Q4 2023 New York Community Bancorp Inc Earnings Call

Participants

John J. Pinto; Senior EVP, CFO & Principal Financial Officer; New York Community Bancorp, Inc.

Lee Matthew Smith; Senior Executive VP & President of Mortgage; New York Community Bancorp, Inc.

Reginald E. Davis; Senior Executive VP & President of Consumer and Corporate Banking; New York Community Bancorp, Inc.

Salvatore J. DiMartino; Executive VP, Chief of Staff to the CEO & Director of IR; New York Community Bancorp, Inc.

Thomas Robert Cangemi; President, CEO & Director; New York Community Bancorp, Inc.

Bernard Von Gizycki; Research Analyst; Deutsche Bank AG, Research Division

Broderick Dyer Preston; Analyst; UBS Investment Bank, Research Division

Casey Haire; VP & Equity Analyst; Jefferies LLC, Research Division

Christopher Edward McGratty; Head of United States Bank Research & MD; Keefe, Bruyette, & Woods, Inc., Research Division

Christopher William Marinac; Director of Research and Banks & Thrifts Analyst; Janney Montgomery Scott LLC, Research Division

David Smith; VP of Banks & Consumer Finance Equity Research; Autonomous Research US LP

David Patrick Rochester; MD, Director of Research & Senior Research Analyst; Compass Point Research & Trading, LLC, Research Division

Ebrahim Huseini Poonawala; MD of United States Equity Research & Head of North American Banks Research; BofA Securities, Research Division

Jon Glenn Arfstrom; MD of Financial Services Equity Research & Analyst; RBC Capital Markets, Research Division

Manan Gosalia; Equity Analyst; Morgan Stanley, Research Division

Matthew M. Breese; MD & Analyst; Stephens Inc., Research Division

Stephen M. Moss; Research Analyst; Raymond James & Associates, Inc., Research Division

Steven A. Alexopoulos; MD and Head of Mid-Cap & Small-Cap Banks; JPMorgan Chase & Co, Research Division

Presentation

Operator

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the New York Community Bancorp Inc. Fourth Quarter 2023 Earnings Conference Call. (Operator Instructions)
I would now like to turn the conference over to Sal DiMartino, Chief of Staff and Vice President of Investor Relations. Please go ahead.

Salvatore J. DiMartino

Thank you, Regina, and good morning, everyone. Thank you all for joining the management team of New York Community Bancorp for today's conference call. Today's discussion of our fourth quarter and full year results will be led by President and CEO Thomas Cangemi, who will be joined by the company's Chief Financial Officer, John Pinto; along with our President of Banking, Reggie Davis, and the President of Mortgage, Lee Smith.
Before the discussion begins, I'd like to remind you that certain comments made today by the management team of New York Community Bancorp may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements we may make are subject to the safe harbor rules. Please review the forward-looking disclaimer and safe harbor language in today's press release and investor presentation for more information about risks and uncertainties which may affect us.
Now I would like to turn the call over to Mr. Cangemi.

