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New York Community Bancorp Inc  (NYSE:NYCB)
Q1 2019 Earnings Call
April 30, 2019, 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 it's First Quarter 2019 Conference Call. I'd like to turn the conference over to management for their prepared remarks.

Salvatore DiMartino -- Director, Investor Relations/Strategic Planning

Thank you, Matt. Good morning, everyone. This is Salvatore DiMartino, Director of Investor Relations. Thank you all for joining us this morning as we report our first quarter 2019 Results. Today's discussion of our first quarter 2019 performance will be led by Senior Executive Vice President and Chief Financial Officer, Thomas Cangemi, together with Chief Operating Officer, Robert Wann; and the company's Chief Accounting Officer, John Pinto. Absent from today's call is President and Chief Executive Officer, Joseph Ficalora who could not be with us this morning due to an unanticipated family matter.

Before I turn the call over to Mr Cangem. I have a few statements to read. 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 condition 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 products 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 its SEC filings, including its 2018 Annual Report on Form 10-K and Form 10-Q for the quarterly period ended September 30, 2018. This morning's release also includes reconciliations of certain GAAP and non-GAAP financial measures that may be discussed during this conference call.

As a reminder, today's call is being recorded. At this time, all participants are in listen-only mode. You will have a chance to ask questions during the Q&A following management's prepared remarks. Instructions will be given at that time.

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

Thomas R. Cangemi -- Chief Financial Officer

Thank you, Salv. Good morning to everyone on the phone and on the webcast, and thank you for joining us today and discuss our first quarter 2019 operating results and performance.

2019 has gotten off to a good start for the company. We were able to offset some net interest margin compression with operating leverage, resulting in a solid quarter. Earlier this morning, we reported diluted earnings per common share of $0.19 for the 3 months ended March 31, 2019, unchanged from the 3 months ended December 31, 2018. Excluding certain items which are more fully discussed in our earnings release, our first quarter 2019 diluted earnings was also $0.19 per common share.

In addition to our solid results this quarter, we are also executing on several other strategies, which should benefit the company going forward. First, we undertook a thorough analysis of our branch network, resulting in closing of 12 branches. Second, during the first quarter, we sold our wealth management subsidiary P. W. Huntington & Company. While this will result in lower level of non-interest income, it will be substantially offset by the cost savings we will realize from the sale. Third, we entered into a new agreement with our third-party provider of non-depository products and services. Under this agreement our financial consultants will be employed by them, but will still service our entire deposit base. This agreement will continue to generate fee income for us without the overhead associated with maintaining a large sales force. And fourth, we are very excited to be partnering with Fiserv as we convert our core account processing system during the fourth quarter of this year. This partnership will result in further expense reduction in 2020 and beyond. We look forward to having a long-term relationship with them. We will continue to seek out other opportunities like these over the course of the year as we continue to grow our balance sheet, right size our cost structure and focus on operating leverage.

Turning now to the financial highlights of the quarter. Following on last year's resumption of growth, we continue to grow assets in the first quarter of this year. Total assets as of March 31, 2019 were $52.1 billion, up $250 million or 2% on an annualized basis compared to December 31, 2018. This growth was driven by loan growth and to a lesser extent, growth in our securities portfolio.

Our loan portfolio increased $360 million or 4% on an annualized basis to $40.5 billion. During the first quarter, we had growth in our C&I portfolio, our commercial real estate portfolio and our multi-family portfolio. The growth in our C&I loans this quarter was driven by our specialty finance business, as this debt portfolio increased $315 million to $2.3 billion. Since 2014 ,this line of business has grown at a compounded annual growth rate of 35%.

Commercial real estate loans grew $81 million to $7.1 billion, up 5% annualized. And multi-family loans increased $49 million to $30 billion or up 1% annualized. The major growth in our multi-family portfolio was the result of seasonality as the first quarter is traditionally a slow quarter for NYCB. However, as reflected in our pipeline numbers, we are very pleased to note that demand has picked up in the second quarter and the current pipeline is approximately $1.5 billion, up 36% compared to the pipeline for the prior quarter, of which $1 billion or 67% of the pipeline is new money,

The multi-family CRE and specialty finance pipelines all were higher than the previous quarter's pipeline, while market interest rate continue to decline during the first quarter of the year, our current loan pricing has been relatively unchanged and our spreads have been consistent More importantly, we had approximately $14.6 billion of multi-family and CRE loans coming in the next 3 years with an average coupon of 3.39%, coming up to the contractual maturity and option repricing days.

