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New York Community Bancorp Inc  (NYSE:NYCB)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and thank you all for joining the management team of New York Community Bancorp for its Third Quarter 2018 Conference Call. Today's discussion of the Company's third quarter 2018 performance will be led by President and Chief Executive Officer, Joe Ficalora; together with Chief Operating Officer, Robert Wann; Chief Financial Officer, Thomas Cangemi; and the company's Chief Accounting Officer, John Pinto.

Certain comments made on this call will contain forward-looking statements that 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 that could cause actual results to differ materially from those the company currently anticipates due to a number of factors many of which are beyond its control.

Among those factors are, general economic conditions and trends both nationally and in the company's local markets; changes in interest rates which may affect the company's net income, prepayment income and other future cash flows or the market value of its assets including its investment securities; changes in the demand for deposit loan and investment projects and other financial services; and changes in legislation, regulation and policies.

You will find more about the risk factors associated with the company's forward-looking statements in this morning's earnings release and in its SEC filings including its 2017 annual report on Form 10-K and Form 10-Q for the quarterly period ended June 30th, 2018. The release also includes reconciliations of certain GAAP and non-GAAP financial measures that may be discussed during this conference call.

If you would like a copy this morning's release, please call the company's Investor Relations department at (516) 683-4420 or visit ir.mynycb.com. As a reminder, today's call is being recorded. At this time, all participants are in a listen-only mode. (Operator Instructions).

To the start the discussion, I will now turn this call over to Mr. Ficalora who will provide a brief overview of the company's performance before opening the line for Q&A. Mr. Ficalora, please go ahead.

Joseph R. Ficalora -- President & Chief Executive Officer

Thank you, operator. Good morning to everyone on the call and on the webcast and thank you for joining us as we discuss our third quarter 2018 operating results and performance. This morning we reported diluted earnings per common share of $0.20 for the three months ended September 30th, 2018, unchanged from the $0.20 we reported for the three months ended June 30th, 2018.

Before we turn to a discussion of our financial performance, I would like to share with you some positive recent developments. First and foremost, we received regulatory approval to buyback our stock. Accordingly, our Board of Directors authorized a $300 million common share repurchase program.

The program will be funded through the issuance of a light amount of subordinated debt. Purchases will be made from time to time in open market transactions subject to market conditions. The capital optimization plan we announced this morning will have a positive impact on our fundamentals going forward.

It will be accretive to earnings per share, improve our return on equity, accelerate our internal capital generation and diversify our capital structure. At the same time, it will have no impact on either our total capital ratios or CRE concentration levels.

Second, three weeks ago we received final regulatory approval to merge our commercial bank subsidiary, New York Commercial Bank with and into our primary subsidiary, New York Community Bank.

This merger is expected to close during the fourth quarter of the year and we expect it to result in additional organizational and capital flexibility as well as operational efficiencies through the reduction of certain redundancies.

Additionally, we also announced that the Board of Directors declared a $0.17 cash dividend per common share for the quarter. The dividend will be payable on November 20th, to common shareholders of record as of November 6th. Based on yesterday's closing price, this represents an annualized dividend yield of 7.2%.

Turning now to the highlights of the quarter. Our operating results and performance measures during the third quarter were impacted by two factors: Higher short-term interest rates as the FOMC continued tightening, and seasonality as the third quarter of the year is historically a slow quarter for us.

These factors notwithstanding, our performance during the quarter was still respectable and reflects the continuation of our three-pronged strategy to increase earnings. One, grow our loan portfolio at higher interest rates; two, redeploy our excess liquidity into higher-yielding assets; and three, significantly reduce our operating expenses while keeping a sharp eye on asset quality.

During the current third quarter: we continue to grow our balance sheet with total assets now over $51 billion; increase our loan portfolio with total loans currently just under $40 billion level; reinvest our excess cash; and further reduce non-interest expenses.

In addition, we grew our deposit base $1.2 billion or 6% on an annualized basis, including $763 million or 10% annualized growth during the current quarter. Total assets increased $2.1 billion or 6% on an annualized basis since December 31st, '17 while total loans increased $1.5 billion or 5% annualized over the same time frame.

Overall loan growth was once again, the result of solid growth in our multi-family and C&I portfolios. The multi-family loan portfolio rose $1.5 billion or 7% annualized, compared to the balance at December 31st, 2017.

While our C&I portfolio which are primarily the specialty finance-related loans increased $287 million or 18% annualized to $2.3 billion compared to year-end. On the originations front, we originated $2.5 billion of new loans during the third quarter which was reflective of our typical third quarter seasonality.

On a year-to-date basis, we originated $7.9 billion of new loans up 36% compared to the nine months ended September 30th, 2017. The current pipeline is approximately $1.3 billion comparable to the pipeline, the year ago quarter and includes $800 million of multi-family loans, $163 million of CRE loans and $316 million of specialty finance loans.

With interest rates increasing since the end of the third quarter, our current loan pricing has increased since the second quarter of the year. Multi-family loan pricing is currently in a range of 4.5% to 4.75% and traditional CRE is in the 4.75% to 5% range with specialty finance and C&I loans pricing off of prime or short-term LIBOR.

Also during the quarter we continued our reinvestment strategy and redeployed some more of our excess cash into higher-yielding investment securities. We will continue to use this strategy in the fourth quarter as well. On the expense front, our operating expenses continued to decline during the third quarter.

Non-interest expenses were $134 million down 3%, compared to the second quarter of the year and slightly better than we expected. Compared to the third quarter of 2017, non-interest expenses declined $28 million or 17%.

For the first nine months of the year, operating expenses declined $81 million or 16%. Our efficiency ratio increased to 49.35% from 48.19% in the previous quarter due to lower revenues.

Moving on to the net interest margin, the margin this quarter was 2.16%, down 17 basis points compared to the second quarter of the year. This decline was due to higher funding cost, as the Federal Reserve continued to increase short-term interest rates, a lower level of prepayments, and the fact that we reinvested funds later in the quarter than anticipated.

Excluding the 8 basis point contribution from prepayment income, the net interest margin would have been 2.08% compared to 2.19% in the prior quarter, slightly below our expectations. On the asset quality front, no surprise. Our asset quality numbers remained excellent during the third quarter.

Non-performing assets declined 20% on a year-over-year basis to $68 million or 13 basis points of total assets.

Excluding non-accrual taxi medallion-related loans, NPAs declined $15 million or 36% to $27 million or 5 basis points of total assets. Net charge-offs were $2 million or 1 basis point of average loans.