Thomas Robert Cangemi

Thank you, Sal. Good morning, everyone, and thank you for joining us today. Before we go into the details of this year's results, I would like to provide some commentary to put the past year into perspective. When I was appointed President and CEO 3 years ago, we embarked upon transforming the legacy New York Community Bank business model from a monoline thrift to a dynamic diversified full-service commercial bank.
2023 was an important inflection point. We built on the momentum created by the Flagstar acquisition that closed in December of 2022, and continue to successfully execute our transformation strategy while establishing a clear path for future growth. We reported $2.3 billion of net income available to common stockholders, up from $617 million in 2022. We significantly diversified our balance sheet with commercial loans representing an increasingly greater percentage of total loans.
Similarly, the percentage of noninterest-bearing deposits, the total deposits have nearly quadrupled since just before we closed the Flagstar acquisition. We began the Flagstar integration successfully meeting every milestone throughout the year with the systems conversion set for mid-February. We also unveiled a rebranding campaign that will launch shortly after the systems conversion is completed, which has been well received both internally and externally.
And we acquired select financial and strategically complementary assets and liabilities for Signature Bank, which strengthened our balance sheet by adding a significant amount of low-cost deposits and added a middle-market business supported by over 130 private banking teams. Importantly, the addition of Signature Bank catapulted us to over $100 billion in total assets, placing us firmly in the Category IV large bank class of banking institutions between $100 billion and $250 billion in total assets.
The last 3 years were all a buildup of this moment. And since the closing of the Flagstar acquisition, in particular, we have been preparing to cross this important threshold. When the opportunity to acquire Signature presented itself, and we were honored to be selected as the lending bidder by the FDIC, the benefits were clear. This acquisition allows us to advance our strategy while strengthening and diversifying our balance sheet.
However, this acquisition also meant, we will become a $100 billion-plus bank sooner than we had anticipated. Subjecting us to enhance financial standards, including risk base and leverage capital requirements, liquidity standards and requirements for overall risk management and stress testing. Alongside the integration of 3 banks, NYCB, Signature and Flagstar, and as we prepare for our first capital plan submission in April of this year, we have pivoted quickly and accelerated some enhances that come with being a Category IV bank.
Specifically, we are taking decisive actions to build capital, strengthen our balance sheet and risk management processes, which better aligns us with the relevant peers for a bank of our largest size and complexity. These actions include investing to strengthen our risk management capabilities to align with the enhanced prudential standards applicable to Cat IV banks as set forth under Reg YY. Building our reserve levels, which brings our ACL coverage more in line with peer banks including Category IV banks and adding on-balance sheet liquidity as we prep for Regulation of YY compliance.
We believe these actions are another prudent step in enhancing our risk management infrastructure. I will go on to more detail in a moment and how these actions impacted our results in the fourth quarter. We are also accelerating our capital build by reducing our common stock dividend to $0.05 per share. We understand the importance and the impact of the decision to our stockholders. This was not made lightly. While NYCB remains well capitalized under all applicable regulatory requirements, resetting our capital allocation priorities was a necessary step to accelerate the building of our capital. We are confident that these actions we took in the fourth quarter and the continued execution of our strategy will position the company to deliver enhanced value over the long term.
We successfully grew into a $50 billion-plus bank in 2018, and we believe the actions we are taking now are building the foundations to make all transition to a $100 billion-plus bank even more successful. Moving now to the results. The company reported $2.3 billion of net income available for common stockholders in 2023 or $3.24 per diluted share. On an operating basis, which excludes merger-related charges, a $2.2 billion bargain purchase gain related to Signature transaction and a onetime special FDIC assessment of $39 million, reported net income available to common stockholders of $609 million or $0.80 per diluted share.
As I said earlier, the actions we undertook impacted several items during the fourth quarter. In the fourth quarter of 2023, we reported a net loss of $252 million or $0.36 per share. On an operating basis, the company reported a net loss of $193 million or $0.27 per share. Our fourth quarter results were impacted by the actions we undertook, including a $552 million provision for credit losses.
Let's begin with asset quality. Nonperforming loans were stable in the fourth quarter as compared to the third quarter of the year despite some continued reasons in the commercial real estate sector. At December 31, 2023, nonperforming loans totaled $428 million and represented 37 basis points of total loans compared to $435 million or 40 basis points in the previous quarter.
During the fourth quarter, we significantly built our reserves to address office sector weakness and an expected increase in criticized loans due to repricing risk in the multi-family portfolio, which better aligns NYCB with our relevant peer banks, including Category IV banks. At December 31, 2023, the allowance for credit losses was $992 million, up $370 million compared to the previous quarter and represented 1.17% of total loans, up from 74 basis points compared to the previous quarter.
Excluding loans with government guarantees and lower risk mortgage warehouse loans, the ACL coverage was 1.26% in the fourth quarter compared to 80 basis points in the previous quarter. Since the third quarter of 2022, we have built our reserves of $774 million. Net charge-offs for the quarter were $185 million or 22 basis points of average loans, driven by 2 loans. First, we had 1 co-op loan with a unique feature for pre-funded capital expenditures. Although the borrower is not in default, we transferred the loan to held for sale in the fourth quarter and expected to be sold during the first quarter.
Importantly, this loan is a one-off, and our review did not uncover any other co-op loans similar to this one. Second, we had an additional charge-off of an office loan that became nonaccrual in the third quarter based on an updated valuation. This one was more than we originally expected, and we responded by recalibrating our qualitative factors in the office portfolio to address the issue and increase the ACL coverage on the office portfolio.
Collectively, these 2 loans accounted for the bulk of the charges we took during the fourth quarter. The other major action we took was regarding our on-balance sheet liquidity. During the fourth quarter, we began preparing to be Regulation YY compliance. This was earlier than we originally anticipated, we thought it prudent to be ready to meet the enhanced liquidity requirement that applies to Category IV banks. Therefore, we have monetized some of our contingent liquidity sources and starts to build our on-balance sheet liquidity during the fourth quarter, which has continued into Q1.
We realized that this will negatively impact on net interest margin in the short term, but it is essential that we as a newly minted $100 billion bank prudently manage our liquidity. Moving next to net interest margin. The fourth quarter net interest margin came in at 2.82%, down 45 basis points compared to the third quarter. This was 18 basis points lower than our guide of down 27 basis points. The 18 basis points variance to the guidance was largely due to actions related to increase our on-balance sheet liquidity and higher deposit costs.
On the lending front, total loans held for investments were up in $624 million or 3% annualized compared to the third quarter of 2023 to $84.6 billion. Most of the growth occurred in the C&I portfolio, partially offset by a decline in multi-family, while the rest of the CRE portfolio remain unchanged. At December 31, 2023, total commercial loans represented 46% of total loans, while multi-family loans represented 44% of total loans, representing significant diversification from a year ago.
Turning now to deposits. Total deposits at year-end were $81.4 billion compared to $82.7 million at the end of the third quarter. The decrease was primarily driven by an expected $1.8 billion decrease in custodial deposits related to the Signature transaction. Excluding these deposits, the total deposits increased $457 million or 2% annualized compared to the third quarter, primarily driven by growth in CDs, partially offset by lower noninterest-bearing deposits.
The shift to higher cost CDs was due to increased competition and customer behavior. Deposits from legacy Signature teams, excluding deposits to the loan portfolio, we did not retain increased $1.5 billion since the end of March. Moving now to expenses, excluding non-interest expense, we -- noncore expenses, which this quarter included the FDIC special assessment of $39 million, total OpEx for the 3 months ended December 31, 2023 were $557 million, down $28 million compared to $585 million for the 3 months ended December 30, 2023.
The decrease was primarily driven by compensation and benefits expense due to lower incentive compensation expense, partially offset by higher professional fees. Turning now to our full year 2024 guidance. In the past, we have typically provided us quarterly guidance. However, in order to provide more transparency and to be more in line with industry peer practices, we are providing expanded full year guidance in which we have summarized in our investor presentation on Slides 36 and 37.
In 2024, we expect period ending total loans to declined 3% to 5% compared to December 31, 2023. Period total deposits to increase between 3% to 5%. Cash and securities balances to increase $7.5 billion on a combined basis. The net interest margin, 2.4% to 2.5% for the full year, inclusive of actions to increase on-balance sheet liquidity for Regulation YY compliance.
Noninterest income in the range of $570 million to $620 million, which includes mortgage-related income of $220 million to $260 million. Operating expenses in the range of $2.3 billion to $2.4 billion due to a full year impact from Signature Bank, the full year impact of 13 private banking teams from the former First Republic Bank, Signature Bank Integration deferral for 2025 in order to minimize customer impact and additional costs related to becoming a Category IV bank. Normal compensation and benefits expense increases and approximately $60 million of conversion-related savings from Flagstar.
We expect our CET1 regulatory capital ratio for the holding company to be at 10% by year-end 2024, and a 22% full year tax rate. We entered 2024 having taken prudent balance sheet actions as we become a Category IV bank. Importantly, the bank has a solid foundation in place and a proven track record across business cycles. We believe we are positioned well to navigate our growth and development as an organization and deliver for customers, and we are confident that it will enable us to deliver long-term value to stockholders.
Finally, I would like to say a special thank you for all of our teammates. We have a fantastic team. And as always, we deeply appreciate the dedication and commitment to our clients, customers and communities. With that, we'll be happy to answer any questions you may have. Operator, please open up the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Ebrahim Poonawala with Bank of America.

Ebrahim Huseini Poonawala

I guess maybe if we can start on credit. So, obviously, you took a huge reserve build this quarter. Just talk to us in terms of your expectations around losses going forward. So one, what's the reserve build at the end of the fourth quarter cover and what that implies for future reserve build through the course of 2024? And then give us a sense relative to the charge-offs you took in the fourth quarter, 22 basis points. Where do you see credit losses migrating next year? And if you expect any losses to come from the multi-family book?

Thomas Robert Cangemi

Appreciate the question, Ebrahim. Let me just give you a general view of the fourth quarter and the process on where we came in at. Obviously, we looked at the marketplace, looked at the office perspective and the general office weaknesses throughout the country. And we really did a deep dive in the office portfolio as well as thinking through payment shock and interest rate shock given the rise of interest rates that we've experienced over the past few quarters, in particular, the impact to our customers in respect to repricing.
We took into account that perspective and clearly had significant addition to our reserve build, a lot of that reserve build went into the office, in particular, I believe the number one from 200 basis points reserve going from Q3 to 800 basis points reserve in particular for office. So given that we gave out the statistics on the actual performance of the portfolio, there hasn't been a whole lot of change in respect to the NPAs and delinquencies.
However, we had moved some of these loans into a status of criticized [positions] because of the nature of looking -- thinking about the office sector and the reserve build out with the anticipation of office still having difficulties within the marketplace. That being said, 800 basis points, I believe, gets us very close to in line with our current peer group, which is a new peer group Category IV banks that I indicated in my previous remarks, and we're confident that we continue to look at the portfolio at -- in significant detail as we are now benchmarking ourselves into a marketplace that has changed.
No question has changed, and we're focusing on payment shock, interest rate shock and the developments in the commercial space. If you want to meet, John, if you want to add some more comments back to the ACL and the application there as well.

John J. Pinto

Sure, Tom. And besides the office, portion of the ACL build. The other item that Tom mentioned earlier is around the multi-family loan portfolio and the repricing risk in that portfolio, as we see our loans continue to hit their option date and reprice higher, we want to make sure that, that risk is captured in the qualitative factors as well this quarter. So we were able to do that and increase the reserve on multi as well. So we saw increases specifically in office and CRE and multi when you look at a coverage ratio from an ACL perspective.