Moving on to deposits. We are also very happy to see that strong deposit growth we experienced over the course of 2018, continue into the first quarter of 2019. With total deposits, increasing $837 million or 11% annualized to $31.6 billion, while most of this growth is driven by our targeted retail CD strategy, we also experienced strong growth in non-interest-bearing deposits and in savings account balances, while interest-bearing checking and money market accounts declined modestly. As a result of the strong deposit growth, we use a large portion of our excess cash position during the quarter to pay down some of our wholesale borrowings as we refrain from investing in securities given the current market conditions.

Turning now to the net interest margin. Our margin this quarter was 2.03%, down 6 basis points on a linked-quarter basis. Prepayment income rose modestly and added 8 basis points to the margin, same as the prior quarter. Excluding prepayment income, the net interest margin for the first quarter would have also been down 6 basis points compared to the previous quarter, in line with my previous quarter's guidance.

Moving on to our expenses. As detailed in our earnings release, the current quarter's expenses included certain items in totaling $9 million, including $3.5 million in employee severance costs and $5.5 million in branch rationalization costs. Excluding these items, total non-interest expense on a non-GAAP basis would have been $130 million, down $5 million or 5% compared to the prior quarter. And the adjusted efficiency ratio would have been 48.75%, down 117 basis points compared to the prior quarter, which came in better than our guidance we provided last quarter. On the asset quality front, our asset quality metrics remained strong during the current first quarter despite an uptick in non-accrual loans related to one C&I borrower in the amount of $15 million. Non-performing assets rose $50 million on a linked-quarter basis to $71.3 million or 40 basis points of total assets. Aside from the asset management non-accured borrower, the majority of our non-performing assets consist of non-accrual and repossessed taxi-medallion related assets. As of March, 31 2019, our taxi-medallion exposure was $69.6 million. Excluding taxi-medallion and the one non-accrual bar, the asset quality measures of our core portfolio remains pristine.

Lastly, we continue to execute on our previously announced $300 million share repurchase program. During the first quarter, we repurchased 7.1 million shares, at an average price of $9.47. To-date, we have repurchased a total of $23.9 million shares at an average price of $9.54 per share or $228 million in aggregate, leading $72 million remaining under the current authorization plan.

This morning, we also are pleased to announce that the Board of Directors declared a $0.17 cash dividend per common share for the quarter. The dividend will be payable on May 28th to common shareholders of record as of May 14th. Based on yesterday's closing price, this represents an annual dividend yield of approximately 6%. On that note, I will now ask the operator open the line to your questions, I will do my very best to get all the within the time remaining. But if we don't, please feel free to call me later today or during the week. Operator?

Questions and Answers:

Operator

Great. Thank you. At this time, we'll be conducting a question-and-answer session. (Operator Instrucation). Our first question here from Ebrahim Poonawala from Bank of America Merrill Lynch, please go ahead.

Thomas R. Cangemi -- Chief Financial Officer

Good morning, Ebrahim.

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

Good morning, Tom. So just, I guess the first question, in terms of the margin outlook. As you see how that progresses from your -- and in the context of, if you could discuss also your funding strategy around more CDs, less borrowings, how you plan to kind of fund the balance sheet going forward? That would be great.

Thomas R. Cangemi -- Chief Financial Officer

Sure, sure. So IEbrahim, I would say that obviously, we came in line with the quarter, down 6 basis points and we were seeing in the short-term that margin should be approximately down 3 basis points in Q2, but more importantly we're seeing visibility given the Fed pivot and we expect their view of short-term interest rates and what their -- and their actions anticipated. So in this -- given that circumstance, we believe that we're still callling for NII growth in the second half of this year. They'll come a little bit sooner. Given the market conditions but more importantly, next year we see margin expansion in 2020 with EPS growth to follow-up with $0.19 versus $0.20. So we're in a unique spot. Given the the patience that we've had over the long time with continuing NII declines, but it appears that there is significant light at the end of the tunnel.