Excluding our core multi-family and CRE portfolios, and our specialty finance portfolio, our loans continue to generate very little in the way of losses. In fact, this quarter, we did not have charge-offs in those 3 portfolios.

I would like to conclude by stressing that we continue to prudently manage those factors under our control namely, loan growth and operating expenses. We believe that these factors along with continuing to reinvest our excess cash, our common stock repurchase program will mitigate the negative effects of the current interest rate environment.

On that note, I would now ask the operator to open the line for your questions. We will do our best to get to all of you within the time remaining. But if we don't, please feel free to call us later today or this week.

Operator?

Questions and Answers:

Operator

Thank you. At this time we will be conducting a question-and-answer session. (Operator Instructions). Our first question comes from the line of Ebrahim Poonawala with Bank of America Merrill Lynch. Please proceed with your question.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Good morning guys.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

I guess just first, if we can talk about the buyback plan, means, obviously it's a positive from a regulatory standpoint, in terms of being able to initiate that, but given where the stock is, Joe, I know you mentioned as you find the right opportunity like, can you talk a little bit about the pace of buybacks, like should we expect all of these potentially getting done over the next couple of months before year-end?

And if Tom, if you can sort of update us on what you expect in terms of the cost of the sub debt that you would have shown?

Joseph R. Ficalora -- President & Chief Executive Officer

I think it's pretty easy to say that our stock is, in our view, in extraordinarily good purchase. So for many, many good reasons, we would be anxious to buy our stock. It is the best way to enhance the value of our company as it trades today, and certainly when you think about the various companies that we can buy, it's not a better buy than us.

So we are going to be aggressively in the market buying our stock.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

And I would just follow up, obviously you can appreciate that we're in these marketing efforts going forward here, so we're not going to put any specific or -- a specific level of cost of that, but it's a very attractive sub debt market and we're enthusiastic about some of the indications we have seen.

So very attractive market and we feel very confident that it will be a successful process.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Understood. And you said you're shifting gears to the margins. So obviously, the core margin pressure was a little more than I guess Tom you expected in July and then you saw the fall off in prepay. I guess looking out in the fourth quarter if you can remind us in terms of your funding plan, deposit versus debt maturity in, what do you expect for the core margin, and if you can on the prepay income in 4Q?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yeah, so big picture, obviously we guided down 8, we came in down 11 for the quarter. So yes, we're up by about 3 bps, but as Joe indicated on his opening remarks, we were very cautious on putting the cash to work in the midst of the quarter, and obviously as the loan starts to close, we're seeing much higher coupons in the pipeline.

So big picture for us is that for the quarter, it's substantial development that all loans that are closed for the quarter were above 4%. So that compares to about 100 basis points above where we were closing loans this time last year.

Last year in November we're rates (ph) late October or November we were about 3.8, now it's 4.5, going into this quarter. So that's a significant change in the refinancing expectations for our customer base. So it's very -- excited about that. The fact that we had a downward margin again 3 basis points we believe was just going to have (ph) an impact on putting the cash to work at a rapid pace.

We're very enthusiastic about the pipeline as far as the current coupons in the portfolio. We had, although we have a very low rate average coupon, that's going to roll off into hopefully a much higher coupon in this rising rate environment and ultimately all our customers will have to react.

So we have approximately $40 billion loan book that all has to go repriced somewhere in north of the current coupon which is about 3.48% in the portfolio. So we're enthusiastic about that. As far as to the quarter, as you know, we give short-term guidance in the quarter. We're probably looking at around down 6 basis points for the quarter and that is indicative of the most recent rate hike we just had.

And we don't have much on the debt refunding coming into the quarter about $1.4 billion toward the end of December. But next year we have a much higher slug of money coming due, about $4.6 billion and that's 174 (ph).

After '19, pretty much all our liabilities have been repriced to the current market. So we're enthusiastic that eventually the asset yields will be the catalyst to offset some of the pressure we've had on the funding side.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. And any sense of prepay, is this the lower mark and at least it should flatten out from here, or potentially rebound? Like any sense there?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Ebrahim, we don't give specific comments on prepayment activity, but I will tell you that it was generally a very slow activity quarter given the substantial rise in interest rates, coming (ph) from a 3.8 from a 12-month period to 4.5 is real and customers are really trying to evaluate their options going forward. The good news in the past (ph) this time is that everyone gets close to that role.

And as you know the role is much more higher than 4.5%, that's usually (ph) a 6. So we're enthusiastic about the fact that we have 3 points or $13.9 billion coming due in the contractually, plus another $11 billion based on our estimates of actual loans that we'll have to more likely repriced in the foreseeable future and that will add a much higher interest coupon going on to the portfolio. So that's the opportunity.

We don't control, I mean, it's hard (ph) to make that decision, nor do we give specific guidance on prepay, but I think the fact that rates moved up so dramatically in a short period of time many customers are weighing their options as we speak.

Joseph R. Ficalora -- President & Chief Executive Officer

Ebrahim, also the third quarter is a quarter that has an inordinate number of lawyers, owners, brokers on vacation and not actively involved in doing the business that we are principally involved in.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Understood. And just one last one, Tom, any line of sight in NII, like are we close to a bottom? Do you expect any NII to bottom out from a dollar standpoint in the first half of '19?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Again I guess you know, we don't give forward guidance, but I think we'd encourage to look at the fact that in our modeling we have pretty much filed a Bloomberg forward curve, we see more likely than that that in 2019 if the Fed stops raising rate some time then, we should be in a position to benefit from a very good stabilization on the funding side and offsetting that just will have a much higher coupon that will have to be priced upwards.

So obviously as the Fed continues to tighten that, it does have a negative impact to us and we're assuming a total of 6 rate hikes which was 4 in 2018 and 2 more in 2019. And if that changes, and if they stop sooner, that will be a positive for us. If they continue to go, we'll continue to deal with this management of the margin.

But the big question is, when will the customers actually move on their current financing? Are they going to stay to 3.8 (ph) and go to 6? It's unlikely? So we're enthusiastic about that. We can't control, but that's going to be clearly a substantial catalyst for the margin going forward.

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Got it. Thanks for taking my questions.

Operator

Thank you. Our next question comes from the line of Mark Fitzgibbon with Sandler O'Neill. Please proceed with your question.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Hey, guys. Good morning.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning, Mark.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

I wondered if you could update us on your outlook for operating expenses, and also give us a sense for where you think the normalized effective tax rate will be?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. So obviously we've been doing a lot of work in the expense side. That was part of our strategy since the -- obviously going into the Dodd-Frank reform, and exiting the mortgage business. So in '17, while run rate was about $660 million a year, we brought -- we guided down the $560 million for '18. We're going to come in around $546 million for '18.