Ebrahim Huseini Poonawala

Right. But do you expect that the coverage and the pressure on multi translating into losses on that portfolio?

John J. Pinto

On the multi-family portfolio, we have not seen significant losses in multi-family with the exception, of course, of the one loan that Tom mentioned, the multi-family co-op loan, which goes up to the multi-family category. And historically, if you look back at what we've had higher levels of substandard throughout the financial crisis throughout the pandemic those -- just the rise in substandard loans does not lead directly to specific losses.
So we're still very comfortable in the quality of the multi-family portfolio. We're not seeing anything on the early stage delinquency side yet either. We did see a little pop in [30 to 89], but a lot of those loans, we had about $60 million that cleared right after 12/31 in the first couple of weeks of January. So we're not seeing any significant trends in the multi-family portfolio besides the repricing risk that we spoke about.

Thomas Robert Cangemi

Ebrahim, in this -- comment I would add that when you think about how we looked at the forward curve, when we looked at the interest rate environment as of the fourth quarter, we did not take into account changes in future interest rates when we shock cash flow, both the payment shock and interest rate shock. So we believe that's pretty cumulative in the event of a potential effect pivot. But we're assuming that rates stay where they are, and we roll that out for a year and what is the impact on future borrowers as that have to go into year 6, and it will go into an higher structure and to the amortizing structure, and we shock them.
That put a lot of those loans closer to a one-for-one debt service coverage ratio in some cases, slightly below on a pro forma basis, and that will be a substandard view of the asset, although they are in performance status. And as you all know, last year, we had an abundance of customers take the SOFR option when SOFR was much lower. And obviously, they ran through that. They're waiting on the sidelines. They feel very strongly that they are going to exercise their ability to lock in longer-term financing when rates move the other way. So they're sitting on the sideline, staying in the bank, go for positive spread, and we'll make the decisions when there's a possibility of a rate change. That's what we're hearing from our customer base.

Ebrahim Huseini Poonawala

Got it. And maybe, John, just on the net interest margin. So fourth quarter is at 2.82%. Just give us the trajectory of the 2.40% to -- like what do you expect the NIM to reset in the first quarter? And then what -- is that guidance still hold if we get 3 or 4 rate cuts during the year?

John J. Pinto

Yes. Yes. On your second question, yes, the guidance would still hold the 3 rate cuts throughout the year. And if you look at the full year 2.40% to 2.50% margin, we're comfortable with that for the first quarter as well, probably a little closer in the first quarter to the lower end of that spectrum, but we're comfortable with the guide both for the year and for end of the first quarter.

Operator

Your next question comes from the line of Steven Alexopoulos with JPMorgan.

Steven A. Alexopoulos

So I want to follow up on net interest income. So you guys gave us most of the components for the 2024 guide without net interest income. You probably noticed your stock trading at $7 premarket, which I think is a 20- or 25-year low. And it's because all of us are running the math on earning asset levels, applying the NIM guide and you get earnings that are down like 40% if you do that. Is that what you guys are guiding to for 2024?

John J. Pinto

So the guide we gave, when you look at net interest margin, you see where the loans come down and with deposits increasing that is not exactly where the totals we're seeing from down 40%. I'm not quite sure exactly how you came up with that number, but you got to look at some of the security builds as well and the cash on the balance sheet. So when you put all that together, from an earnings perspective, that sounds much lower than what we would have anticipated that you'd be coming out with.

Thomas Robert Cangemi

Steven, it's Tom. I would also add to John's commentary that we are solving for Reg YY, it's a substantial cash build in the billions of dollars. I think our guide has an additional $7.5 billion on top of 12/31 numbers for 2024. And that's going to really impact until that we rightsize our position on liquidity where we need to be as a Category IV bank have a negative impact on the margin in the short term.
Over the long term, we hope to normalize our cash positions as we rightsize our businesses and focus on relationship lending, where deposit base comes from the relationship and looking at that lines of businesses that are deposit rich, not deposit scarce. That's the journey as we go into this Category IV peer group. And clearly, this is impacting '24 for sure.

John J. Pinto

Yes. And there will be pressure, no doubt as we transition from loans to lower-yielding securities or cash. So that absolutely you'll see in that guide on the net interest margin. That's the transition that's going to happen in '24, and then we'll see that start to change as we can continue to grow the portfolio in '25 and beyond.

Thomas Robert Cangemi

And I would also add, Steven, is that clearly, we haven't seen any activity in multi-family CRE. So it's been about a 90% reduction in activity in originations. There are no real property activities happening right now. So we have a relatively low coupon on the book and billions of dollars that have the possibility of moving either into a higher coupon and off-log balance sheet has to be focused on relationship deposit lending.
And that's clearly the focus as we focused on commercial bank efforts to focus on doing commercial lending. But more importantly, reallocating our resources to businesses and lines of businesses that have a unique return perspective as a commercial bank will service a commercial bank. So it's prudent to expect that a lot of these larger relationships that we have that are not depository relationships will end up gravitating off the balance sheet probably to the government over time as rates reset themselves, and we have the ability to move on those low coupons off balance sheet as we rightsize our position as a full-service commercial bank.

Steven A. Alexopoulos

So if I put together everything you guys just said, why not just give us what you think net interest income will be in 2024? So we're not all guessing and maybe your stock won't trade down to $7. Like John, why don't you just tell us what you -- you might be wrong because you said basically, we did, we just took earning assets, we applied your margin. We said, okay, this is where NII is, fall it out with the other midpoints and it's not substantial.
You're saying it's not that, but you just cut the dividend, maybe you do your shareholders in favor and tell us what do you think NII will be in 2024? You know better than we do because you know what was impacted fully in the quarter. There are certain actions you took, which didn't fully impact the quarter. So why don't you just give us the color? So why don't just give us the number and make life easy?

John J. Pinto

Yes. Absolutely.

Steven A. Alexopoulos

You're stocking a 25-year low, I can't imagine you're happy with this. So unless you want -- I don't know why you wouldn't take this opportunity to level set expectations.

Thomas Robert Cangemi

Steven, we're very focused that the market will truly understand the strategy going forward. We're in a Category IV bank strategy. We were well positioned in the closing of Flagstar at the end of last year, and an opportunity came up to acquire Signature Bank. We took advantage of that opportunity. We're very grateful to have the FDIC approve that transaction, and we're in a different perspective when it comes to our peer group.
These necessary steps need to happen in respect to rightsizing ourselves in our new category of peers. And clearly, going forward, we're focusing on building the bank in the market where we set itself when it understands the strategy. We appreciate your commentary on the guide. We wanted to be felt it was prudent for us to give some guidance for the full year. As you know, Steven, you've been covering us for a long time, we've always given quarterly guide. We want to expand that.
But as John indicated, a lot of this is significant cash balances at a slight negative carry that's impacting the drag in the margin. And as we reset ourselves into the future, we believe that the market will truly understand the expectations of our Category IV expectations both the capital build, which is driven off the dividend adjustment, along with the guidance that we have, which is we feel is something that we felt more transparent as going out of full year, not just the quarter, to show where our CET1 expectations will be at the end of 2024. And more importantly, rightsize ourselves for the future as we build out our new Category IV expectations. In our new dividend.