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

Understood. And any signs of a pickup in prepay is given just overall activity being lower, we should expect that to still around 1Q levels ?

Thomas R. Cangemi -- Chief Financial Officer

No, we typically don't give guidance on prepayment as you have been fully aware of, but it's been -- it was an encouraging Q1 versus Q4, it's much pretty much relatively flat. So typically Q4 is stronger than Q1, but Q1 had a nice amount of prepayment. I think that consistent level is reasonable. Obviously, there's been less property transactions as we know it is mostly refi within the marketplace from other portfolios, including our own, but big picture, I think, on the prepaid side, we'll wait and see. Obviously there's some interesting dynamics going on with the potential adjustments to the land regulatory laws. And I think borrowers waiting on the sidelines. So property transactions are relatively slow. But and then also going back to your other comment, you had on the deposit -- you had a question on the deposit side. I would say that overall our strategy has been consistent. Last year, we were very focused on growing the balance sheet. We grew the balance sheet, as first-time coming off a city for 5 years and without crossing over $50 billion. And we were successful in bringing in good deposit flows. What's most encouraging about that it continue into 2019 and the reality is that of every dollar we continue to bring in, approximately 82% of that money is coming from our existing customer base. That's a very encouraging dynamic, given that we do have regional pricings, we have branch structures in Arizona, Ohio, Florida, in much of the areas. So we have the ability to target these unique opportunities on the retail front. The good news is that most of that money is coming from our existing customer base. At the same time, some of the money that we bought in prior to our significant growth, we can have now right size that cost of deposits and manage our margin toward hopefully having some of the higher cost money roll off, including institutional assess 15 seats (inaudible) money and then we target the retail campaign, which is in this environment, slightly lower than the institutional market. So we're excited about being able to shift around some of the deposit flows to benefit the margin in the short term.

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

Understood. And just moving very quickly to expenses, your book came in at the core run rate of about $129.7 million, that's $520 million annualized. As we look at your previous guidance for the low $500 million by the end of the year, given the sale of the wealth management business one, how much more expenses go away because of that sale? And what's your expectation in terms of where expenses land by the end of the year ?

Thomas R. Cangemi -- Chief Financial Officer

Absolutely, we are very excited about where we are, and we were very focused on meeting our goals. One of the few things we can control is our operating expenses, we've done a fine job in getting that. Just to be specific, I'll dive down in Q2 to 1.25 for the quarter. If you take that run rate, that's $500 million. So we're at the run rate as we speak today. We've announced a number of initiatives. These initiatives are real changes to the P&L going forward. We're very excited about the accomplishments we've had since the announcing going back to 2017 of looking at the balance sheet and looking at how we can look at our operating expenses and in particular, our headcount reduction has down significantly. We were down approximately 20% from our targeted initiatives of looking at cost containment and looking at lines of businesses to right size our efficiency ratio. So, we had approximately 3,500 full-time equivalents back in let's say June of 2017, were down to 2,700 or just under 2,800 today, which is a 20% reduction. So we are focusing on what makes sense going forward here. Efficiency ratio as my prepared remarks talked about, we're in the high 40%, but once you start getting operating leverage to kick into balance sheet growth and the NII starts to go up. We should target that low 40% type efficiency ratio. So we're excited about where we are, we're very comfortable on our guidance on that $500 million number.

I think last quarter was $505 million to $515 million. It seems like $500 million is in the short term, very achievable. And we're going to run it flat for 2020. We have a lot of other initiatives that we haven't publicly announced yet, we continue to dive hard on looking at operating expense reductions, and we're going to hopefully benefit from the rise of our balance sheet and operating leverage.

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

Understood. You mentioned your remarks around the Fiserve and bringing them and moving your core systems do that like just, what's the thought process behind that? Is there any expense impact tied to that and does that make M&A easier or does it not have any impact? Just one last question.