That will lead the fourth quarter to somewhere around this level of 135-ish, that's a flat off the third quarter, and in '19 we're really enthusiastic that we're going to continue to drive our cost structure down. So it's reasonable to say we'll be in the low 500s. And that's almost $160 million for the '17 run rate. That's a substantial reduction as we grow the balance sheet.

As we hope to see the margin expansion as the -- when the Fed ultimately stops rising interest rates. So we're enthusiastic about the operating expense side. We can control that, and clearly we've been very focused on delivering that number. So going back to my point, Mark, if you think about where we were 1.5 years ago, in the midst of becoming a CCAR Bank, it's a big difference on the expense base.

So we're excited about where we are, and where we're going with that. On the tax side we'll probably end up for the year around 25.50% and that should be pretty much the effective rates for 2018. So 25.5% will be the appropriate rate for the fourth quarter.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

And also do you have a sense for the approximate timing of the sub debt issuance?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Obviously we're very enthusiastic to be coming into the market, as soon -- actively and we can't really get specific time frames on that, but it will be as Mr. Ficalora indicated, it was a very enthusiastic process. We feel like we have a very good value here given where our stock is right now, and obviously at these levels it's highly accretive.

Joseph R. Ficalora -- President & Chief Executive Officer

There is no question that anybody today could buy a stock and get a dividend of 7%-plus. It's highly desirable for us to be able to buy that stock as well.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Thank you.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

You bet.

Operator

Thank you. Our next question comes from the line of Ken Zerbe with Morgan Stanley. Please proceed with your question.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning, Ken.

Kenneth Zerbe -- Morgan Stanley -- Analyst

Can you guys just remind us or talk a little bit more about the liquidity that you're reinvesting into securities? I mean, is this cash on hand or is this borrowings? Because it's how borrowing tick up. I'm just trying to understand kind of where the money is coming from to grow the securities portfolio?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Sure. Well, obviously we've had a substantial cash on hand since the exit of the mortgage banking business and the exit of the loss share arrangement that we have at the FDIC. So we're still winding down that cash and deploying into a high-yielding asset.

As of the close of the quarter we had about $1.7 billion on cash, the previous quarter is $2.2 billion. If you look at the change from quarter-over-quarter, that's pretty much the deficit in our loan growth right?

So we are thinking about what we're doing going forward, we really strength the balance sheet dramatically you know, to avoid being a city bank going back over the past 3, 4 years. Now we'll be deploying that balance sheet back up, we're not participating sales of assets, and we're pretty much rebuilding our securities portfolio hopefully at much higher-yielding asset level.

So with that being said, we're still too slow on the security side. Right now we're about 9.3% of total assets. My guess is that somewhere between 12 and 15 we'll end up, so there will be some more security purchase coming into the quarter as well as some in next year as well. But big picture that we funded the balance sheet for this year in addition to a nominal amount of wholesale, which really been the retail deposit and gathering efforts. This has grown our deposit base, for the first time in our public life, I would say, at these levels at 10% on linked-quarter basis, and we're running at a 6% annualized basis on deposit growth.

That's not typical for our strategy. We've always been a growth to acquisition story, but we recognize that now that that we're in a growth mode we have to fund our growth, and given that it was successful in continuing to bring in deposits, it's of substantially less costly than going into the wholesale market to the -- either the repo market or the Home Loan Bank advanced market.

So clearly we have some refinancings coming due next year. If we're successful on the deposit side, we'll used our deposits at lower cost to pay off some debt as well.

Kenneth Zerbe -- Morgan Stanley -- Analyst

Got you. Okay. And then, and with the securities that you're buying, presumably they're longer a little duration hence the higher yielding that you're getting at that. Can you just talk about how you're managing, how are you guys managing sort of the -- sort of asset duration extension? And because I don't want to, presumably it makes you slightly more liability sensitive? Or how should we think about that, overall?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yeah, so I would say, big picture we'd assume that we're going to change the mix, we have been changing the mix over the past years since we started rebuilding the portfolio. So it's shying away from a longer duration securities. We're buying some I'll say -- we'll call medium-size duration, but more importantly a third of this portfolio that we're building will be of floating rate.

So as the rates were increasing over the past two quarters, we're getting a yield bump in those securities. So they are lower yielding initially, but as rates rise, they go up with a rising rate environment.

So I would say big picture we'd like to have about a third to 40% of securities portfolio which will be positive for interest risk management and a floating instrument and then the rest will be medium or I would call, average duration, somewhere between 4 to 5 years in average duration which is somewhere between 340 to 360 depending on market conditions on the fixed side and low 3% on the floating side all in.

Kenneth Zerbe -- Morgan Stanley -- Analyst

Perfect. Thank you very much.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Sure.

Operator

Thank you. Our next question comes from the line of Moshe Orenbuch with Credit Suisse. Please proceed with your question.

Moshe Orenbuch -- Credit Suisse -- Analyst

Great. Thanks.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Good morning.

Moshe Orenbuch -- Credit Suisse -- Analyst

Good morning. I was hoping if you look at your kind of rate table, if you look at the yield on and I assume this includes the prepayment income so that's part of the explanation, but if you look at the yield from the second quarter to the third quarter, it's down 6 basis points on a loan portfolio.

So given the comments that you made about the rates kind of going up, when does -- when do we see that kind of actually factor in materially?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. So Moshe, what I would say is interesting for the quarter every month in the quarter we closed north of 4% on our origination closings, which is a significant change in the previous 2, 3 quarters. As you know, as we quote rates and we quote the portfolio, it takes time to get through the system and get to the actual -- on to the balance sheet.

So it's a very positive development for this quarter in the third quarter and it continues throughout hopefully going forward here is that all loans close above 4% coupon. So as you know, we have a relatively short duration portfolio with a yield somewhere around 350-ish on the multi-side maybe 360 on the commercial side, but all loans now are being closed at north of 4% and quoted at 450 or higher.

