVP and COO

John Pinto - EVP and CAO

Analysts

Tony Davis - Stifel Nicolaus

Greg Ketron - Citigroup

Mark Fitzgibbon - Sandler O’ Neill

Bob Hughes - KBW

Matt Kelley - Sterne & Agee

Mark Close - Oppenheimer & Close

Gary Gordon - Portales Partners

James Abbott - FBR Capital Markets

Steve Moss - Janney Montgomery Scott

Tom Alonso - FPK

New York Community Bancorp Inc. (NYB) Q2 2008 Earnings Call July 23, 2008 9:30 AM ET

Operator

Good day everyone and welcome to this New York Community Bancorp second quarter 2008 earnings conference call. Today’s call is being recorded. Now for opening remarks and introductions I would like to turn the call over to the Executive Vice President and Director of Investor Relations, Ms. Ilene Angarola. Please go ahead, ma'am.

Ilene Angarola

Thanks. Good morning everyone, and thank you for joining the management team of New York Community Bancorp for our quarterly post earnings conference call. Today’s discussion will be lead by Joseph Ficalora, our Chairman, President and Chief Executive Officer and Thomas Cangemi, our Senior Executive Vice President and Chief Financial Officer. Also with us on the call are Robert Wann, our Senior Executive Vice President and Chief Operating Officer and John Pinto, our Executive Vice President and Chief Accounting Officer.

Our comments today will feature certain 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 we currently anticipate due to a number of factors, many of which are beyond our control. Among those factors are; changes in interest rates, which may affect our net income, prepayment penalty income and other future cash flows or the market value of our assets, changes in deposit flows and the demand for deposits, loans and investment products and other financial services in our local markets.

Changes in the financial or operating performance of our customers’ businesses, or changes in real estate values which could impact the quality of the assets security loans and changes in competitive pressures among financial institution or from non-financial institution. You will find a more detailed list of the risk factors associated with our forward-looking statements in our recent SEC filings and on Page 11 of this morning’s earnings release.

The release also includes reconciliation of our GAAP and non- GAAP earnings, net interest income and capital measures which also will be discussed extensively on this mornings call. If you would like a copy of the earnings release please call our Investor Relations department at 516-683-4420 or visit our website at www.mynycb.com.

I'd now like to turn the call over to Mr. Ficalora, who will speak to you briefly about our performance and the benefits of the actions we took in the quarter before opening the lines for Q&A. Mr. Ficalora?

Joseph Ficalora

Thank you, Ilene, and good morning, everyone. Thank you for joining us for today’s discussion of the second quarter 2008 performance and the significant strategic actions we took to enhance our earnings and capital. Among the items we we’ll be talking about, are the benefits in the common stock offering we completed in the second quarter, and its immediate contribution to capital. The benefits of the repositioning we expect to see, including the expansion of our margin and double-digit earnings accretion in the quarters ahead.

The repositioning of certain borrowings during the quarter and the resultant distortion of our second quarter GAAP financials. The strength of our earnings on an operating basis, which reflected the meaningful expansion of our net interest margin, the growth of our net interest income, and non-interest income and the consistency of our operating efficiency ratio.

We'll also be speaking to the continued strength of our asset quality, which is of particular importance in the current credit cycle, together with the healthy growth of our loan portfolio.

I know that’s a lot to cover, and that you are likely to have multiple questions. So let me begin with the first of these items, our common stock offering on May 23. The offering generated net proceeds of $339.2 million in the second quarter, including $199.2 million that served to offset the impact on our capital measures of repositioning $4 billion of wholesale borrowings with an average weighted interest rate of 5.19%. The remainder of the proceeds nearly $140 million represented a pure contribution to capital. As a result, our ratio of tangible stockholders’ equity to tangible assets raised 44 basis points to 6.14% over the course of the quarter and our ratio of adjusted tangible stockholders’ equity to adjusted tangible assets raised 40 basis points to 618.

It's important to note that the common stock offering was an earnings accretive action. It was not motivated by a need to cover current or future losses nor did it need to be. The quality of our assets remained intact at the end of the second quarter, with non-performing assets representing 0.10% of total assets and non-performing loans representing 0.15% of total loans.

I'll be returning to the topic of asset quality in just a while. Given the strength of our capital at the close of the quarter, the Board of Directors maintained the quarterly cash dividend at $0.25 per share. The dividend will be paid on August 15 to shareholders of record at the close of business on August 6, 2008. I might also add that the capital levels of New York Community Bank and New York Commercial Bank continue to be solid. Each exceeding the requirements for classification as well capitalized bank.

We are pleased to rank among the safest and soundest banks in the nation. As reflected in our regulatory capital measures, which have been supported by our consistently strong record of asset quality? Returning to the strategic actions that were taken during the quarter, it is important to note that the repositioning is expected to add 25 basis points to our net interest margin beginning this quarter, and to be $0.12 to $0.14 accretive to our earnings per share over the next 12 months.

The $4.0 billion of borrowed funds we prepaid were replaced with $3.8 billion of lower-cost federal home loan bank, New York advances and repurchase agreements featuring an average cost that was approximately 200 basis points lower than the 5.19.

Reposition generating pre-tax charge of $325 million in the second quarter including $39.6 million that was recorded in interest expense in accordance with EITF Issue 96-19. The remaining $285.4 million was recorded as non-interest expense. The $325 million charge significantly distorted the levels of interest expense and non-interest expense we recorded in the quarter and therefore had a significant adverse impact on the quarters GAAP results. The charge was equivalent to $199.2 million or $0.60 per diluted share on an after-tax basis and resulted in our recording a GAAP loss of $154.8 million in the quarter or $0.47 per diluted share.

Excluding this charge, our operating earnings increased by $4.9 million to $75.1 million on a linked-quarter basis equivalent to a penny increase in diluted operating earnings per share to $0.23. These improvements were supported by an increase in our adjusted net interest income margin, both of which exclude the impact of $39.6 million debt repositioning charge recorded in interest expense. Excluding this charge, our net interest income would have risen to $170.2 million and our margin would have expanded to 2.54%. These improvements would have occurred despite the reduction in pre-payment penalty income over the course of the quarter and year-over-year.

With refinancing activity quelled by the uncertainty in the market, pre-payment penalty income totaled $8.2 million in the second quarter, down from $10.3 million and $22.3 million in the trailing and year earlier three months. Refinancing activity thus added 13 basis points to our second quarter 2008 margin, as compared to 15 and 34 basis points in the prior periods.

In addition, the debt repositioning charge, our second quarter GAAP earnings were reduced by a non-cash after-tax loss of $29.8 million or $0.09 per diluted share on the other than temporary impairment of certain pooled trust preferred securities and perpetual preferred stock.