Operator

Your next question comes from the line of Dave Rochester with Compass Point.

David Patrick Rochester

Just one on the expense side. Where do you guys anticipate finishing the year roughly just on a quarterly basis? I know you had talked about being elevated in the first part of the year as you go through your integrations, if you can talk about -- sorry if I missed it, but the updated timing on the Signature integration would be great?

John J. Pinto

Yes. So the updated timing, we pushed the signature integration into 2025, just to ensure we have minimal customer impact and make sure that we've gone through the Flagstar integration process. We're still on track for here in February, get through that integration. So that's why you'll see a little bit less of a cost save in 2024.
So your run rate at the end of 2024 will be a little bit higher. Yes, we've guided that the first quarter is typically a higher quarter for us, especially in compensation and benefits and as well as the systems conversion that will happen in February. So you will see the first quarter be the higher quarter. But from a trend perspective, the fourth quarter, when you're going into 2025, will be in that lower end of the range that we gave on an annualized basis with the start of the year at the higher end of the range.

David Patrick Rochester

Okay. And then just on the credit analysis that you've done for this quarter. It sounds like you're assuming stable rates through year-end, and I'm assuming that incorporates all the repricing you're expecting in the multifamily book through year-end. So it's kind of the catchall for everything that you're looking at through 2024. Is that right?

Thomas Robert Cangemi

Dave, I want to be clear on that. We did a deep dive in the Q4, and we assume rates that are the current level in Q4. We do not anticipate the forward curve adjusting downwards. So we took that into account when we looked at the ACL to establish the risk with respect to repricing.
I believe we have about $3 billion on to [$3 billion] Coming due to reprice in 2024.

John J. Pinto

That was only $3.4 billion.

Thomas Robert Cangemi

So when you take that into account as far as what that impacts these loans are going from a very low coupon to the market, with customers decide to lock in a fixed rate versus keep the floating rate as they make the decision. Last year, 80% or maybe more like 90% were taken SOFR option. In the beginning of obviously towards the tail end of '23, it was more like 75% and some of them will grabbing the fixed rate options.
So it's more compelling for them to take a fixed rate option now, but the rate is still high compared to the current coupon that they're coming out of. I will tell you with the specificity, customers are waiting on the sidelines. There's not a lot of activity. I indicated that 90% reduction in the business. People who are on the sidelines, they're expecting that rates will move in the back half of '24 and they'll make their long-term decisions in the next round of refinancing.
And as I indicated very clearly, we anticipate to focus on relationship deposit lending. So in the event we have a non-relationship model coming at a 3% coupon coming off the books, they'll probably end up in the government unless they want to be a full-service commercial bank line with the bank. That will gravitate our concentration of multi-family down significantly assuming that they're not going to be a full service relationship with the company. That is the strategy going forward. It's going to be relationship lending.
And clearly, we have an opportunity to take a very low coupon of the portfolio, assuming there's a shift in customer sentiment to lock in their next round of financing, which many of our customers are focusing in the second half of '24.

David Patrick Rochester

So with your bumped up classified loan balance, that assumes all the repricing that you're expecting for this year and where you see those debt service coverage ratios going based on the rates that you're seeing today, is that right?

Thomas Robert Cangemi

Yes. That's not on the SOFR curve, that's the active fourth quarter.

David Patrick Rochester

And those 2 options, the fixed option is still 2.50% over 5 and then the SOFR 2.50% over the SOFR, is that right? Those 2 repricing options?

Thomas Robert Cangemi

Just to be clear, we assume they all went into the SOFR options. So the more punitive option. We took conservatives in there. We do not take the fixed rate option as an option. So we went more conservative and looked at, soon everyone has arrived at the SOFR curve that decide to lock in the next round of refinancing, which also stressed debt service coverage ratio for SOFR versus the fixed rate option is more punitive.

David Patrick Rochester

And more recently, they've been going into the fixed rate option, right, because that's the least punitive option?

Thomas Robert Cangemi

The activity has been very, very slow. But what we indicated probably towards the back end of the fourth quarter of last year, more like 25% of them are locking in some fixed rate terms. It's still a high percentage of them willing to roll SOFR, well the expectation rates are going to be projected to go lower in '24.

David Patrick Rochester

Got it. And where is the multi-family reserve now? How much of that provision went into the multi-family book versus the office book...

John J. Pinto

Yes, when you look at the allowance coverage ratio quarter-over-quarter is up 95%. So we went from 42 basis points to 82 basis points.

Thomas Robert Cangemi

Historical losses is at [13] Lifetime losses at 13 .

Operator

Your next question comes from the line of Casey Haire with Jefferies.

Casey Haire

So a question on the 10% CET1 target. I kind of reiterate what Steve was talking about with the PPNR guide relative to consensus. And I'm coming out at like $875 million for next year, which I know you guys are talking about the balance sheet loans down, so you get some deleveraging on the risk-weighted asset front. But it's basically to get to that 10% that 90 bps of CET1 build. Credits going -- provision is going to have to be de minimis by my math. So kind of, again, I want to address what are you guys baking in for provision to get to that 10% level? And is that aggressive?

John J. Pinto

Yes. I mean if you look at the provision that we took in the fourth quarter, we're not -- we're expecting that, that covers the emerging risks and the portfolio that we have currently. As you know, through CECL, external factors, changes in the portfolio, macroeconomic changes is going to impact where our provision is going forward.
So historically, if you look at where our provisions have been, they have not been as big as, of course, we took in the fourth quarter. We are very comfortable with the early delinquencies that we're seeing and those trends have not dramatically jumped up. So when you look at that concept of where the provision can be, we'll flow it through, of course, our CECL models and go through that process.
But yes, there's not a -- anywhere near a significant provision as we saw in the third and the fourth quarter combined in 2024 that we're expecting right now given what we're seeing in the portfolio and in the portfolio dynamics. We do appreciate that substandard and criticized loans, of course, could still increase from here, and that's something that we will manage through as we go forward.
But when we're looking at that potential, that's what we've tried to capture in our CECL modeling with the facts that we know right now.

Thomas Robert Cangemi

Yes, Casey, it's Tom. Just obviously, the dividend adjustment, adding back to accretive of capital is also forecasted in that 10% CET1 for the year.

John J. Pinto

That's right. As well as the shrink in RWA is we're taking loans down, and we're growing it with cash and 0% securities to a lesser extent, of course, 20% security is in the Fannie and Freddie space.

Casey Haire

Okay. So of the criticized assets in office and in multi-family, it looks collectively, it looks at about $4 billion. How much of that is coming due in '24?

John J. Pinto

From a maturity perspective, it's a very, very low number. From an option perspective, it's a very manageable amount because when you look kind of through why it would be substandard is it's -- it was coming through in that year bucket that Tom mentioned. So when we're looking at repricing risk. A lot of the substandard category would be the stuff that's coming through in the next 12 months from a repricing perspective.
So when we look at the -- especially on the multi side, those would be coming up to their option date, a large portion of that number. And that's due to the fact that that's how we're capturing that repricing risk is that getting to that 1 0 or just over or just under 1 0 coverage ratio.