So the opportunities that, until we see real activity at the borrower side, it's a much higher rate environment for our customer base. So that 3% and 8% we call it lower closing level than last year of 2017, it's now well over 150 basis points above that traditional 5-year type multifamily bread-and-butter offering. So we're excited about that. That took about 6 months to go through the balance sheet. As you remember when rates are up in the beginning of the year, we were still closing loans in the low 3s. Now we're closing in the low 4s, soon to be in the mid-4s.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it. And kind of in a similar vein, I mean you talked about lower activity in Q3 because of a couple of different reasons, rising rates and the way some of the schedules fell out. Does that -- do you get that activity back in Q4? Is it something you'll see in '19? How do we think about that?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

We could actually start seeing that in the fourth quarter and of course all through '19. This is not an unusual evolution of a cycle. This is the way things typically evolve when rates are changing and our portfolios are restructuring themselves based on the owner's desire to lock in lower rates than (ph) are clearly anticipated into the future period.

Joseph R. Ficalora -- President & Chief Executive Officer

Moshe, just to follow up on that one comment, you know, I just want to be clear, on a loans -- on a quarter-over-quarter basis are up 2 basis points, so we're seeing it's a large portfolio. We actually saw a loan yield ex prepay go up 2 basis points for the quarter.

That's a move in the right direction, and bear in mind we do have a substantial amount of new loans coming up in the specialty finance which is two-thirds floating rate. So that's also going to help this unnatural change into the coupons in a rising rate environment to be more favorable for us.

Moshe Orenbuch -- Credit Suisse -- Analyst

Got it. Thanks.

Joseph R. Ficalora -- President & Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line of Dave Rochester with Deutsche Bank. Please proceed with your question.

David Rochester -- Deutsche Bank -- Analyst

Hey, good morning guys.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning, David.

David Rochester -- Deutsche Bank -- Analyst

On the NIM guide for 4Q is that assuming the rest of the cash is deployed in securities or loan growth? And then how much can you bring that cash balance down? I think you were around $1.7 billion this quarter. Can you bring that down below $1 billion?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

It may range between $800 million and $900 million, suffice to say, $800 million will be my level of having liquidity. We had some treasuries on our portfolio which has kind of moved the loan yields down a little bit, the security yields down a little bit, those are real low yielding. That is going to be put into securities as well. So I think at the end of the day, $800 million, $900 million of total cash on hand and the rest will be deployed into loans and securities.

David Rochester -- Deutsche Bank -- Analyst

And is that also assuming that the sub-debt issuance you're talking about as well 6 basis points down?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

None of these number include the sub-debt at all.

David Rochester -- Deutsche Bank -- Analyst

Okay. Got you. And then on the $1.4 billion that you talked about rolling this quarter, I guess in December and then the $4.6 billion for next year, what's the average cost of that at this point?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

The average cost for the '19 is 1.75.

David Rochester -- Deutsche Bank -- Analyst

Okay. And then the $1.4 billion?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

We have about $1.4 billion coming due at the end of the quarter, that's about 1.60 but we may pay that off depending on how actively or successfully on the deposit side. We've had a very strong deposit push, but now we're all growing the balance sheet, until we acquire liabilities, we need to fund our growth and funding the growth to deposits building organically is more attractive than wholesale. So that's always on the table.

David Rochester -- Deutsche Bank -- Analyst

And so then and so (Multiple Speakers) -- Go ahead. Sorry.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Go ahead. Go right ahead.

David Rochester -- Deutsche Bank -- Analyst

Oh, I was just going to say so, hopefully I guess you can pay off some of that $1.4 billion with deposits, but then for the $4.6 billion next year just trying to get a sense for what the pricing is on the borrowings that you're looking at to roll into at this point just given the duration that you want?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. At some cases depending on how much we bring in deposit growth, it's going to be somewhere between 220 and to 260 depending on wholesale markets versus the retail markets. We've been very active and successful on bringing our customers to the table both new money and existing money that's rebuilding the accounts at attractive rates. These rates are market rates, and not that we're above the market, we're in the market.

Our money market rate (inaudible) in every Community Bank in the country, just that we have always had a issue of paying at lower rate. So 1.75 (ph) for money market is not uncommon in this environment. I think I said in the previous call although betas are higher for our retail franchise, all money is going to be rewarded with a higher rate opportunity in this environment.

So all bank will catch up to these levels, so it's -- at a 1.75 money market and a CD rate somewhere between 2 and 2.40, that's the range of the marketplace and we're just being successful because historically we have not actively marketed the branches and we have 250 branches that we can actively market in different regions of the country.

We're very pleased with having a growth of 10% on a linked-quarter basis and our budgets are around 4% to 6% deposit growth. And if things are more actively we'll able to -- we'll grow faster or just ramp up our deposit efforts.

David Rochester -- Deutsche Bank -- Analyst

And then I guess -- go ahead.

Joseph R. Ficalora -- President & Chief Executive Officer

Well, basically what I was going to say, this has nothing to do with your discussing. But the reality is that we have in excess of $5 billion of loans that were participating with others. That represents to us a huge additional enhancement in refinanceable assets.

That's going to come in the period in front of us. No question besides whatever is in the market, we have this existing participation tool that has a huge benefit to us with regard to refinancing. So that's going to be a very significant asset enhancement to us.

David Rochester -- Deutsche Bank -- Analyst

Yes. Okay. And just one last one real quick if I could on loan growth. You mentioned seeing slower activity this quarter and that would explain why the pipeline looks a bit lower this quarter. But I guess just given that lower pipeline, does that imply less growth in 4Q? Is that what you're expecting? I know 4Q tends to be generally stronger for you guys, so just trying to marry that with the pipeline.

Joseph R. Ficalora -- President & Chief Executive Officer

So Dave what I would say with certainty we've been very laser-focused as far as what our targeted growth was for the business this year. We've said over the past in 2 or 3 conference calls we planned to grow our net loan portfolio mid-single digits, but we're on target with that. We're very pleased with the activity.

We're more enthusiastic not that we're going to get our targets, but I'm more enthusiastic that we have a very low weighted average coupon in the portfolio, and as customers realize that financing costs can go dramatically higher in the future, they need to come to the table.

And we will be very active on bringing them to the table. That means you will have -- like I indicated north of 4% closings, now the rate offering is 4.5%.

If the Fed continues to significantly increase interest rates, and the yield curve cooperates with this and it's parallel shift. Funding cost can be significantly higher, so customers will ultimately have to come to the table. I want to point out a very significant driver for this company. We have a substantial amount of loans coming due in the next 36 months. If you put a reasonable prepayment assumption on that, that could be well north of $20 billion, $20 billion of paper that's going to go from a 340-ish, 350 coupon to somewhere in the mid-4s or higher.

That's a very positive impact to stabilize some of the margin pressures we've had as the funding caused falling prices continuously.