Previously, the unrealized mark-to-market loss on these securities had been reflected as a reduction to equity through other comprehensive income. As a result, other than temporary impairment had no affect on the stockholders equity, intangible stockholders equity or our measures of capital strength. As a result of the OTTI, the carrying value of the remaining pool trust preferred securities declined to $35.6 million including $17.3 million in income notes. The carrying value of the remaining perpetual preferred stock was reduced to $29.2 million, included in this amount was $3.7 million of Freddie Mac exposure and $25.5 million of exposure to perpetual preferred stock of broker dealers, all investment grade.

Excluding the impact of the pre-tax impairment and of certain other items recorded in the earlier quarters, our adjusted non-interest income would have increased on a linked-quarter basis as well as year-over-year. I should also add that it took 25 years, but the safe deposit litigation we inherited when we acquired Haven Bancorp has been resolved at last. The settlement cost us $3.4 million in the second quarter, equivalent to $2.3 million after-tax.

Excluding the noise relating to the three charges I've mentioned our operating efficiency ratio was a consistent 40.14% for the three months ended June 30, 2008. Our second quarter results also reflect our first provision for loan losses in 51 quarters. At $1.7 million, the provisions exceeded actual charge-offs of $1.2 million and increased our allowance for loan losses to $92.9 million at the end of June. Our decision to record a provision in the quarter was a response to specific circumstances including the level of charge-offs recorded and should not necessarily suggest that additional provisions will be made in the quarters ahead.

The fact is, we are very pleased with the quality of our loans at this juncture, and the fact that our loans or charge-offs stem from our small portfolio of other loans.

Not withstanding the widespread deterioration in the financial and housing markets, we have yet to take a loss on any loan within our mortgage loan portfolio. This is not to say that such loss will not occur some time in the future but that our portfolio has thus far retained its strength.

We continue to see opportunities for prudent multi-family lending, as the growth of our loan portfolio and our current pipeline suggests. At $20.9 billion, our loan portfolio was up $415.1 million from the balance recorded at the close of the trailing quarter reflecting an annualized growth of 8.1%. The increase stemmed entirely from organic loan production with $1.6 billion of loans produced over the course of the quarter, including $783 million of multi-family loans.

With a pipeline of approximately $1.3 billion including multi-family loans of $768 million, the growth of our portfolio is right where we want it to be. It should, in short while the strength of the fundamentals was masked by the debt repositioning charge and the second quarter charges I've mentioned, we expect that our third quarter performance will reflect not only the merits of our business model but also the significant benefits of our recent stock offering and the repositioning of our debt.

At this time I would be happy to take your questions. As always we will do our best to get everybody in on time, but if we should miss you, please feel free to call us on the Investor Relations line.

Question-and-Answer Session

Operator

(Operator Instructions). We’ll (We will 20.23) pause for just a moment to assemble the roster. And we'll take the first question from Tony Davis of Stifel Nicolaus.

Tony Davis - Stifel Nicolaus

Joe, good morning.

Joseph Ficalora

Good morning, Tony, how are you?

Tony Davis - Stifel Nicolaus

Fine. I wondered if you could do two things. First, give us a little more color here on the NPAs increase and trends that you're seeing in the construction and C & I portfolios and I guess your level of conviction that provisions in the last half of the year may or may not be made.

Joseph Ficalora

Well, I guess the important thing is that our performing portfolios are significantly in line with expectations and better than the industry as a whole by a large measure. The likelihood that we'll make additional provisions I guess will be driven by what actually may occur in all of the quarters in front of us. I think the important thing to recognize is, that the change in our non-performing is de-minimus. The actual charges that we may see, may also be characterized as de-minimus and therefore the need for additional capital, not capital but the need for additional reserves may not even occur.

So it's the very hard to be sure as to what will happen, but the important thing is that it should be very consistent with our historical experiences. I think that as mentioned in the release, we're looking at charges on acquired assets. No mortgage losses have been recorded and I guess with their principal assets in 28 years. So the important thing here is even when we have non-performing, it's not like we have 100 house loans that go to 300 house loans all of which are going to result in an individual loss.

The likelihood of a house loan, for example, not resulting in a loss, is extremely low. The likelihood that we will have a loss on an asset that goes non-performing is in fact not likely at all. More of our loans have been non-performing over the course of years without there being a charge than I think in anybody’s portfolio. If you look at the percentage of non-performing assets in ‘03, ‘04, ‘05, those percentages were very high, but still we had zero charge-offs. Very high compared to our historical numbers. Very low compared to the rest of the financial sector. So I think the important point here is that even when the non-performing goes up, it doesn't necessarily mean that we're going to have a meaningful charge. The annoyance of quarterly charges on auto loans and such, that's a different product, and we will continue to have those.

Tony Davis - Stifel Nicolaus

Secondly, Joe, versus the, I think it was 257 points last quarter, look back over the last decade, what has been the widest credit spreads that you recall booking on new loans?

Joseph Ficalora

I'd say probably in the range of 500 basis points.

Tony Davis - Stifel Nicolaus

Given what’s happening at Fannie and WaMu conduits and basically the Sovereign and Norfolk leaving the field, why shouldn’t we expect just continued increases in this 257 here the next few quarters.

Joseph Ficalora

I’d say that as we go further into this cycle, quarter-by-quarter-by-quarter, we should have ever wider spreads. That has been the normal experience that should be the experience on a go forward basis here. We regularly see fewer traditional good lenders in the market. There are a couple of new lenders in the market that are different, and therefore they're thrashing around and getting some product, but the real players in the market as we sit today, the single largest player in the market by far is Fannie Mae, and exactly what they're going to do on a priority basis with their balance sheet is going to be decided by the Congress, as well as by them. So, I'm not sure exactly how they're going to materialize in the future here.

Tony Davis - Stifel Nicolaus

Final question, and that's just M&A. I guess a little update on your appetite, the frequency of discussions that you're having today and the realistic odds that you'll find something else to do here over the next 6 to 12 months.

Joseph Ficalora

I think the reality is that, there is a significant heightened awareness that partnership makes sense, there's increased dialogue, but there is in fact reality that asset risk must be considered, and unless we're able to mitigate asset risk to our comfort levels, we're not going to do a deal. So pricing can easily become more and more favorable, and asset risk is going to a paramount component of any decision process. So as we go down the road, I think it's without question; there could be circumstances where the assets could be totally resolved, regulatory or otherwise. If the assets are totally resolved, very accretive deals could be done because the pricing differentials between our currency and the targets will be massive and therefore, overnight almost, we could find a very attractive deal that increases our earnings very substantially and does not represent an asset risk, because the assets have been resolved either by regulators or by others.

There are multitude of ways in which assets can be dealt with. There are parties that are perfectly willing to buy assets and to fund highly accretive deals. Contemplate that, we will only do an accretive deal with low risk on the asset side and this environment represents opportunity to accomplish that. The number of shares necessary for our company to actually do an accretive deal will be substantially less, then that would be required for many of the other buyers in the marketplace. Therefore, we should be in a very attractive position to do highly accretive deals under the right circumstances.

Tony Davis - Stifel Nicolaus

Thanks, Joe.