Operator

Your next question comes from the line of Chris McGratty with KBW.

Christopher Edward McGratty

John, the slide mentioned a goodwill impairment test. And I know in the past, when banks have had to write-off goodwill, it's led to the dividend. I assume this is a little bit reverse order, right? You cut the dividend first and may impair intangibles, goodwill going forward. Is that kind of the right way to read that?

John J. Pinto

Well, we're in the middle of evaluating the goodwill on our balance sheet and going through the process to see and evaluate if there is any impairment of goodwill. And as you know, that goodwill stems from transactions back to 2003. But we will evaluate that based on the facts in the fourth quarter and what we're looking at now as part of our impairment analysis, and we'll make that decision.

Christopher Edward McGratty

Okay. But if you were to impair it, would there be any subsequent action you think would need to happen, I guess, is my question.

John J. Pinto

Now from a capital -- from a regulatory capital ratio, the goodwill impairment wouldn't impact regulatory capital ratios. So there's not anything else that I would expect.

Christopher Edward McGratty

Okay. Great. And then maybe, Tom, for you. Whether it's a 50% or 40% cut to numbers, I think we can work through our numbers. But the ROE is going to be, by my math, kind of mid- to upper single digits. How do we think about just the ROE constructed this company now that you're through $100 billion -- understanding you've got some near-term headwinds. But how do you think about ROE?

Thomas Robert Cangemi

Good question. I mean obviously, '24 is going to be the year of the category IV comparatives for us. We have some heavy lifting to focus on regarding balance sheet metrics, the ACL, which we built up significantly, the dividend adjustment as we build CET1. But going forward, when we think about the long-term prospects of the business model, the company is in a unique position to compete.
We're focused on being within the median peer group over time. and we'll be gravitating with a significant enhanced liquidity position as a result of Reg YY. That's really driving the margin under pressure in '24. As we reset the cost structure as we integrate the systems, the processes and build out the businesses and we focus on businesses that have higher returns to the company. We focus on relationship banking, we would like to be in the median peer over time. It's not going to happen in '24, but that's the strategy over the longer term as the market understands the longer-term strategy to be a Category IV bank as peer group has changed dramatically.
Going from $9 billion prior to the acquisition of Signature in March into that right catapulted in that $100 billion club we have some balance sheet items that we need to focus on. And we believe we will focus in the Q4 to address some of those items, the capital build we talked about. Now it's going to be about operating effectively as an institution on enhanced potential standards and risk governance framework that's necessary as we roll out this Category IV bank. And over time, if you think about the median peer group over time, that's what we'll strive for. It's not going to be '24 story, it's going to be a long-term story, and hopefully, the market will truly understand the long-term story as they reset ourselves as a Category IV bank.

Operator

Your next question comes from the line of Christopher Marinac with Janney Montgomery Scott.

Christopher William Marinac

John, I know you talked a little bit about the migration of criticized assets. What are your thoughts that has to happen on those? And again, what did you recognize that, that could go wrong from here?

John J. Pinto

So -- yes when you look at the migration, a lot of it will do partially to interest rates. So depending on what happens to the 5-year part of the curve, that can change dramatically the trajectory of, especially the multifamily book. We're seeing the loans that hit their option date take that floating rate option. That is not the typical spot that these borrowers want to be.
So depending on what happens with rates, we can see some movement pretty quickly in that portfolio from a paying off perspective or just the rerating of that portfolio. As rates start to drop and the payment shock gets less and less, and we start to see more and more information on '23 financials and how the cash flows and the net operating income is coming on, that will start the trend of getting these closer and closer due out of the criticized buckets.
That's kind of the thought process we're looking at as it's dependent on interest rates and where they're headed. Given the trend we're starting to see now, we're hoping that, that's abated, then we could see less of that repricing risk from the customers.

Thomas Robert Cangemi

I just want to reiterate the magnitude of what we've seen historically with the customers that running in place, we were doing $8 billion a year in net originations as a company, and we ran in place. The growth was in mid-single digits net loan growth. And when we were stand-alone NYCB franchise focusing on multi-family lending.
Last year, our originations were indicated down 90%. We did about $100 million versus a very small number. $800 million. So that's a significant drop of activity. If things were to really focus on the next round of refinancing and locking in your longer-term funding scenario as a client, they're on the sideline, and they're going to focus on what's the next 5- to 10-year financing deal they'll tend to look at. And we feel very strongly that many customers are focusing on -- back after '24 to make that longer-term decision with the expectation that the Fed is in a position to pivot, which will have a position on our customers to take advantage of long-term financing.
Right now, if they lock in a fixed rate coupon, it's more attractive than the SOFR option. Many customers will choose to the SOFR option as they're looking to make those decisions as we go into the back half '24. We talked about the $3 billion coming due. Last year, most of those loans are SOFR, we see a little bit of a shift to fixed rate. At the same time, there's a significant appetite by the agencies to take these types of loans. And we're going to be very focused to rightsize our position to ensure that relationship lending stays on the book and nonrelationship lending will move outside of the portfolio as we reduce our exposure to this area and put our cash flows into businesses that have higher returns as a firm.

Christopher William Marinac

Tom. That's helpful background. And just a follow-up, I guess, is do any of your borrowers have alternatives outside of the banking industry, could they go to alternative funds? Or is that interest rate simply too great for them to consider?

Thomas Robert Cangemi

Great point. I mean, look, the government is open for business. They are a huge appetite for this product mix. The agency is always one of our largest competitors. There's other banking competition as well as some of the largest banks in the country. We're pricing our risk accordingly. We feel very strongly that it's going to be a relationship-driven model that will focus on true customer relationships and ultimately, our largest competitor is Fannie and Freddie, and they have probably closer to collectively to them, $200 billion of an appetite on an annual basis.
There hasn't been any activity. Last year was the lowest activity we've seen, actually lower than -- even during the pandemic. So we're in a unique position, given the fact that there's no activity. But when activity does pick up and rates do tend to move, customers will find the best vehicle and the government is very accommodated there.

Operator

Your next question comes from the line of Steve Moss with Raymond James.

Stephen M. Moss

Just kind of -- on the loan side here, just given the change in the growth outlook curious how are you guys thinking about commercial real estate concentrations relative to capital and how we're thinking about the loan portfolio remixing here going forward?

Thomas Robert Cangemi

Yes, great question, Steve. And obviously, we're targeting down on growth. That's really driven off of my dialogue talking about customers going to the government versus staying on our portfolio is not relationship. We are moving towards a relationship lending through a bank focus. And clearly, a lot of the lines of business which are high-return businesses will have the ability to build up our C&I book over time.
we have Reggie Davis here who can talk us about some of those specific files as well as Lee Smith and the warehouse. But clearly, we have a focus on moving out of a high degree of concentration, which you indicated and focus on relationship running and moving the cash flows into higher-return businesses.

Lee Matthew Smith

Yes, sure. I mean I think yes, from a warehouse lending point of view, as you know, we're the second largest warehouse lender. If you look at the mortgage market in Q4, it was down 12%, but our warehouse and MSR outstandings were flat. And I think we benefited from dislocation in the market, and we've grown market share from a mortgage finance point of view, and we're also leveraging those relationships from a deposit point of view.
So as I've mentioned before, we picked up a cash and treasury management team as part of the Signature acquisition, and they're working very closely with our warehouse team and our mortgage team to leverage deposits from our TPOs, warehouse borrowers, MSR borrowers and the MSR owners we subservice for. And right now, we're probably generating anywhere from $9 billion to $11 billion of deposits from that mortgage ecosystem that we touch.