David Rochester -- Deutsche Bank -- Analyst

Are you seeing any pickup in refi activity right now, just given the uptick in loan pricing we've seen?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

I will say it's significant conversation with all our customers that have large portfolios and realizing that 3% and 8% (ph) is substantially lower than with the market. So guys that have '14 or '15 originations have significantly to take into account that you have a higher rate environment. So if you ever go year 6, year 6 is much more punitive than refinancing today.

David Rochester -- Deutsche Bank -- Analyst

Okay. Great, thank you guys.

Joseph R. Ficalora -- President & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Steven Alexopoulos with J.P. Morgan.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Hey, good morning.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Just a couple of questions on the deposit side. First, why was there such a drop in the interest-bearing checking and money market accounts this quarter?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

I think -- I think it is -- I think naturally there's going to be opportunity to move some of your money into a higher-yielding benefit for the customer base. We are not actively trying to push our money market accounts into a -- we call a premium side level of benefit for the customer, but it's always that shift of deposits. I use the example that is, no matter where your money is, you can pay 6 basis points and not pay attention and let's say broker's (ph) account or you can get 2% at the same, what we call a large broker dealer.

So there is offerings throughout the country. At the same time, we think, where treasury rates are right now, both short and medium-term treasuries are very attractive for someone who get a tax benefit in New York state investment opportunity by buying a treasury bill.

So we kind of price off the treasuries in slightly south of that. So that's the way the market is, and we saw some significant movement in those fronts but the bank has been really pushing toward having our customers bring new money, take their money out from your bank at J.P. Morgan and come back to NYCB and at a comparable rate.

So I think that's what we're seeing in the market. There's no magic doing this. We've never been an aggressive deposit gatherer. We have 250 branches that we're going to actively pursue deposit growth. If we actively pursue deposit as a thrift type company, remember retail deposit, we will be successful at the current rate environment.

Now where we've historically done successfully is bring in deposit through acquisition. You know, that's all the long-term strategy hopefully that comes sooner rather than later but we're making significant strive in funding the balance sheet now because we see growth and we haven't grown in many years so we want to fund the growth.

Joseph R. Ficalora -- President & Chief Executive Officer

We have more grandmothers than CEOs.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

So if we look at the sharp growth in the CDs this quarter, what do you estimate came from your current customers migrating into that product versus new money raised?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. We did a lot of work, and if I take half 50-50, new money versus renewal in there.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

And Tom, when you think about deposit cost increase you saw this quarter, do you view that as a good proxy for what we should expect over the next quarter or two?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

No.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Did it get worse from there, better? Or how do you see that playing out?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

I don't know, obviously, I think right now we have always -- we were probably one quarter ahead of the market to bring in the money knowing we had a good loan book to close NOI, and that we're actually growing and looking at the offsets from borrowing cost versus deposit cost. But clearly, we're at the market. I don't envision us raising rates here, and we feel very successful on a daily basis bringing in significant deposit fund.

So I think we're at a good place where our current rate offerings and we'll adjust it depending on market conditions.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Okay. And then a final question. I mean, you guys called out quite a few times now this rise we've seen in multi-family rates and you've been in the business forever. As you look out over the next year, what impact do you think this has on volumes?

Joseph R. Ficalora -- President & Chief Executive Officer

I think it will have a noticeable impact, but it will -- for the people that we deal with, and we deal with a different type owner than the market broadly. New York is a very diverse place. The sources of funding come from the world, from the biggest banks in the nation. From many little banks that have in some cases very, very small appetites, but they're in the market.

With all the lenders that are available here, there's going to be a tremendous amount of activity that will accommodate the needs of new buyers and the existing people to refinance their loans. So this is going to be in the period ahead of great deal of activity and I think for us, we expect that we will make money on this activity.

As I mentioned earlier, we have something that we've never had before. We have over $5 billion of participations that actually add great dollar value to us with regard to every loan that we refinanced that's in that pool.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. I would just add to Joe's commentary that it's big picture for us, it's not just volume, it's also a rate. That's clearly -- the rate is so low on the -- for the average coupon that we feel very confident we'll grow the book, but at the same time, the real opportunity is going to be repricing the portfolio.

If this is a substantial portfolio that's super-short duration and like I indicated multiple times this morning very few people have got real estate, if your real estate is punitive.

So as they come due in '19 and '20, '21, it's a substantially higher rate assuming rates continue to be at around these levels, at a very attractive repricing mechanism for the margin.

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Okay, great. Thanks for taking my questions.

Joseph R. Ficalora -- President & Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question comes from the line of Brock Vandervliet with UBS. Please proceed with your question.

Brock Vandervliet -- UBS Financial Services -- Analyst

Good morning.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning.

Brock Vandervliet -- UBS Financial Services -- Analyst

I just wanted to rattle through these numbers again. So the debt coming due in -- at the end of Q4 is $1.4 billion and that's costing 160 bps right now?

Joseph R. Ficalora -- President & Chief Executive Officer

Yes.

Brock Vandervliet -- UBS Financial Services -- Analyst

Okay. And it's $4.6 billion -- what's that? The middle of next year?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

No. Throughout, regularly throughout the whole year.

Brock Vandervliet -- UBS Financial Services -- Analyst

Okay. Throughout the whole year.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

And I would spread it out evenly per quarter.

Brock Vandervliet -- UBS Financial Services -- Analyst

Okay. And the NIM guide for Q4 that is exclusive of the cost of the sub-debt issuance or does that include that?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. That's correct. We do not proforma that into these numbers. Obviously when we looked at the potential transaction that we would do with the seasons of that cost regarding the buyback is probably a third versus given the current market value. So obviously for every dollar we raise, one-third will be the fees by buying back the shares.

Brock Vandervliet -- UBS Financial Services -- Analyst

Okay. And what do you think the rate will be on the sub debt?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

We're not going to comment on market conditions. Obviously we are just launching the process, but I will say we're starting to use a very attractive sub-debt market and it's been some very good transaction in the market and a substantial appetite for this type of transaction to be accomplished.

Brock Vandervliet -- UBS Financial Services -- Analyst

Okay. And lastly is it reasonable as we sort of dimension the implications of that those resetting debt levels at the end this year and next that right now it would be roughly between 220 and 260 depending on whether you're funding that on a core basis or have to use some borrowings to back stop?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

That's fair. You know, obviously if we were to bring in let's say substantial financing through deposit acquisition, that can change the game tomorrow, but that's not currently announced yet. But obviously if we were to put on a strategic initiative of a deposit transaction, that would clearly would adjust that large pool of funding that has to come to be refinanced.