Joseph Ficalora

You're welcome.

Operator

Now moving on to Greg Ketron with Citigroup.

Greg Ketron - Citigroup

Good morning.

Joseph Ficalora

Good morning, Greg.

Greg Ketron - Citigroup

Just a couple of questions. One, regarding margin, if you can walk us through maybe what your expectations are, even outside of the benefit from the debt repositioning, which I think you indicated will add 25 basis points, starting at third quarter, but beyond that, some of the underlying margin trends that you may expect maybe going forward for the rest of this year and into early 2009?

Thomas Cangemi

Greg its Tom. I would just reflect on, we still see the continuation of deposit cost reducing dramatically. We've had substantial pick up here on the benefit of lower CD, although rates have risen in the past six weeks or so. We still have a nice re-pricing going on in the portfolio, but more importantly, the overall loan yields that we see in the portfolio around 550, we believe that some of our higher yielding paper has been removed from the portfolio and we should see some benefits momentarily going forward on the loan side. I am honestly considering around 20 to 57 basis points spread in the quarter and the (inaudible) was very volatile, so obviously the pricing was a little tight this quarter but it's reasonable to say that we'll start to see pricing increase based on the competitive nature of the business, being much less right now and having the ability to do more paper at higher spreads. And we see some good benefits on the asset sides as well as benefits on the funding side exclusive of the wholesale transaction that will add five more benefits in Q3.

Greg Ketron - Citigroup

Okay, it so may be a fair way to think about lending yields going forward given the spreads that you're seeing over the five-year CMT. Maybe you've reached somewhat of a floor here and we may actually see yield increases going forward? Depending on what the five-year CMT does?

Thomas Cangemi

Right. It's fair to say that. If you look at asset yields in general, I mean even on the conservative side, yields are much higher, calling them they were out four weeks ago. So things are being priced more realistically, including multi-family lending as a commercial lending.

Greg Ketron - Citigroup

Okay. Then the other question regarding credits, if you look at things like the construction book out on Long Island which I believe is in the $600 to $700 million range. As you look at auto, C&I, commercial real estates, maybe you can share any color on trends there that may cause you any concerns, early stage delinquency levels, where they've obviously decreased compared to last quarter?

Joseph Ficalora

Yes. Our portfolio and I'll talk to our portfolio. Obviously the market is going to be different than our portfolio. In the construction book, we have some very experienced well established builders of communities that represent our construction book. We did not grow our construction lending. We are continuing to advance existing developments that are local and likely to be very successful at their conclusion.

The speed with what things are moving is a little slower, but in fact things are moving in the right direction. With regard to auto loans, that is not our product. We only have that as a result of an acquisition of Synergy and this is the residue. So if we're down to $30 million or $28 million or $26 million that will continue quarter-by-quarter-by-quarter to pay off and unfortunately, continue to result in losses. But when you put those losses to a balance sheet of our size, they're very de-minimus.

Greg Ketron - Citigroup

Okay, anything on the CRE side.

Joseph Ficalora

CRE is fine. C&I is a different kind of product as well. There will be C&I losses as we go into the market in front of us. I would think that we will see more losses than we are typically expected to have but we will see substantially fewer losses, than everybody else in the financial sector. If you look at our actual charges, they're going to be very small compared to our sector.

Greg Ketron - Citigroup

Okay. Is there anything in delinquency patterns that you saw that changed?

Joseph Ficalora

No, nothing dramatic has occurred. As I mentioned earlier, if you look at the delinquencies that we may report, the number could go up because we have large loans. It doesn't mean that we're going to lose any money. Over the course of many, many years, we've had higher percentages of delinquencies and yet with those higher, two times that we have today, two and half times what we have today, in percentages of outstanding loans and yet we have zero losses.

So the measure of quality of asset isn't driven by delinquency, it's driven by charge and the reality is that we wind up charging off much less than our peers. As I mentioned earlier, if you are looking at trends in one to four family, if you have 100 houses that are not performing this quarter and you have 200 houses next quarter, that’s a lot because a very high percentage of those non-performing will actually go to loss.

If you look at our non-performing from one quarter to another, that number can change dramatically without there being any change, meaningful change in losses. So, I think that the kinds of losses that we’ve actually been having over the last few quarters are on the C&I and the consumer loans. They’re all very de-minimus and they’re all as a result of acquisitions.

Can we have losses on assets that we’ve generated? Absolutely. Do we expect to have losses? Absolutely. But, in perspective, we shall have fewer losses than the sector, surely, and an indication of how much loss we’re going to take is not driven by the size of the non-performing, because by example, we have a very large loan. If it goes into non-performing that percentage can change dramatically, but that loan maybe resolved with absolutely no loss, so as I say, you can’t look at the measure in the same way as you would look at that particular number when you’re considering the risks in a one to four family lending portfolio as example, because there you have lots of people, individual home loans that are on the verge of non-performing. When they go there, coming back is not that easy. When our loans go to non-performing, there could be a variety of circumstances that will be resolved and ultimate disposition of the asset if we keep it will in fact be favorable.

Greg Ketron - Citigroup

Okay. And when you look at your loan to values like commercial real estate somewhere around 56%, 63% on multi-family loans, is it fair to project that loan-to-value level across your other parts of the portfolio that would be commercial real estate, would it be that conservative across?

Joseph Ficalora

No actually, our commercial real estate has a lower LTV than our multi-family real estate. But I think if you look at the actual numbers, you’ll see that our commercial real estate loans are structured the same as our multi-family loans and they have a shorter life, and they have a lower LTV. And in many cases, they are actually multi-family loans on the second is and above floors. They are retail on the first floor and if retail represents 25% of the income stream of let’s say a 15 storey building in Manhattan, where the retail is at market and the rest of the building is controlled, that’s considered a commercial loan in our portfolio. But for the most part it has the attributes of a multi-family product.

Greg Ketron - Citigroup

Okay. Great. Thank you. Appreciate it.

Joseph Ficalora

You are quite welcome.

Operator

Now moving to a question from Mark Fitzgibbon with Sandler O’Neill.

Mark Fitzgibbon - Sandler O’Neill

Good morning, Joe.

Joseph Ficalora

Good morning, Mark.

Mark Fitzgibbon - Sandler O’Neill

Joe, what are the initial rates today on multi-family loans you’re originating?

Joseph Ficalora

I’d say they are north of six.

Mark Fitzgibbon - Sandler O’Neill

Okay. And then secondly, the pipeline looked really strong, going into the third quarter here, but typically, there’s been seasonality in that multi-family business in the third quarter. Do you think a lot of that pipeline may not close because of the seasonal factors and some of the holidays that you referenced?

Joseph Ficalora

Yeah. I think Mark you are touching upon reality. There is going to be far fewer business days for the relevant participants in this market. However, the market is so unusual. In that, the factors that are impacting this market are somewhat extraordinary, that it would be very hard to know. I don’t think we’re going to fall short of our expectations here, but how much beyond that we will go, I don’t know.