Stephen M. Moss

Maybe just put it this way. Is there a commercial real estate to total capital ratio you guys are targeting longer term that we should think about going forward here?

Thomas Robert Cangemi

No. I mean, look, if you call about multi-family, I think our CRE ratio is probably in the mid -- low 100s. Is that right, John? Low 100s. But when you look at our legacy multi-family portfolio, which we've been doing for multiple decades, and we have a long track record of success there.
We're going to look at, like I indicated, very specifically, relationship deposit lending. So as we look at the marketplace, we have the lowest interest rates we've had in our [Republic Elite] that's going to have to make a decision in the out quarters and years ahead. You're going to be very prudent to manage that risk and manage the CRE concentrations and move it into higher-yielding businesses, assuming these customers are not depositors. It's going to be deposit driven. That's going to be a significant shift on our concentration by that business strategy as becoming a full-service commercial bank.

Stephen M. Moss

Okay. And maybe just one on office here. I mean, obviously, a big driver of the reserve build. As you guys stress to test that portfolio, is this -- do we think about this as a true up of the office reserve allocation? Or should we expect further reserve build of this level?

John J. Pinto

So we did a really, as Tom mentioned earlier, a really deep dive on the office portfolio and really took into account some of the more recent appraisals we're seeing and what we're seeing in that sector and really tried to capture that risk in that portfolio.
So the 800% coverage -- 800 basis points of coverage that we have there, we're comfortable with right now. We still have 2 loans that are the same loans we talked about in the third quarter that are sitting in nonaccrual. We haven't seen any other significant trends from a delinquency perspective yet in that portfolio. So we're comfortable with where we are now. We'll continue to revisit it, of course, as we get additional appraisals in for properties that have been rated that have been criticized.
But as of now, we're comfortable with where that is at an 8% coverage ratio. I think we've captured a lot of the risk in that portfolio that we've seen so far.

Operator

Your next question comes from the line of Manan Gosalia with Morgan Stanley.

Manan Gosalia

On the capital side, can you talk a little bit more about how we should think about RWA migration from here? So I know you're bringing your loans down as we move through 2024. But at the same time as some of these criticized assets move into NPLs, is there another push on RWAs? Is there another denominator effect for capital that we should be thinking about next year?

John J. Pinto

Yes. I mean as -- if nonaccruals do increase, then yes, we will go to 150% from an RWA perspective, but the big benefit that we're seeing from an RWA reduction is the actual loan portfolio reducing because the additions on the asset side in cash and securities, as we mentioned earlier, are at 0%. When we're looking at cash, of course, Ginnie securities at 0% and to a much lesser extent than Fannie and Freddie at 20%.
So that's the major items in the RWA walk, as you mentioned. It's the offset between any changes that we're estimating in nonaccrual compared to that more significant loan decline and RWA decline from the loan portfolio since there's no pickup on the security side there.

Manan Gosalia

Got it. And then on the percentage of book that you've scrubbed you're at current valuations. There haven't been many transactions. There hasn't been much price discovery. So how hard do you think you've hit valuations as you build reserves in that multi-family as well as the office book?

John J. Pinto

In the office book, I mean, we've looked at not only some transactions, as you mentioned, there's not a lot in the marketplace, but we have looked at the actual appraisals that we're getting and looking at the percentage change peak the trough and what those appraisals are and using that from a qualitative perspective to add to our office reserves.
On the multi-family portfolio, as we mentioned, we took rates where they are now. Took the more punitive structure that the option loans could turn into, which is the SOFR plus 2.50% and hit that along with any potential amortization that could come in place. So we really think we hit the portfolio from a repricing perspective on the multi side, especially for those loans coming over the next 12 months.

Operator

Your next question comes from the line of David Smith with Autonomous Research.

David Smith

The actions you're taking to tighten up from a regulatory perspective affect the pace of the private banking build out at all or the earn-backs that you're expecting there?

Thomas Robert Cangemi

So obviously, we are highly regulated, and we're focused on enhanced prudential standards. But in respect to Signature and the teams that we've built, they're doing a phenomenal job as indicated in my prepared remarks, they've had a great year. They really have stability for March. We're very excited about the stability.
And more importantly, they had growth, $1.5 billion net growth, and the teams are geared up. So First Republic team's started onboarding and focusing on relationship and white-glove service. I bet you, David, if you want to expand on some of the initiatives that we have working with the teams want to expand upon that as well.

John J. Pinto

Yes. And I actually want to speak more to the banking group because the private bank consists of the legacy of First Republic teams and legacy Signature teams, but we're now under one envelope. So kind of want to talk about the success and some of the progress that we've made in 2023. We've essentially taken 4 distinct teams and created 1 highly focused banking organization.
And as Tom mentioned earlier, we create a single brand, and we launched that brand internally in midyear, and that's something that seems to have really rallied around. And I think the brand represents the current capabilities and future aspirations of the combined company. We've also completed a restructuring of the banking group in total. So the new structure has some synergies, quite frankly, between the 4 legacy institutions taking advantage of each other's strengths.
And part of creating that new structure was reducing the number of client coverage models from 10 to 3. So now we operate as the private bank, the Commercial Banking group and the Consumer Banking group. And as a result of that, and I think Tom mentioned this, we discontinued operations in several legacy businesses to further focus on relationship banking. And so the translation of that is if we're going to use our balance sheet, we're going to use it to get deposits. And so we combined -- also combined 2 separate branch teams from legacy Flagstar and NYCB under 1 leadership structure.
We've introduced common routines, common client, engagement models, common tools across the entire network. And we've also accelerated onto a common platform with common AI tools across the entire branch network. We've also combined our retail investment business into 1 platform, 1 structure under 1 leader. And then we've also combined our wealth management organization with a clear mandate around teaming up with both the commercial bank and the private bank, the greater relationship experience. And so the legacy First Republic teams and Signature teams are under 1 leader.
And together, they comprise the private banking group. And as Tom said, their performance has really been stellar this year. They've recaptured all of the deposits that we lost in March and April time frame, which is about $1.5 billion, $1.6 billion. In addition, the DDA portion of that book has been rock solid at $11 billion, and that's essentially unchanged because that represents the operating accounts that are very much reflective of the relationship nature of those deposits.
And then also our retail bank only lost 3% of the deposits in March and April time frame. And quite frankly, we've captured all of that back as well. So those 2 businesses, the private bank and the retail bank are deposit engines for the company. And I might add, from a Signature perspective, we haven't lost any teams. And the addition of the Signature book has actually helped us from a mix perspective in our deposit book. It shifted it from a 39% pre-signature to 25% and CDs, which is actually more in line with our peers. So we feel really good.
Our deposits actually grew up 5% quarter-over-quarter, and that's a lot -- it has a lot to do with the growth embedded in our retail bank. And in the legacy Signature book, and we expect that to continue, quite frankly. We're starting to see more and more momentum and more success as those teams are part of our larger organization. So all good news stories.

David Smith

Okay. So not looking to really take your (inaudible) guess there yet?