So we think that it's reasonable at that level that you discussed but more importantly the deposit efforts could maybe bring it a little bit lower depending on how successful that you are, and more importantly on the commercial side, if we're successful on bringing deposits from our commercial customers which we have a substantial opportunity in front of us that could bring the cost lower.

That's obviously that we will watch those developments as we move along into '19.

Brock Vandervliet -- UBS Financial Services -- Analyst

Got it. Okay, thank you.

Joseph R. Ficalora -- President & Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line of Christopher Marinac with FIG Partners. Please proceed with your question.

Christopher Marinac -- FIG Partners, LLC -- Analyst

Thanks. Good morning.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning.

Christopher Marinac -- FIG Partners, LLC -- Analyst

So there's long-term benefits with reducing 5% or 6% of the share count through the buyback. You know, I'm just curious as you look into next year and beyond, would you consider kind of a trade-off between less retained earnings going back to dividends or other measures and more toward the buyback, just given the opportunity in the stock today and the pricing?

Joseph R. Ficalora -- President & Chief Executive Officer

No. I don't think that is what we're thinking. Obviously, in simple terms -- we're paying a 7% dividend today on every share we purchase and whatever caused us to repurchase that we're going to have a very favorable effect.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes, as we take a look, that's a tax-deductible cost of financing. But big picture we look at this opportunity here that we haven't seen this is unfortunately where the valuation is right now. This is an unique opportunity, but more importantly, the messaging of capital return back to our shareholders that have been approved by our regulators is significant.

This is not -- this is a post Dodd-Frank adjustment here. This is something that came after Dodd-Frank has changed from $50 billion to $250 billion. We believe that the fact that we were able to distribute substantially more than 100% of our capital generations back to shareholders is a testament for asset quality of the portfolio and our direction going forward.

Everything we do going forward on our capital distribution gets approved by our regulators. So that's a positive development. That, coupled with the fact that our Commercial Bank has now consolidated into the Community Bank is another long way to development for the Company, so we're very excited about the future that we can start to grow our business again, and hopefully growth through acquisition will be the priority as we go into '19.

Joseph R. Ficalora -- President & Chief Executive Officer

There's no bank in the marketplace that we could buy that is better than the bank we're buying especially given the immense savings we get on the dividend.

Christopher Marinac -- FIG Partners, LLC -- Analyst

Great. I follow that. Thank you for the clarification. Now Tom just a quick follow up on (Multiple Speakers) --

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Yes. And I would just reiterate the point, it's been the strategy, we have always been a very strong dividend payer and the fact that we have the ability to pay out more than 100% here is a good indication of where we see the future for the company's earnings and process going forward.

This is a unique opportunity, obviously we're not happy where the stock price is, but if we can buy the shares down here, this could create some value long term. We look at for the next five years of value versus not the next five quarters, this a great opportunity to be able to buy back shares.

Christopher Marinac -- FIG Partners, LLC -- Analyst

Great. Thanks again. And just a quick follow up on the charter consolidation, what type of savings does that give you? Is it simply small incremental or is there something more substantial next year.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

So you know we've been very active on managing our cost structure. This is all part of our internal plans as we have other internal plans that will roll out as we go along to 2019, but we have $660 million run rate as we try to become a city (ph) bank and that obviously change the rules changed, and we were very active on exiting the mortgage banking operations given the low profitability there.

So we shaved over $110 million, and our guidance is about $100 million going into '18, and our plan has always been to the low $500 million into '19. So we're going to be very active and very laser focused on something we can control which is cost containment initiatives, as we grow the balance and try to get operating leverage opportunities.

Once the margin stabilizes, and we start seeing the margin hopefully grow, we will then get a tremendous operating leverage play as far as the run rate for this company but more importantly our efficiency ratio will back to the levels that we're used to running which will be in the low 40s not the upper 40s, low 50s that's where this company should be running.

Unfortunately that -- you know, the revenue side is the pressure on the margins but that will ultimately stabilize as the loan book yield starts to be priced into the current marketplace.

Christopher Marinac -- FIG Partners, LLC -- Analyst

Got it. Thank you, Tom. Thank you, Joe. Appreciate it.

Joseph R. Ficalora -- President & Chief Executive Officer

No problem.

Operator

Thank you. Our next question comes from the line of Matthew Breece with Piper Jaffray. Please proceed with your question.

Matthew Breese -- Piper Jaffray -- Analyst

Good morning, everybody.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning.

Matthew Breese -- Piper Jaffray -- Analyst

I just wanted to go back to the the borrowings that we'll reprice this year and next year and the types of borrowings you're likely to put back on to replace them. I think you said that all-in the cost will be between $220 million and $260 million. Looking at where classic (ph) advances are right now, that seems awfully cheap. And so I was just curious if those are going to be short duration borrowings or convertibles?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Matthews we will try they will get all the options that are in the marketplace like I indicated, deposit market is the most attractive market for us. So if we had our what we call, best case scenario. We'd love to put all that money into deposits, but we were to go into the portable market with the Home Loan Bank and all the repo market, it's a very active market right now, both the street (ph) is still in business and we can be very active there and that's going to be at that range I gave you.

So no question that we have options, the best option is paying it off right? Or actually, I should say the best option is replacing it with someone else's deposit base. That's the historical strategy for the company. Now this is the end of all of the $11 billion that will be restructured to do the Astoria deal, that's behind us now, that is the legacy that's left to be replaced. After next year, it's all replaced. All of our LIBORs are replaced, to what we call as the current market.

So that's going to abate some future margin pressure going forward. So this is just -- '19 will be the last leg, and hopefully as we move into the years past that, we'll be able to bring in some real core deposits with the traditional M&A transaction which clearly will adjust the funding side. The fact that, you know, the length and the duration is somewhere between 2 years to 3 years, and we feel highly confident that we'll be very active in the marketplace on looking at other deposit sources either deposit acquisitions, deposit opportunities in our own customer base, but more importantly, growth to M&A, that's our historical growth in deposits.

Joseph R. Ficalora -- President & Chief Executive Officer

That's an important point not to miss, the reality is that over the public life of the company which is now 25 years during November, we've in fact proven time and time again that we can make great sums of money for our shareholders by acquiring other bank's deposit bases. And lo and behold, in this unique moment, we're actually able to buy our own stock at extraordinary pricing.