Thomas Cangemi

Mark its Tom. I would also add. If you look at historical originations and in growth, steep decline in the portfolio in the previous year and I believe the prior year too, we are in a growth mode, we feel pretty confident throughout the year. You’ll start seeing more loans being booked on a net basis on a quarterly basis going throughout 2008, as discussed in the beginning of the year. First quarter, second quarter, third quarter, fourth quarter, each quarter should be higher than the other based on what we’re seeing. So our pipeline looks obviously encouraging here.

Mark Fitzgibbon - Sandler O’Neill

Then secondly, did I understand correctly before when you were saying aside from the impact of the balance sheet repositioning, the core margin should also continue to rise?

Thomas Cangemi

Absolutely.

Mark Fitzgibbon - Sandler O’Neill

Okay. What should we assume for a normalized tax rate, Tom, in the coming quarters? Is it still around 31-32%?

Thomas Cangemi

Well obviously, if you go forward, we intend to make more money. We feel pretty confident that our earnings will continue to increase here. So, obviously I would compounded tax rate is around 32% going forward.

Mark Fitzgibbon - Sandler O’Neill

Then lastly, could you share with us perhaps some of the strategies that you have for building the deposit base, maybe deposit programs or things of that nature?

Joseph Ficalora

Yeah, I guess there are a variety of ways in which we’re approaching that, including the unique circumstance where we actually have two banks. We have the ability to cross over FDIC insurance, so as to have double the benefit of FDIC insurance for depositors. As I’m sure you’re well aware, that has become an issue in recent weeks as a result of what happened with IndyMac. So many people have been raising the question because they don’t quite understand the issue, but the fact is that we uniquely can provide twice-as-much insurance to depositors on a relatively simple basis, who can keep their deposits with us.

Of course the other reality is that a bank such as ours has no risk of need to pay that insurance based on the other strengths of the company. And as I’m sure you’re well aware, IndyMac and any other bank that has ever had a need for FDIC insurance had a long period of deterioration that would have been ample opportunity to warn depositors that there could be a problem.

In the case of most of the banks in the nation, you’re not seeing that kind of stuff. But, it’s normal. When there’s a headline about loss, some people to be concerned about FDIC insurance and our program, the thing that we’re going to be putting out and pushing is in fact tied to building sound deposit relationships with yet even more insurance that is normally available in other banks.

Thomas Cangemi

Mark its Tom. I would also add that obviously the core is holding up very nicely. We have not been aggressive at all in the CD fund. We have been letting the higher cost money roll off as the need for liquidity. We feel pretty confident on liquidity levels. We are probably at the low end of the spectrum throughout the entire second quarter. The rates have moved up quite a bit. We had some very high cost CDs that are re-pricing lower and if we’re 100 basis points off the market, they may choose to go there.

Mark Fitzgibbon - Sandler O’Neill

Thank you.

Joseph Ficalora

You’re welcome.

Operator

Now we will take a question from Bob Hughes, KBW.

Bob Hughes - KBW

Hi, good morning, guys.

Joseph Ficalora

Good morning.

Thomas Cangemi

Good morning, Bob.

Bob Hughes - KBW

Question; the repositioning took place about mid quarter, is that correct?

Joseph Ficalora

No. Actually most of the repositioning actually closed on June 30th. We had some of the liabilities that were put to work in the late part of June but the vast majority or the super majority of it closed as of June 30.

Bob Hughes - KBW

Okay. So, what was the net impact of the margin from the repositioning itself in the quarter?

Thomas Cangemi

It only affected the June month. It did not affect May or April and it was few basis points.

Bob Hughes - KBW

Or it’s up two basis points?

Thomas Cangemi

I think it was going to be July, August and September. You'll see a noticeable difference going forward.

Bob Hughes - KBW

Okay. Do you think--

Thomas Cangemi

All that adds up to 30.

Bob Hughes - KBW

You would say that the third quarter margin should probably increase modestly on a core basis plus roughly 25 basis points?

Thomas Cangemi

Obviously, in the event we see a substantial amount of higher loan, yes, you can look at a significant increase, but we feel pretty confident that the vast majority or all our wholesale liabilities are going to take place on July 1. We’re going to get a very sizeable benefit there, but in addition to that, Bob, if the CDs are still re-pricing lower, the core model itself outside the repositioning we're getting favorable results on the margins, so if you look back on the previous quarter being Q2, margin was up but if you take out pre-pay about 15 bits maybe four or five basis points as equivalent that was part of the repositioning and realities going forward, you’re going to have a sizeable benefit here. For the core business models while as the repositioning going into Q3 and beyond.

Bob Hughes - KBW

It’s clearly going to be helpful going forward but coming off of third quarter core earnings of $0.23will probably get you outer slightly above.

Thomas Cangemi

We feel that this quarter that will probably cover our dividend.

Bob Hughes - KBW

In the third quarter

Thomas Cangemi

Yes.

Bob Hughes - KBW

Okay. At the same time though you’ll still be paying up pretty close to a 100% of your earnings, meaning your book values is really not going to grow.

Thomas Cangemi

We feel pretty confident that intangible will stay well above 6. We like the position of our capital strength right now. We raised little bit more money on the rents deal, as we did on the stock side and we could have, I will defy with you there was a lot of money available to both of the capital ratios. We clearly looked at the trade-off between accretions and honest with those and then we took enough money at that point in time to give us a little bit of capital cushion as well the ability to reposition the whole support.

Bob Hughes - KBW

But given the growth opportunities you have, today presumably, why did you not raise more capital for tangible book then?

Thomas Cangemi

Very comfortable our capital levels are now Bob, very comfortable, comfortable and confident. 620 now, we haven’t seen 620 since 2000.

Bob Hughes - KBW

No, I agree but given that you’re paying out a 100% of earnings or so, you’re not retaining a whole lot of capital for growth.

Thomas Cangemi

With the expectations going forward we won’t be paying at a 100% of our earnings and making more earnings and we’re paying out.

Joseph Ficalora

I think Bob if you look at the last couple of years, we’ve actually being paying out a higher percentage of our earnings and we’ve grown our capital year by year by year. As we sit today looking forward, the opportunity to grow capital is going to be accelerating and our earnings are going to be accelerating so, the issue that might have been more relevant in 2005 or 2006 is materially less relevant in 2008 and 2009.

Thomas Cangemi

I would also like to add. Its very compelling right now is the despair we’re getting on our core businesses is very favorable compared to prior years. We’re not at the 500 basis point spread level, but we are close to 300 and we had a lot of volatility in Q2 as we expected at the marketplace. If we thought to see the continuation of sibyl curve here, we can see significant benefits from the loan side. Our loan average loan yield from multi-family of 5.5% and we have substantial cash flow and we see finance going forward. We’re opportunistic that we’ll get benefits there. We didn’t see it that much on Q2, we will see in the second-half of ’08.