Thomas R. Cangemi -- Chief Financial Officer

It will make M&A much easier obviously, we're going to eliminate a lot of the patches that we have currently. This is going to be a partnership with Fiserv of long-term contract. We chose them, they chose us, we are in business together, and more importantly, as we've continued to invest together in the opportunity on systems, and data processing and IT, we have to look at our internal process and down the road, we'll look at the cloud -- cloud computing, a lot of other items that will generate better efficiency for the company. That's on -- in the going forward. I'm not going to be specific on that. I'll not specific as far as when it's going to happen. But will start the benefit at the end of the year and our conversion is slated for I believe it's November of 2019. So that will be behind us this year, we move forward with the potential of further cost reduction in respect to our systems. More importantly, we are an M&A company. We look at transactions to grow our funding base and look at opportunities. This should only make that more of an enhancement for us given that we do look at the partnership and hopefully, as we look at other opportunities to merge other Fiserv clients or other non-Fiserv clients onto our system.

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

Got it. Thanks for taking my questions.

Thomas R. Cangemi -- Chief Financial Officer

Sure.

Operator

Our next question is from Brock Vandervliet from UBS. Please go ahead.

Thomas R. Cangemi -- Chief Financial Officer

Good morning.

Brock Vandervliet -- UBS -- Analyst

Hey, good morning. Just wondering if you could just start with maybe an update on the FHLB refinancing. You may have done this quarter and what you've got ahead you the remainder of the year? And how you're looking at that?

Thomas R. Cangemi -- Chief Financial Officer

Thanks. Sure. So what we have remaining for the rest of 2019, about $2.9 billion. So, I think last quarter, we announced $3.8 billion. We do look about $1 billion of that repricing. The current $2.9 billion that's remaining that at 1.8% cost of funds, that would impact us. Good news is that what the $1 billion of these already dealt with going forward in the previous quarter is that approximately low $2 billion, about a $2.05 billlion to to $2.15 billion type range of levels. When we looked at this in November and where markets where in November with the Fed in the position of continuing to raise rates with expectation of higher rates, that number was close to $2.80 billion to $2.90 billion. So we're seeing the benefit there clearly for the funding side, but more importantly when you think about past '19, which is in we're getting there past '19, you look at you know low to upper $2 billion on the funding coming due in '20 to '22. So that's pretty much, slightly above the market. So that's the opportunity. I'll call that a slight tailwind for the company going forward in the funding side that mirror that with the CD opportunity, given where the CDT pricing is in the market, we think that will also be a potential tailwind for the company on the funding cost. So we're excited about where we were/ We had a lot of beta risk. Last year we had to reprice our liabilities up quickly from the aggressive move by the Fed. But given the Fed pivot and their position. This should bode well for the company.

Brock Vandervliet -- UBS -- Analyst

And it seems to be a bit of a bit of a change in terms of Q1 where end of period borrowings were down, securities growth looked somewhat less than we had expected. Is that kind of a pattern, given where rates are you may pay down borrowings as opposed to building up securities as much as you have in the past?

Thomas R. Cangemi -- Chief Financial Officer

So Brock, I would say long-term, we'd like to have a securitities more right sized for the industry but still well below, we should be between 15% and 18% is reasonable. So we're not there yet. We've been very proactive to ensure that when we put on some duration risks, we're going in the right opportunity time. We were more aggressive last year on putting on securities. We build it up in the third and fourth quarter. And rates went the other way, so we took advantage of that in the first quarter to sell some assets given the substantial rally in the market. So, we'll be opportunistic in the long-term plan over the next quarters ahead is to grow the portfolio, but will be very prudent when we deploy the cash. We sat on a lot of liquidity. The deposit growth was real. It was significant, and we looked at what the margin was on securities versus paying down debt. We paid some -- we paid down that it makes sense for us, but I would say, put the big picture, you'll Fiserv Securities grows, so we can probably model it between $300 million to $500 million a quarter, until they get to that 15% to 18% total securities to total assets.

Brock Vandervliet -- UBS -- Analyst

Got it. Okay. Thanks, Tom.

Thomas R. Cangemi -- Chief Financial Officer

Sure.