So the multiple things that are on the horizon, all add value to the currency of this company and therefore we're very optimistic that we're in a very unusual, bad place today, but moving toward a much better place tomorrow.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. Okay. Maybe going back to the multifamily pricing you noted, new rates 4.50% to 4.75% is that where the majority of new loans are being booked? And you noted that it takes a while for the pipeline to kind of flow through. I'm just kind of curious, how long do you honor prior rate commitments for?

Joseph R. Ficalora -- President & Chief Executive Officer

We have a history of being very flexible to our customers, we're a handshake bank. We're not putting out a derivative against that offering. We've been doing this for as you know the leader for decades, we have a handshake type of relationship with our customer base. So as we look to the portfolio today, we would still, let's say, sign of a deal tomorrow at 4.50% somewhere in between the next 90 to 20 days that will come on to the portfolio. I think what's important is that when you look back to the early of 2018, those 2% coupons are all done, they're all on the -- now we're looking at 4% north of 4% and above.

So the most exciting and encouraging point for the loan book for July, August and September is that everything closed north of 4%. Okay, that's all loans put on the portfolio. Going forward here, the new rate offering is 4.5% and higher. So as we go into the commercial space we're now brushing a bit north of 5%.

So these are all significant changes to the interest rate environment from 12 months ago, this will have significant consequences if customers don't realize that 5% become 6%, they're going to have to come to the table and we're going to be very accommodative to bring them to the table to not only are we going to get volume as a benefit for us going forward, we also assume rate is going to be a significant catalyst that will seriously change the loan book going forward, in spite of 150 basis point to the market with 14 or 15 origination, that's significant, but it's not a small portfolio. It's a relatively short portfolio. We have $40 billion of opportunity in front of us, and the fact that our wholesale liabilities are pretty much what we call, close to the market as of the end of '19, we look for the benefit on the asset side.

I think if you spend some time on the asset side, you will realize that every contract we write, there will have to be decision made within reasonable short time period. Worst case scenario of five years, average scenario of three years. They'll have to come to the market. And coming to the market and our coupon will benefit the overall loan coupon and you'll start to see asset yield start to rise.

Matthew Breese -- Piper Jaffray -- Analyst

Right. So we're no longer booking multifamily loans with any sort of three handle on it?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

That's correct. Again, I really like to be remind (ph) in the call July, August, September, all in all the 4%, the previous quarter we were still dealing with rates that were offered in late '17 going into early '18 and going through the system, now it's all 4% north, which is a positive development for us.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. Cobbling together the sub debt raised to buyback, you know, the CRE concentrations, it seems like given where the payout is, you will continue post the sub debt raise to march higher on CRE concentrations toward that 850% Fed limit. Is there any discussion around cutting the dividend to keep the balance sheet sustainably below 850% long term?

Joseph R. Ficalora -- President & Chief Executive Officer

No, realistically, we just announced a substantial capital return to our shareholders. That should give you some good comfort that not only we can pay a very strong dividend, but we can be very proactive on rewarding our shareholders for doing the right thing. In this environment, our dividends are important. It's a strategy we've had for decades and our dividend is not on the table. What's on the table is that we'll be returning more capital back to shareholders and optimizing our capital position.

The debt markets are relatively cheap on an after tax basis, it is an attractive way to buy back our shares in a very attractive price. If you know, so the market conditions have changed and we wanted to make sure we reward our shareholders with or we will increment our shareholders and our regulator is allowing to move forward this is a very positive signal for where we are.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. That's all I had. Thank you for taking my questions.

Joseph R. Ficalora -- President & Chief Executive Officer

You're welcome.

Operator

Thank you. Our next question comes from the line of Steve Moss with B.Riley FBR. Please proceed with your question.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning Steve.

Steve Moss -- B.Riley FBR -- Analyst

I was wondering here in terms of the loan portfolio how much do you expect to refinance in 2019, and kind of what is that coupon rolling off?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Right. So I would say that we have on our public slides we do give you some guidance as far as where we actually see contractual maturity. So in the next 3 years or 36 months, we have a 3.37% weighted average coupon that could potentially will refinance away. That's about $14 billion at the same instance, as we also run over a 18 months of CPR on that book is probably about $7 billion to $11 billion.

So you arguably say 30 -- but north of $20 billion over the next 3 years could easily be potentially a repricing coupons in the low 3s. With that being said, we have no idea when customers will come back to the table. If rates go to 6%, they may come back a lot quicker. All we know with certainty is that the average coupon in the portfolio is dramatically below the current market and that's the opportunity and customers will realize that these are not long term data loans, loans typically on average life is about 3 years and each year, they don't reprice (ph) one year closer to the role and the role is very punitive, very few customers will pay fine plus a very large margin.

So it's not in their best interest to go to year 6. So we're very excited that customers will realize that the rate environment is what it is. It's not really in the 8s anymore, it's in the 4s and maybe in the 5 going forward, they will have to react and they will react -- and we will work with them very actively to move that portfolio to the market.

So we're going to be very active with our customer base to get them to the current market which will help alleviate some of the margin pressure that we've seen in the past year and a half.

Steve Moss -- B.Riley FBR -- Analyst

Okay. And then on the CD side, what is the duration you're targeting for CDs these days?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

I would say the market in general, very few customers are going past 2 years, so I'd say on average it's 14 months.

Steve Moss -- B.Riley FBR -- Analyst

Okay.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

This is being typical for the past decade, given the low interest rate environment.

Great. Thanks.

Joseph R. Ficalora -- President & Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line of William Wallace with Raymond James. Please proceed with your question.

William Wallace -- Raymond James -- Analyst

Hi. Good morning guys. Tom, just -- apologies if you've answered this already, but the guide for the fourth quarter NIM down 6 basis points, does that assume that you deployed the rest of the cash liquidity in the fourth quarter?

Joseph R. Ficalora -- President & Chief Executive Officer

A portion of it. But, you know, that was depending on market conditions, that is a certain portion of that, yes. I mean, not all of it.

William Wallace -- Raymond James -- Analyst

Okay, thanks. And then, when you talk about getting your expense for '19 down to that low $500 million range do you anticipate that the opportunities to take cost out will be front end loaded, back end loaded or kind of spread throughout the year?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

I think for modeling purpose, Wally, I would just go, later (ph), with drive, we are very active on looking at cost containment initiatives as I said everything is on the table. We're looking at some branch opportunities, some opportunities within the overall process within the bank coming from a future CCAR bank, we're not a CCAR bank, that does change things.

We have a significant opportunity among just the amount of money we spent over the time on the systems side that we should get some benefits from the process. I mean, we've spent a lot of money and effort to be a CCAR bank and now that we are going to enjoy the changes on regulatory, there's been a significant pendulum shift to the middle and banking that we hope to enjoy going back to somewhat of a normalized level.