Joseph Ficalora

Bob there is another reality here that you shouldn’t miss. We’ve demonstrated that we can get access under very favorable terms to capital, should there be an opportunity for us to have a need for more capital to create a highly accretive deal, we’ll do it. There aren’t any banks that I'm aware of that have done double digit accretion in the issuance of stock in the last couple of years. Prospectively, we have a very good likelihood that we'll be able to do accretive issuance of stock and there will be plenty of people that are willing to take that stock. Should we present them with the facts that this is an accretive deal.

Bob Hughes - KBW

Okay. I'm not sure you answered one of your original questions directly but the 10 millionish increases in NPLs in the quarter, what drove that?

Joseph Ficalora

I guess a loan or two. It’s probably as I mentioned the increase.

Bob Hughes - KBW

I'm not asking about loss count, I'm just curious that are the multi-family commercial real estate brokers or is it construction or?

Thomas Cangemi

I think its split between multi and commercial.

Joseph Ficalora

Yeah.

Thomas Cangemi

Two loans.

Bob Hughes - KBW

Okay.

Joseph Ficalora

Yeah. In other words I think the issue is that it’s not an important matter.

Bob Hughes - KBW

Okay. And then one final question Joe. Last couple of quarters we talked a little bit about some of the assets that are classified as commercial real estate might be multi-family or rent-stabilized multi-family in nature but if the cash flow is generated from those properties are north of 25% coming of it.

Joseph Ficalora

Right.

Bob Hughes - KBW

Maybe retail. What we've seen in the commercial real estate space so far is that retail is by far the weakest sub-segment with rising vacancies and minimal cash flow throughout and I think projections for cash flow did decline. How are you monitoring your portfolio and your retail exposures?

Joseph Ficalora

That's a good point Bob. Obviously we monitor our portfolio very diligently and what I can say to you is given the nature of the provisional loan think about it from the standpoint of our loan is fixed for five years. People who choose our loan have different expectations than normal commercial real estate property owners. So, the reality is that we are dealing with a different client base that has a different expectation, a value creation from the real estate that they hold and therefore we have a different experience.

So what you are seeing in commercial real estate generally is not necessarily what is going to impact us because the people that we are lending to are not the people that you would generally find in commercial real estate.

Bob Hughes - KBW

Okay. That's helpful guys. Thank you.

Joseph Ficalora

Thank you, Bob.

Operator

And now, we'll take a question from (inaudible).

Unidentified Analyst

Yes, good morning.

Joseph Ficalora

Good morning how are you?

Unidentified Analyst

Okay thanks and yourselves?

Joseph Ficalora

Very well.

Unidentified Analyst

Good. I was fiddling around with your savings from the reallocation of the loans that you said would bring in $0.12 to $0.14 over the next year and one would assume thereafter with the charge of $0.60 and it seems to me that that means it will take a little less than 4.3 years to recoup the charge. Now am I missing something, is there going to be an incremental savings or what?

Thomas Cangemi

Ted, I would tell you that the one thing we miss in our loan is bonds. It was a wholesale liability and not the loan portfolio. And yes, it's around four years. We estimate around 4.01 years, so approximately four years, and that is correct. Picking up between $0.12 to $0.14 a share and obviously is a range there but we feel pretty confident that in this environment it enhances the margin to generate capital going forward with a prudent decision, and obviously, investors that have the ability to understand the transaction are invested into the transaction. But that math is correct.

Unidentified Analyst

Okay, very good. I thank you.

Joseph Ficalora

Thank you.

Operator

And now, we'll take a question from Matt Kelley with Sterne & Agee.

Joseph Ficalora

Good morning, Matt.

Matt Kelley - Sterne & Agee

Yeah, hi guys.

Thomas Cangemi

Good morning.

Matt Kelley - Sterne & Agee

The regulatory filings when it breaks down the construction loans, basically evenly split between single family construction of $600 million, and then other construction and land development of $600 million, could you just give us some detail on each of those buckets, and help us understand what's in each of those components?

Thomas Cangemi

Matt, I would just say, if you look at the balance sheet, we're around $900 million. We've dropped considerably from $1.2 billion, around $900 million as of June 30.

Joseph Ficalora

But I think it's also important. We probably would be best if we do this when we sit down in front of some of the numbers that we have. There's no escaping the fact that our construction book is primarily driven by developers of communities. So, when you're talking about land development, you're often talking about people that have accumulated land for the purpose of building a whole community on that property. If you look at some of the substantial property owners that we have, there is no question that some of them can very readily bank a large portion of the land assets that they have and not necessarily look to develop it in the near term. But, I think that it would be best if you want, we could talk more specifically about this offline.

Thomas Cangemi

Just some additional color. Obviously, we still have the Staten Island franchise that has about $125 million, that's pretty much small lots that are being knocked down and rebuilt was between three or four, five units on a single lot which take time to get approval, but they get it done at Staten Island, it's about $125 million, and you have a sizeable portion from the Roslyn franchise that we still are working very diligently through and feel very confident that we builders have the capacity to weather the downturn. We don't see any negative trends there. So overall, the whole portfolio on the mortgage side has been performing [shallow], as Joe indicated previously, not a [shallow] principal loss in any mortgage assets in the portfolio. What you're seeing, for example, the 1.2 million charge-offs was driven by the synergy loans, from small Richmond County, loans that were acquired for [fleet] years ago, and we have a lot of small stuff and some stuff at C&I business from Atlantic, that stuff happens. You have businesses that may fail in a tough environment, and you have some unsecured lending’s. The unsecured portfolio for NYB is significantly small. We typically attach ourselves to some form of real estate.

Matt Kelley - Sterne & Agee

Okay, but I mean, just to be clear, within the single family development portfolio, there's nothing, no individual projects that you're starting to get concerned about in terms of sales activity?

Thomas Cangemi

No. Obviously the market is off, but these guys are substantial players, Long Island, by way of example. We have communities in Long Island, and prices have come down, but they're well built along the way, and we are not doing large deals in this market. We're winding down the portfolio. We had a sizeable drop on a linked-quarter basis. You'll start to see considerable sizeable drops. We're still getting out advances on commitments, but those are commitments. We're not taking on new projects.

Matt Kelley - Sterne & Agee

How much of the legacy Roslyn, kind of holiday organization type of developments are in the portfolio today, those types of credits?

Joseph Ficalora

They still stand as some of the best builders on Long Island. So, there is some legacy loans, but there are also many brand new loans. We're perfectly willing or have been perfectly willing to lend to these developers, they are very successful.

Thomas Cangemi

It’s a strong book of business, not only on the lending front but also on the depositary front, and they are partners with us and obviously we're confident in their ability to weather a downturn but they will also not going to risk their own capital strength by going out and building new project in this environment.