Operator

Our next question is from Ken Zerbe from Morgan Stanley. Please go ahead.

Thomas R. Cangemi -- Chief Financial Officer

Good morning Ken, how are you?

Ken Zerbe -- Morgan Stanley -- Analyst

Great. Hey, Tom. Doing well. Thanks. Can you just talk about in terms of Peer B Canal. On a full year basis, how much were they adding to both fees and expenses?

Thomas R. Cangemi -- Chief Financial Officer

Yes. So big picture. It's about a $20 million expense business -- income business with about $14 million to $15 million, $16 million of total expense. So our net debt, we're looking at approximately just under $4 million of contribution to the bottom line. We've had a tremendous and that's a before tax number. We've had a tremendous long-term relationship with them, and obviously they're growing into a position where they opted to do a management buyout of the firms. So they owned the company, now they took it private. And we had a very long relationship with them, that was very successful relationship and our investment is pretty much at a level where we will get a decent returns, but at a very insignificant amount for the consolidated company. So we look at our cost cutting initiatives. There was many items on the agenda. This happens to be one of them. We're pleased that they that they're enjoying the private world again. But more importantly, we have to focus on the big picture for the company. So clearly, we need to look at some of expense initiatives, and this happens to be one of the items that we spend some time on over the past few years amd evaluating and also too -- it was just too small of a business for us.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. Understood. And I noticed that you in the press release, you mentioned the fee income was lower because of the sale. Were expenses also lowered in this quarter given the sale?

Thomas R. Cangemi -- Chief Financial Officer

Yes. So again -- yeah, that was part of it that. We backed that out the $9 million. We had the one-time severance payments as well as the branch optimization charges that we took for the quarter with a total of $9 million, but I was clear on the $125 million to Q2. We're in the run rate of $500 million. We're very pleased, we think we're about 2 quarters ahead of that. There's a lot of work that the entire bank focused on and as far as reducing FTEs was another strategy for us over the big picture, given healthcare costs and the like and overall payroll cost. So we're very pleased on where we are right now. We're not saying we'll go into further adjustment there. There are other things to do, but we like the fact that we have now the operating leverage capability as we grow the balance sheet on at that $500 million level. In the best case scenario, I would like to go the balance sheet and keep $500 million filing to '20. We'll update that as we move along during the year to see how much of benefits we get from the conversion, but clearly that's a real possibility going into next year to have flat expense base and assets growing and margins expanding and growing. So we're excited about where we are on a cost-cutting initiatives.

Ken Zerbe -- Morgan Stanley -- Analyst

Alright, great and then just one last question . It wais good to hear the pipelines are picking up in 2Q bit can you just talk about the other side of that, which is the competition from the non-banks. But what are you seeing there, how aggressive are they being right now? Thanks.

Thomas R. Cangemi -- Chief Financial Officer

So I think there is the number of factors going on, obviously, is the non-banks. And more importantly, there are competition that has to look at the multi-family space and the CRE space. And then, I still believe personally, that there is some real rightsizing on institutions on credit risk management skills. So we went through a very interesting time and announcement of our transaction and helping me not closing the transaction. At the same time, we've invested heavily on credit risk management. With that being said, we think we're in a great position to be in the market to be continue to be relevant in the market. We are the leader in the market for commercial real estate multi-family in the New York City marketplace and I have to look at the dynamics of what's been going on in New York City politics. We have this uniqueness of democratic controlled position on the political framework and there's some rent regulatory changes that may come down the pike. And I think a lot of a small profit on the sitting on our hands right now watching and waiting to see what happens in the next three months. The good news, what we'll be able to talk about this at the next quarter and what the results are. But there's a four or five items that are now on the table full potential adjustments and we just have to wait and see. But I think a lot of that has to do with the property transactions. Our refi business is very strong, both within our portfolio and without -- and no one's coming from other portfolios because we're in the business of doing this. This is our core model and we're very focused on building it. So, you know, although growth in multi-family was not significant for the quarter, we still grew the book and we anticipate that mid single-digit loan growth is reasonable for us in a time where things are relatively surviving right now.