Thomas Robert Cangemi

I think the reality is it's deposit, deposit, deposit. We have a great opportunity with some experienced bank is that are welcome here and the energy, as Reggie indicated, in that long we did answer, which is a lot of positive momentum. There's a lot of positive momentum. The conversion is happening in a few weeks from now. We're excited about that. One platform, one bank, one brand. But what's exciting about is that they are focusing on their white-glove service, what they do.
It's not really a lending model here. This is about deposit opportunity to service the clients and specifically in the middle market position.

David Smith

Okay. And then on capital, do you view the 10% target at the end of this year to be an ending point? Or would you be looking to ultimately get your capital ratios higher?

Thomas Robert Cangemi

Ultimately, as we think about capital, we were very clear in our public announcement this morning along with our views is that we want to be within the peer group. We have a new group that we have through to pertain to, and that's clearly the focus here. So as we gravitate to that double-digit CET1, the dividend adjustment plus what we'll call it a conservative view of guidance in respect to our balance sheet will generate increasing capital quarter-over-quarter with the expectation over time to be within a few.
That's the plan over the long term. Clearly, we have a long history of a strong payment in dividend. We have to go through the capital planning process. This is our first submission under the Reg YY with the Fed, that's going to happen in April, and we want to prepare for that accordingly.

Operator

Your next question comes from the line of Brody Preston with UBS.

Broderick Dyer Preston

I wanted just to ask within the deposit book. How much of the increase in CDs was brokered CDs this quarter? And then the uptick in the wholesale borrowings. I'm assuming that's all FHLB, what's the remaining capacity that you have for FHLB borrowings at this point?

John J. Pinto

So from an FHLB borrowing perspective, we have, as of 12/31 significant capacity to borrow, and we'll use that to continue to build our liquidity here in the first quarter to, as we mentioned earlier, prepare for Reg YY. So we're very comfortable with the on-balance sheet liquidity and the contingent liquidity we have behind that.
From the broker deposit question, broker deposits were up about $1 billion. Broker CDs were up about $1 billion quarter-over-quarter.

Broderick Dyer Preston

The influx in the CDs, the rest came from the retail network?

Reginald E. Davis

Yes. The rest came from the retail network, we actually raised about $2 billion over about 2 months. And that -- I mean, again, that reflects the strength of our retail franchise. About 72% of that were new to bank and about 28% were existing relationship, and we're able to cross-sell about 15% in on checking accounts. And that's going to set us up for next year in terms of converting some of those single product new clients into DDA accounts, relationship accounts.
And so it's not only -- it's good for the balance sheet, obviously, but long term, it also will add to a cheaper funding base. we feel really good about that. About 6,700 new clients.

Broderick Dyer Preston

Okay. Great. And then just on the deposit front again, I guess the 32.7% of the deposits are uninsured, but you also have escrows down this quarter for seasonality. I guess I wanted to ask, is the 32.7% uninsured, a good read on what percent of the deposit base is institutional clients at this point? If not, what percent of the deposit base is institutional clients?
And then secondarily, we saw at least one other bank that went through some stress on the deposit front earlier this year, signed NDAs with some of its larger depositors. Did you guys consider doing anything like that moving forward with some of your larger depositors so that they can feel good about the health of the balance sheet?

John J. Pinto

Yes. When you look at some of those uninsured deposits, they're not all institutional by any stretch. There's customers in there. There's businesses in there. So that's not the escrow or entirely large balance institutional deposits. If you look at the organizations we had some of those balances from a 15c3 and that type of money, those types of business institutional-type accounts, we don't have a lot of those deposits at all anymore.
I mean that deposit base that's uninsured is primarily business type deposits and operating accounts. And yes, there's a lot of DDA in there as well.

Operator

Your next question comes from the line of Matthew Breese with Stephens.

Matthew M. Breese

So understanding some of the actions to take in this quarter, the course correct is $100 billion -- over $100 billion bank versus some of your similar-sized peers. Are there additional capital-related actions to be considered apart from CET1? So I'm looking at total risk-based capital, 11.8%. Your peers are at 13.5%. Should we be considering any sort of need for additional sub debt to kind of get you to that peer range? And if so, when?

Thomas Robert Cangemi

So Matt, I appreciate the question. I will tell you that between forward guide along with the dividend adjustment and our targets for CET1, we're focusing on that specific area in respect to building capital. Obviously, we're waiting for the new rules on Basel III. That will come out and it will try to watch us as a Category IV bank over time. But no question, the adjustment on our distribution to shareholders, along with building out the business and running a run rate based on our guidance is where we're focused on the capital build.
So clearly, that's going to put us slightly below the table, but with the expectation of building capital over time and accreting capital going forward.

Matthew M. Breese

Okay. And again, understanding this quarter, you took some actions to course correct. Could you give us some balance sheet mix targets once you're done in terms of cash to assets, securities assets? So where you would like to be and by when?

John J. Pinto

Yes. Well, the main issue and thought process that we're talking through with this quarter on-balance sheet liquidity is just preparing for Reg YY. So if you look at where we were at 12/31 at 18% with the peers at 25%, we're going to be in that range. We'll be above 18%. So we're going to get to that 22%, 23% range and get closer and closer to peers.
As you know, our securities portfolio has historically been very small on a percentage basis to total assets. And that securities portfolio is really the main liquidity buffer that we need to keep in place here going forward. So that's why when we look at that portfolio, it will be significantly skewed towards 0% and 20% risk-weighted assets, high-quality liquid assets in order to ensure that we can meet our on-balance sheet liquidity demands and regulations. So I'd say that we'll be much closer to that 25% range of our peers over time, and we'll get there in the first and the second quarter.

Matthew M. Breese

And when you measure security, are we talking securities assets or total assets because I'm looking at 9%... Okay. So 9% securities assets today that's going to be -- near triple by next quarter?

John J. Pinto

No. We add cash in there as well, right? So I'm looking at cash and securities as a combined basis as a percentage of total assets, right? And that's how we manage that. That's how we manage on balance sheet liquidity. Normally, that will be more in the securities portfolio. Given the buildup here, it's starting in cash and over time, we'll be putting that out in the securities portfolio.

Reginald E. Davis

I think it's fair to say that the guide has most of these assets are sitting in liquidity in the form of cash.

Matthew M. Breese

Correct. And you assume that the lion's share of whatever you need to do here will be completed by the end of the first quarter? It's not going to drag out throughout the whole year?

John J. Pinto

That's right.

Reginald E. Davis

That is correct. Okay.

Matthew M. Breese

And then going back to the CRE concentration. So when you look at the CRE concentration versus peers, is it still appropriate to exclude multi-family given the repricing risk? And do the regulators look at it that way? I know for decade after decade, rent-regulated multi-family has been virtually risk-free. But post 2019, the rental has changes is the new paradigm in the release, in your commentary, you're discussing repricing credit risk here. It feels like the CRE concentration, including multifamily is the right one to look at with all the...