Matt Kelley - Sterne & Agee

Okay and then just a second question also kind of looking at just some of the regulatory filings which provide a little bit more detail on a couple of levels in the balance sheet. If you look at other debt securities in your call reports about $400 million between held -to -maturity and available for sale and that's typically where we are seeing a lot of the higher risk assets that people are now marking down and taking other than temporary impairments on. Is there anything else in there that we should be concerned about beyond the trust preferred breakdowns?

Thomas Cangemi

Matt. We feel pretty confident based on what we have in our portfolio, is very strong asset quality. And what we took this quarter is obvious. And we had legacy Roslyn investments that we acquired back in 2003 that in particular the pooled trust preferred. A lot of those bonds were on deferral this quarter. We dealt with them and we felt very confident that was time to make a temporary impairment these are legacy assets, for example, the preferred stock what all we have, Freddie Mac is small, it's $5 million, wrote it down a little bit, we had some primary dealers but they are all investment grades, so the reality what’s remaining is very strong portfolio and some of the largest banks in the Country, JP Morgan’s of the world, CDs the world, maybe not the best credit, but they are not D minus credit. And we have strong investments in held-to-maturity and we feel confident that it is not close to it any how. Things change, but we feel pretty confident that the actions we've taken this quarter was the prudent thing to do.

Matt Kelley - Sterne & Agee

And how much single issuer trust preferred do you guys have? What's the total amount of that?

Thomas Cangemi

A handful of smaller names, the local names that are very good friends of investments that we know very well. We've dealt with these companies for multiple years and we're very confident and we under write them as giving that company a loan, so we know as you know, the typical needs that are out there, we have a nice investment and some good companies and some of them very discounted levels.

Matt Kelley - Sterne & Agee

So what is the dollar amount of single issuer trust preferred?

Thomas Cangemi

We don't break it out.

Matt Kelley - Sterne & Agee

Okay but that would be in that other debt securities?

Thomas Cangemi

Yes and (some 54.25) very good financial institutions that are very strong that we have investments in. And we've also purchased those in those companies as well. Or other companies have purchased those companies. So we feel pretty confident that we had no issues there currently.

Matt Kelley - Sterne & Agee

Okay, but it could be in that total $400 million bucket that we?

Thomas Cangemi

It is in that total but we also have other type of investments in there that are triple A.

Matt Kelley - Sterne & Agee

What would those be?

Thomas Cangemi

Various agency types, investment that are not perpetual in nature.

Matt Kelley - Sterne & Agee

Like debentures with the agency debentures?

Thomas Cangemi

We have a lot of agency debentures, we have sizeable amount of agency debentures.

Matt Kelley - Sterne & Agee

I mean, help us understand. This is an area that people really want to get detail on and figure out where the risks lie on balance sheet and if you don’t have it, talk about it?

Thomas Cangemi

No disrespect where we feel the risk lies in the balance sheet we dealt with this quarter, no question we've had some assets that we sold at this particular quarter was time to write down, particular the pooled trust preferred securities and income notes we own a handful of bonds that we've acquired through an acquisition that were performing very nicely over the multiple years and it went into deferral mode. We opted to be aggressive and write it down that's where the risk lies and we actually articulated in our press release what's remaining, $30 million of pools with 17 million as income and we have about $29 million left in the preferred stock, which are all investment grade.

Matt Kelley - Sterne & Agee

Right. But, I mean the single issuer market is under some distress as well, so that's an important number.

Thomas Cangemi

No, we can talk offline.

Matt Kelley - Sterne & Agee

Okay. All right. Thank you.

Operator

And now moving to a question from Mark Close with Oppenheimer & Close.

Mark Close - Oppenheimer & Close

Good morning, gentlemen. I wanted to circle back to the repositioning of your wholesale funding. You know, when I present value that net future benefit, I mean that come out across, its even using the pretty generous discount rate that's well over five years to pay this out and it begs the question is do you normally lock up your funding that for out and fix it that for out and if it wasn't fixed that for out, really what was the compelling reason to do this?

Thomas Cangemi

It's higher. I mean obviously I can't talk about that. It's 4.01 years. That's when we compute the actual earn back, 4.01 years.

Mark Close - Oppenheimer & Close

That's on a present value basis?

Thomas Cangemi

No that's on the actual math.

Mark Close - Oppenheimer & Close

Yeah, but let's deal with the real world. There has to be present value. There is some cost to the capital.

Thomas Cangemi

Fair enough. When we went to the marketplace with a capital accretive deal and we're issuing stock at approximately 3.8 times tangible book to facilitate this transaction in a marketplace we feel confident that the slope of the curve is going to add sizeable benefits to earnings and we took that to shareholders and shareholders were very comfortable with this transaction and we felt that this was a good transaction to do at this particular time, but more importantly, [absent] the wholesale transaction, the current marketing conditions for our core business model has changed dramatically. We are locking in funding spends right now that are substantial and we haven't seen in about three to five years on wholesale and on retail, based on our multi-family trial. It was the right time to restructure our wholesale. We would restructure the wholesale through a merger transaction, we were very close in multiple occasions where we merged the transactions, the reason, the deals were not done were not because of pricing, was not because of social issues. It was because we could not dispose of the assets. We felt that this was a riskless type of transaction in respect with execution versus doing an M&A transaction and dealing with both the regulatory approval side as well as dismantling the assets. And the assets right now in this environment are very difficult to sell.

Mark Close - Oppenheimer & Close

Yeah, I mean, I guess that it just makes a lot of earnings management as opposed to shareholder accretion especially relative to your tangible capital levels, and the question again I go back to is when would this funding have run-off on its own or when would you have been able to refund it without this $300 million dollar charge?

Joseph Ficalora

Yeah, I think that what you're asking about is history and not tomorrow.

Mark Close - Oppenheimer & Close

I know, but you are saying that this, we shouldn't view a $300 million charge as part of your operating earnings. [Balance sheet] management in a spread bank, that's exactly what it is.

Thomas Cangemi

Well, let me go back to the point on when we expected that money. So, actually we say, we don't know. It was either 10-year hold on and maybe not just for another eight or nine years so we obviously take advantage of walking the significant benefit today. There is no guarantee that some of these issuances would have been called depending the rates are. It's anyone’s guess, correct? So we felt at this particular time where the credit was heading and where our portfolio was heading, we felt it opportunistic to do this transaction.

Joseph Ficalora

I think it's simple to say that it saves 200 basis points on $4 billion of liabilities immediately, so without question, the ability to save $80 million a year is definitely well worth doing, and I think that's the whole point here. If you like to you know lets go into more detail about this, Tom will be available to talk further offline but there's no escaping the fact that the economics are very clear. The stock that was issued resulted in opportunity to increase earnings for all shareholders double digit by reducing our actual cost of funds by $80 million a year.

Mark Close - Oppenheimer & Close

Well, it only reduces, it only increases your earnings power if you don't count the $0.60 it cost.

Thomas Cangemi

We cannot give it that way, can't look at that way. It was easier to get. Thank you.

Mark Close - Oppenheimer & Close

Thanks.

Operator

And now we'll hear from Gary Gordon, Portales Partners.