So we look at our efficiency ratio in a -- we'll call a more normalized environment somewhere in the low 40s. We hope to get there as soon as we can.

William Wallace -- Raymond James -- Analyst

Okay, and just just for clarification I think you said this last quarter but when you talk about low $500 million you're talking about for the full year, not a run rate, not a quarterly run rate by the end of the year?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

That's correct. Again, you're not going to see expenses going up here, we're going to have to be very, very focused on managing our expense structure. So if we just take where we are right now, for '18 we will be coming in at $546 million assuming with my fourth quarter guidance, by initial guidance is $560 million, well for that $660 million run rate we hope to get some benefits on the FDIC on the discipline (ph) and that should be a benefit to all banks in 2019. We expect that to come. Half way there, we get to the low $500 million. So we feel pretty good about that.

William Wallace -- Raymond James -- Analyst

Okay. Thanks. And then my last question is just looking at the third quarter tax rate it was significantly lower than the guidance from last quarter. Were there any credits or anything in the tax expense this quarter?

Joseph R. Ficalora -- President & Chief Executive Officer

We had some stewards from the substantial tax reform from the previous year, obviously it was a major tax reform and we had some additional adjustments that we had to pick up for the year '18 versus '17, so it came through in the third quarter. But the run rate I think I indicated in this, it's given (ph) 25.5% for the year, 25.50%, normalized rate, which is by the way about 150 basis points better than we expected in the beginning of the year as we delve into the tax reform act.

William Wallace -- Raymond James -- Analyst

Yeah. Thank you. Appreciate it.

Joseph R. Ficalora -- President & Chief Executive Officer

Okay.

Operator

Thank you. Our next question comes from the line of Collyn Gilbert with KBW. Please proceed with your question.

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

Good morning, guys.

Joseph R. Ficalora -- President & Chief Executive Officer

Good morning, Collyn.

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

I will make this pretty quick. Just a couple of quick questions. One on the -- what was the blended rate on the CDs that you added into the -- added in this quarter?

Joseph R. Ficalora -- President & Chief Executive Officer

For the third quarter 2.31% was blended. 2.31%.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

That's the new rate, yeah.

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

Okay. And then just, you know, I hear what you're saying obviously on the multifamily side for loan growth outlook. How are you thinking about the CRE book, I mean it's been down now kind of 4 quarters in a row. Do you see an opportunity to reverse that and grow that portfolio or how are you thinking about CRE trends?

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Collyn, I would say that this is not by design this is a matter of you know, they're a little bit longer in average duration, right, so as other borrowers are sitting on the sidelines trying to get sales transactions done or accomplish a transaction, they happen to have a little bit of a longer duration portfolio and as credit in general starts to become less available for those types of opportunities, which is very super conservative on the underwriting side.

So if someone's wanted to put dollars on the table, that I won't do we will let it trade away, if it's OK. We're very focused on having pristine asset quality, and then whenever the cycle changes, we should get the benefit of having a very pristine portfolio of solid loan growth. We underwrite, you know at a very conservative level, so if there's more dollars being offered, we're not going to lose it because of the rate, we're going to lose it because of dollars.

So we would assume that we see loans leaving the portfolio is not because of rate. They could be very competitive on the interest rate side. We're not going to be aggressive on the dollar. So very concerned -- that is the hallmark of NYCB.

Joseph R. Ficalora -- President & Chief Executive Officer

The difference between us and others Collyn is very clear. Other lenders are paid on dollars, we don't pay our people on dollars. We pay our people on results and for us, results are not losing any money on the assets we actually put on the books.

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

Got it. Okay. And then how about your outlook on the C&I side in the specialty finance?

Joseph R. Ficalora -- President & Chief Executive Officer

So they've been doing a phenomenal job, are good friends of the Foxboro, Mass so really you know crushing it and we're very pleased on their results. We grew that book, I believe it's around 80%. The CAGR on that, since we put in inception (ph) probably like 40% or some CAGR and and we're very selective I think I've mentioned in many conference calls we turned down around 95% and 96% of what we see.

So when we do these deals there, it's really like club deals, it's the best asset quality opportunities and a relatively strong market out there. We're very selective, so we never change our underwriting standards there, we're not leading these deals, so unfortunately do not come with the deposit balances, traditionally that's someone who has that type of business where they're managing the lead transaction.

But we definitely participate in deals where it's highly confident as far as the duration and yield that makes sense for the bank. So I feel highly confident these guys can grow for us, you know, high teens, which is reasonable and that's you know, comes probably from zero, our total commitments all in is about $3 billion. So we've done a good job in building a book that our board in conjunction with our operators created a great portfolio.

Now we could have bought that portfolio, we traded away to another bank but we took the people that generate the asset and they've done a phenomenal job for the bank and we're very excited about it, and two-thirds of that business is a floating ratio, which is good for interest rate risk.

So there's no question we're talking about people that are lending at 100% performance. Every asset that they put out is 100% performing.

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

We never had a delinquency or a late pay.

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

Got it. Okay. Alright, I'll leave it there. Thanks guys.

Joseph R. Ficalora -- President & Chief Executive Officer

You bet.

Operator

Thank you. And that concludes our question-and-answer session. I'd like to turn the floor back to Mr. Ficalora for any final comments.

Joseph R. Ficalora -- President & Chief Executive Officer

Thank you again for taking the time to join us this morning and we look forward to chatting with you again at the end of January when we will discuss our performance for the 3 months and 12 months ended December 31st 2018.

Operator

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Duration: 60 minutes

Call participants:

Joseph R. Ficalora -- President & Chief Executive Officer

Ebrahim Poonawala -- Bank of America Merrill Lynch -- Analyst

Thomas R. Cangemi -- Chief Financial Officer & Senior Executive Vice President

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Kenneth Zerbe -- Morgan Stanley -- Analyst

Moshe Orenbuch -- Credit Suisse -- Analyst

David Rochester -- Deutsche Bank -- Analyst

Steven Alexopoulos -- J.P. Morgan & Co. -- Analyst

Brock Vandervliet -- UBS Financial Services -- Analyst

Christopher Marinac -- FIG Partners, LLC -- Analyst

Matthew Breese -- Piper Jaffray -- Analyst

Steve Moss -- B.Riley FBR -- Analyst

William Wallace -- Raymond James -- Analyst

Collyn Gilbert -- Keefe, Bruyette & Woods, Inc. -- Analyst

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