Thomas Robert Cangemi

It's a fair point. As you know, we're not going to speak specifically our regulatory conversations, but really, we understand our business very well. We also have a focus on looking at CRE concentration as a much lesser number after we focus on relationship banking. That is the mission of the new Flagstar.
We are going to bank customers that have deposits at the bank and their full relationship deposits. We have an opportunity here to significantly take advantage of market conditions and reduce low-yielding concentration, putting into high-yielding loans, higher-margin businesses over time, which are focused on its relationship with partners lending. That is a meaningful statement as we have no activity in the marketplace.
If you go back to history, when we were doing $8 billion, $9 billion a year in originations, we were running flat at 4% to 5% asset to stay flat. So when the market does react to changes in interest rates and customers look for refinancing, we have a golden opportunity here to take low-yielding coupons off the book. We do sell concentration materially here and move that into high-yielding assets and obviously focus on our liquidity expectations because having a lower compensating balance to the asset is not the focus of the new Flagstar. It's going to be well balanced towards relationship deposit lending. That is the focus of the institution on a combined basis going forward.
And we think that given the activity last year, as I indicated, it was 90% down there's no activity in the market, although the customer activity that we speak to, they're waiting on the sidelines. And they're going to react when they feel confident the next 5 to 10 years that financing for us. As some had indicated taking fixed rate loans, some will go into the agency now, but the agency has a huge appetite. And when the customer feels prudent that it's trying to lock in the next 5 to 10 years of financing, they will make that decision.
And we will work with our customers for balance sheet purposes. And if it's not a true customer relationship, that will be a significant reduction on our CRE concentration.

Matthew M. Breese

Over time, I mean there's a lot of peer comp going on this quarter. Over time, the CRE concentration you need to get the peer loans?

Thomas Robert Cangemi

Look, it's a huge business model of ours. We have a great track. We have great customers. They have lots of relationships on the deposit side. So we're obviously uniquely different. After we are, and it goes back to our roots. But ultimately, we're a new company. We're a commercial bank evolving from the monoline swift. We're excited about the lines of businesses that we have.
We're excited about the opportunity of mortgage in the ecosystem, what side of what Reggie Davis is doing what's his lines of businesses, and we have choices, and it's going to be based on a return on equity model, which is very different in history, where it was given a monoline business, which was multi-family CRE.
So we're going to reallocate those resources, take advantage of market conditions and work with our customers. We feel very strongly that just by the near fact that the coupon was coming off the lows, we have an opportunity to move a lot of assets at low coupon to make our balance stronger and earnings profile better.

Matthew M. Breese

Okay. Last one for me. The language here around being over $100 billion feels far more urgent today than just a few months ago. Has something changed on the regulatory front in terms of overall standing or time line to be ready for new stress testing? A lot, like I said, a lot of peer comparison here. If so, can you give us some updated time frame milestones? I know you mentioned April submission in terms of being prepared for the -- for stresses?

Thomas Robert Cangemi

Matt, we are obviously -- we're not going to speak specifically about regulatory conversations. We're a highly regulated institution and in an industry is probably regulated. But the reality is that we do have an April submission, we've invested our capital position significantly as well as ACL. Those are big steps as we forecast our submission to the Reg YY.
That's an important milestone. As John indicated, we're doing significant work on Reg YY on down liquidity. We went into the -- we catapulted into the $100 billion club post liquidity prices in March. We were preparing for that last year since it passed over organically. And we -- an opportunity came, and we thought it was a great opportunity for building out the conversion from a thrift model to a commercial bank model, and we are in a unique benchmark now.
We're in a different category. There's 8 of us that we benchmark too, and we want to get those ratios in line to that makes sense going forward as we run our business. And I think the market will understand what's in front of us. But more importantly, as we build new Flagstar, we're excited with the team and the energy as they gravitate to hear to come and be part of the brilliant team, we've made significant changes on the risk side, significant changes on bringing people in house as a larger institution. That's the journey that we're focusing on here.
So it is fluid given the situation in respect to the timing because it became a little bit unexpected in March of this year as we opted to be able to come in and buy Signature Bank through receivership. And now we have to make sure that we're in place to be honorable of the fact that we are a Category IV bank, and that's our regulatory obligations.

Operator

Your next question comes from the line of Bernard Von Gizycki with Deutsche Bank.

Bernard Von Gizycki

So with the sales of the CRE multi-family loans from Signature, how will that they seem now completed, how does that impact the expenses from the loss sharing and then the fees, some of that loan administration income that you had and how we think about that for '24?

John J. Pinto

Yes. So if you look at those transactions that hit the marketplace, we eagerly expect that those loans will transfer off our servicing platform this quarter entirely. So we will see some loan servicing income a little less than we saw in the fourth quarter. We'll see some of that come in, in the first quarter. That's within the guide that we gave.
And then from a cost save perspective, that -- some of that information once we get through the Flagstar integration, some of those cost saves are in that -- the noninterest expense walk that we put together in the slide deck. So that's included in that number. So from a quarter-over-quarter perspective, we'll see a decline in fourth quarter to first quarter in income from the subservicing.
And then by the second quarter, we expect that those loans will have transferred out so that we will have some cost saves that come out of that, and then the income will disappear there.

Bernard Von Gizycki

And then just as a follow-up. I know there haven't been many transactions and it sounds like you're more focused on appraisals. But did these sales potentially impact your decisions to add reserves for multi-family and office? This is the Signature sales?

John J. Pinto

Yes. No, a lot of the information we're getting, a lot of it specifically comes from the appraisal we're seeing in our portfolio. We are looking at market and any market indications that we can get our hands around and using that as well. So we're taking into account as much information as we can to develop the right qualitative framework for the -- for especially the office portfolio.

Bernard Von Gizycki

So those sales had no impact on the qualitative factor that you're mentioning?

John J. Pinto

Yes. No. From a -- we're looking at information in the marketplace, but specific sales from a portfolio perspective, would not be as important for us to look at as the individual appraised information and individual factors we're getting on our book.

Operator

Our final question will come from the line of Jon Arfstrom with RBC Capital Markets.

Jon Glenn Arfstrom

Just 2 questions, 2 important questions, I think. There's some confusion on this, but did the dividend reduction have anything to do with your outlook for credit? Or was it more about looking peer-like and adjusting for the new earnings run rate?

Thomas Robert Cangemi

Great question. Let me be crystal clear on this. This is razor focused on looking at the company's long-term plan and being part of the new Category IV banking institutions and having a capital position as we grow it into a level that we're in our peer group. And clearly, the dividend significantly increases that capital efficient in 2024 and beyond.
When you take all of the factors that we talked about between forward guidance and the dividend adjustment, we get our CET1 to double digits. That is primarily focused on the rationale there as well as thinking about the future growth of this company as a Category IV bank. And there's no question that this was a difficult decision as a firm, but clearly necessary as we reestablish our capital allocation story.

Jon Glenn Arfstrom

So really not -- it's more about the latter. It's not about your outlook for credit is what you're saying?

Thomas Robert Cangemi

Yes.

Jon Glenn Arfstrom

Okay. Tangible book value a little over $10, maybe a simpleton question, but do you expect tangible book value to grow in 2024?

John J. Pinto

Yes. Yes, we do.

Operator

With that, I'll turn the call back over to Thomas Cangemi for any closing remarks.

Thomas Robert Cangemi

Thank you again for taking the time to join us this morning and for your interest in NYCB. We look forward to speaking with you in April regarding the first quarter 2024 results.

Operator

Thank you all for joining today's meeting. You may now disconnect.