Gary Gordon - Portales Partners

Hi, thanks.

Joseph Ficalora

Gary, how are you?

Gary Gordon - Portales Partners

Good. A question about prepayment fees, which are down last from last quarter on a year ago and that makes common sense to me as the department owner, I would think it's a tougher sale environment its.

Joseph Ficalora

You're 100% correct. The uncertainties within the market and the continued adjustment by major property owners as to what they are going to sell and what they are going to refinance has been part-and-parcel of what's been going on here. As we go down the road, there will be more and more intentional owner decision-making that will refinance their assets. In the last couple of quarters, there's been a re-digestion of where the markets are and what individual owners are going to do. The good news for us is that everybody that we have in our portfolio, I'm talking about the multi-family, everybody that we have in our portfolio has a short expectation to refinance. They take a loan that explicitly necessitates refinancing within five years. So that will happen. It's just a matter of which quarter it will happen in.

Gary Gordon - Portales Partners

Okay, so there is clearly an incentive to refinance because of the structure of the loan.

Joseph Ficalora

That's right.

Gary Gordon - Portales Partners

There's less of an incentive to refinance because of the sale or for cash out presumably?

Joseph Ficalora

Yes. That's correct.

Gary Gordon - Portales Partners

Okay. So I would suggest that if activity is slowing and your originations are strong, I would think that you are gaining market share?

Joseph Ficalora

Yeah, I think that that's true. That's likely every single quarter ahead, we should both gain market share and we should also have the benefit of seeing a ever continuing likelihood that the people that we're continuing to deal with are in fact the survivors of the cycle. They are going to be the people that will be not only making money on the assets that they hold and refinance but they’ll be the people that will actually be bringing to the table 1031 exchanges and other opportunities to buy into the market.

Gary Gordon - Portales Partners

Okay, good. And one last question. You mentioned in the release that you're taking three operating systems going to one.

Joseph Ficalora

Right.

Gary Gordon - Portales Partners

Is that material expense saves? Want to quantify that?

Joseph Ficalora

I think, that it's hard to, by the time it's all complete, it could be in the millions of dollars and the savings across-the-board will be substantial in the way we operate the various individual banking components that we have today. So, I think that that will be a very substantial savings as we go down the road.

Gary Gordon - Portales Partners

Okay, thank you.

Joseph Ficalora

You're welcome.

Operator

And now we'll move to James Abbott with FBR Capital Markets.

Joseph Ficalora

Good morning, Jim. Welcome back.

James Abbott - FBR Capital Markets

Good morning to you, thank you. Did you miss me last quarter?

James Abbott - FBR Capital Markets

Well, I had a couple of questions on the reserve. Historically, you've had some small charge-offs, very small but you've allowed the reserve to loan ratio to decline a little bit. In this quarter, you obviously put a provision in there. Is that, should we interpret that as a signal that we've kind of reached a low level, low watermark on the reserve?

Joseph Ficalora

I think it's a composite of all the other factors. Obviously this quarter had a huge amount of noise. This quarter had a huge contribution to our capital position. There are lots of things that are unique to this quarter. I wouldn't over interpret what it means about the quality of the loan book or the assessment of the market. We believe the market place is going to deteriorate significantly quarter-by-quarter-by-quarter, and we believe that we have more than an adequate reserve. I think as Tom mentioned earlier, we look at this quarter as an opportunity to do something internally that we normally would have done through a transaction. Doing an accretive deal always has added to our reserve and we decided that this is a good quarter in which to add to our reserve. The fact is if you look over the years, our reserve has gone up. We haven't made a contribution to our reserve other than to the successful acquisition of companies and the way those reserves have been reallocated based on the assets that we kept in the portfolio. So, I think, I wouldn't read anything special into this other than the fact that the unique circumstances of this quarter, presented an opportunity to raise the reserve as we in fact improved double-digit our earnings per share. The important thing is that this quarter has created significant upward momentum in our margins, in our earnings per share, in our capital position, and that's just consistent with that.

James Abbott - FBR Capital Markets

Joe, what would allow the reserve-to-loan ratio to continue to decline there? Because from a coverage ratio perspective you’ve got years of coverage and so historically that's kind of been the --

Joseph Ficalora

I think the best way to look at it is, and there are different perspectives here, the SEC perspective is different than the regulatory perspective and certainly the investors or bank perspective. The reality is we have had de-minimis charges over the course of multiple cycles. We've had de-minimis charges through the worst of times that the last several decades have presented. We will have charges over the cycle that we're in today but they are not going to be very large charges. So the adequacy of our reserve is driven by the actual charges that may go against the reserve, and when you think about it, we've had a very, very strong experience in that regard. So to compare our percentage to the percentage of a bank that in the last let's say 15 years has charged off 690 basis points over the course of those years, versus us that has charged off maybe 0.2 or 0.3 basis points, I think would be a mistake. So I don't think the reserve levels that are common with regard to loan losses. The reserve levels that are common to the industry are not relevant when looking at the actual losses that we've taken. So the statistics verify what I just said. It is not a matter of in order for everybody to be comfortable we all have to have the same reserves. It's not so.

James Abbott - FBR Capital Markets

Did the special mentioned loans or loans of concern increase at all that would cause you to try to maintain the reserve ratio?

Thomas Cangemi

Jim, it's Tom. I would answer that in the respect of the commercial bank. It's a different operating platform. You know, we've been saying that all along quarter as the quarter, a lot of these charges came from the commercial bank. A lot of unsecured credits and again, if the economy becomes very challenging which is very possible, you can look to see additional charges of the commercial bank. We haven't had a loss on the mortgage portfolio in many, many years. So I think what you are seeing here is legacy assets that are unsecured, we're charging them off. Obviously this has a lot to do with the economy, as the economy suffers a great deal, you would expect to see additional weakness at the commercial bank, and you know when we have to look at the reserves independently, both of community bank and the commercial bank.

James Abbott - FBR Capital Markets

So you are saying that there was not a material shift at all in the--

Thomas Cangemi

Mortgage portfolio is extremely strong. We're seeing obviously look at the NTAs, it's not a material move but one or two loans and we feel confident that will work them out.

James Abbott - FBR Capital Markets

But this is commercial bank. So within a commercial bank there was some meaningful shift in the loans of concern, the watch list.

Thomas Cangemi

Well, they probably were charged off. That's why we have $1.2 million charge-off. Some are commercial, some are some community, some like for example auto paper, and when auto loans, they don’t find the auto, it's going to be charged off. We have about approximately 30 million left in that portfolio. Our goal is to wind it down to zero.

James Abbott - FBR Capital Markets

No. I'm not speaking about the charge-offs. I'm speaking about the watch list behind the scene, stuff that we don't get a chance to see.

Joseph Ficalora

I think the important thing and I've said this before, because loans are watch listed or otherwise characterized as non-performing does not have the same result in our portfolio, as it typically has in other loan portfolios. So, if and I'm just going to throw out a number. If a bank has an experience, where 13% of the loans that go non-performing, result in a loss of 10 or 15% of the value of the loan that's their experience. In our case, even when loans are non-performing over the course of years, many ,many years, we've had non-performing loans that were watch listed or otherwise a higher visibility that have had zero losses.

James Abbott - FBR Capital Markets

Okay.

Joseph Ficalora

So I think that's the important distinction that people miss. Just because the number of loans that are special mention or are on a watch list have gone up, it doesn't mean we're going to take a loss. The actual experience has been because we under write with the right people properly that we have very little loss even when there is a circumstance where there is a delay in making a payment. It doesn't mean that we won't have loss. It just means that our experience is not typical to the industry.

James Abbott - FBR Capital Markets

Okay, let me just move on --

Thomas Cangemi

We're seeing very strong trends right now, so we're very comfortable with the asset quality. We are not seeing any substantial changes, which is a positive thing. That could change at any quarter, the marketplace changes on a daily basis. We're seeing very good performance and I got to tell you the mortgage portfolio extremely strong. I reiterate the commercial bank, when you have unsecured assets you have businesses that fail you have to deal with those issues. But on the mortgage side, we're a cash flow lender and we lend very prudently and we see the construction book is very strong, we're holding up very nicely outside of we're principally in the New York area. It's a pretty strong market right now and there is no guarantee New York going to stay strong forever but right now the trends are very favorable.

James Abbott - FBR Capital Markets

Can you give us real quick shifting gears because I've got to hop here but the CD duration, did you extend that at all during the quarter? Do you plan to extend it?

Thomas Cangemi

Just a little bit. We're seeing some customers go out 18 months, two years but I'd say on average, we're probably in the 70% of our CDs are due within one year. We're not getting the benefit as we had in the previous two quarters of 200 basis points but we'll probably get 50 to 75 depending on where we price our rates. You just pay attention to the local papers here; again, banks are raising rates dramatically. I think it has a lot to do with some of the headlines that are out there, but we're still well below the spectrum and as liquidity needs take place, we're pricing our CDs below the market.

James Abbott - FBR Capital Markets

And your GAAP today? Your one year GAAP?

Thomas Cangemi

It's probably I'd say slightly neutral. Take 1% or 2% negative positive right around neutral.

James Abbott - FBR Capital Markets

Okay, so no real change from prior quarter?

Thomas Cangemi

Obviously, we did the big change with the repositioning. And it went out well over three years but it's where we are for the wholesale book.

James Abbott - FBR Capital Markets

And then on your loans, the ones that prepaid that contributed the prepayment penalty income. Were there any larger loans that were included in that?

Thomas Cangemi

Not at all. A lot of small stuff. Nothing major there. I don't think even a million dollars.

James Abbott - FBR Capital Markets

So, nothing large that we should consider as one time?

Thomas Cangemi

Oh, absolutely not.

James Abbott - FBR Capital Markets

Okay, thanks.

Thomas Cangemi

Very well.

Operator

We'll now move to Steve Moss, Janney Montgomery Scott.

Steve Moss - Janney Montgomery Scott

Good morning.

Thomas Cangemi

Hey, Steve.

Steve Moss - Janney Montgomery Scott

With regard to the borrowings that were restructured this quarter, when are they callable?

Thomas Cangemi

A lot of them are on average, we went out and we blended it but I would say the vast majority of our liabilities we're looking at like the 10 year three structure, 5-2 structure, I think the vast majority is a 10-3 structure. So you have a three year lock out.

Steve Moss - Janney Montgomery Scott

Okay. And then moving back to the --

Thomas Cangemi

Just to reemphasize, the stuff that was restructured was callable today. So that's the analysis that was very helpful for us, protection if rates do go higher.

Steve Moss - Janney Montgomery Scott

Okay. And then with regard to the securities portfolio here, in your 10-Q, where were the pool trust preferred classified?

Thomas Cangemi

They were all marked in assets; there is no consequence to capital. They were locked down on a monthly basis and every quarter we present our quarterly mark through AFS.

Steve Moss - Janney Montgomery Scott

Were they within capital trust notes or corporate bonds?

Thomas Cangemi

Combination of both.

Steve Moss - Janney Montgomery Scott

Okay. So the corporate bonds, they had a pretty significant market March 31for those the income notes

Thomas Cangemi

Those we marked in both. We had a mark on the income notes, we had a mark on the pool trust preferred that we had. And we also had a mark on the perpetual securities which, there were three issuers of which one was Freddie Mac, up for obvious reasons, we marked that down.

Steve Moss - Janney Montgomery Scott

Great. And what else remains within the capital trust notes?

Thomas Cangemi

I think the remaining left is about $17 million on the income notes. That's what's left in the portfolio. We obviously, we though it went in deferral and we were obviously felt that it's important to write them down this quarter. Clearly, they could cash flow back up but they were given significant cash flow for multiple years of which these are legacy laws on purchases. So, we had them earning a very nice yield of return and we were prudent to write these down in this particular quarter because of the changes in the marketplace. No question there's been a significant amount of deferrals in the full of the income notes are the first ones to be affected by that.

Steve Moss - Janney Montgomery Scott

Okay and within the health and maturity category where you have the capital trust notes, what's in there?

Thomas Cangemi

Again, various securities with multiple banks, local banks, large money center banks, we're pretty confident on the quality there. Both on financial sale and investment grade, some investment grade, some are non-investment grade. Some are local competitors that we socialize and we know that franchise very well. These are securities that were under written as loans to companies.

Steve Moss - Janney Montgomery Scott

Okay. Thank you.

Thomas Cangemi

And we're very confident there.

Operator

And our final question today will come from Tom Alonso, FPK.

Tom Alonso - FPK

You've actually managed to answer most of my questions.

Joseph Ficalora

Hi, Tom, how are you?

Thomas Cangemi

How are you?

Tom Alonso - FPK

How are you guys holding up?

Joseph Ficalora

Good.

Thomas Cangemi

Okay.

Tom Alonso - FPK

Yeah, most of mine have been answered, thanks.

Joseph Ficalora

Very well, you have a good day.

Operator

And with that I'll turn the call back over to Mr. Ficalora for closing remarks.

Joseph Ficalora

Okay, thank you. On behalf of our Board and Management team, I thank you again for the opportunity to discuss the strategic actions that impacted our second quarter performance and the benefits we expect to see in the quarters ahead. In the midst of a significant downturn in the financial and housing markets we remain intently focused on our business model which has enabled us to sustain our solid fundamentals at this time, as in the past, strong asset quality, profitable loan production, and efficient operation, and a balance sheet that is increasingly solid and there for well positioned to capitalize on opportunities for prudent growth in the quarters ahead. Thank you.

Operator

And now we'll conclude your conference for today. Thank you for your participation. Everyone have a wonderful day.

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Source: New York Community Bancorp Inc.Q2 2008 Earnings Call Transcript
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