Ken Zerbe -- Morgan Stanley -- Analyst

All right, perfect. Thank you very much.

Thomas R. Cangemi -- Chief Financial Officer

Sure.

Operator

Our next question comes from Dave Rochester with Deutsche Bank. Please go ahead.

Thomas R. Cangemi -- Chief Financial Officer

Good morning, Dave.

Dave Rochester -- Deutsche Bank -- Analyst

Good morning, guys. Just so on the sale of the wealth management business, you've already sustained a hit from a fee perspective and the numbers that's completely in the numbers, is that right?

Thomas R. Cangemi -- Chief Financial Officer

Yes, that's correct. There was no gain of sales, there was a wash.

Dave Rochester -- Deutsche Bank -- Analyst

Okay. So the $5 million came out and that's it. Okay. Got It. And then I'm following up on your NIM. Yeah. So that was all the fee income, it's $5 million is out. Okay. Got It. And then just following up on your NIM comments, where are you seeing do loan pricing in multi-family and commercial real estate at this point? And then on the commercial as well that you brought in?

Thomas R. Cangemi -- Chief Financial Officer

So obviously as we reported our pipelines, about a $1.5 billion, of which $1 billion is new money. The average rate in that portfolio is a 4.35%. So that's what's coming on. Obviously it's not 4.5%, but it's still north of 4%. Pricing right now, I'd say in the marketplace, given where interest rates are, I would say --we'll call it the cherry transaction. The best 5-year structure is probably 3.78%, it's a 4.25% of a 5 year product, 7 year 4% to 4.25% in the quarter as well. And I look at the CRE portfolios somewhere between 4.25%, 4.5% in its highest from 3 quarters in that range, depending on the type of parameters that we're looking at. So although it's slightly lower than the previous quarters, given interest rates, just spreads are holding up very nicely. And as we all understand, we have a tremendous amount of a vintage from 2015 coming due. That's pretty much the unknown. When is the 2015 vintage going to refinance or reprice? That vintage is approximately about $8.3 billion of '15 vintage that needs to deal with the current rate environment. That's a $3.29 billion for multi-family and the $3.72 billion for CRE. So they're significantly in the money. And if they roll into the year 6, they're paying a floating rate of close to 7%, 8% and fixed rate is not option for them. So they have to come to the market and if they come to the market. Our rates are around 4%. So that's going to be a catalyst for us. We haven't seen the catalyst yet, but as time passes, we get closer to over $15 million going into $20 million. I mean every single loan has to be dealt with in 2020. So excited about that dynamic in the balance sheet.

Dave Rochester -- Deutsche Bank -- Analyst

Yeah. Okay. And then your sense for the 2015 vintage $3.29 billion. I thought I heard at $3.39 billion number earlier was that for everything?

Thomas R. Cangemi -- Chief Financial Officer

$3.29 billion it's just the multi-family, CRE is a part of the $3.72 billion. When you combine that's at $3.37 billion. And these are just the 2015 vintages. This does not take into account any of the legacy from '14 which the majority of the opportunity that we see right now is that those were the lowest yields, we've originated and the most volume originate. So we look at, rate and volume. This is the opportunity given the current marketplace as long as rates don't fall dramatically from here. Our customers are going to have to make a decision to deal with their financing and that decision in this environment is not only way up, the cost is only going up not down in the current market. Now, that changes we'll deal with that, but obviously $15 billion is significant for us.

Dave Rochester -- Deutsche Bank -- Analyst

And at this point right now, the 5.1 pricing. It sounds like 3% and 7.8% maybe 4%, is that right?

Thomas R. Cangemi -- Chief Financial Officer

Yeah, the average is 4.35% in the $1.5 billion pipeline of which $1 billion new money. We quote rates every week. We change literally weekly depending on what happens with the treasury curve, but given where the current rate environment is 3% and 7.8% to 4.25% is the range of our price. We have Tier 1 pricing versus Tier 3 pricing. But I would say, somewhere around 4% is reasonable for the 5-year pay term, 4.25% to 4.5% will be little bit more duration. I mean when you go into the commercial real estate book, you're hitting around 4.75%.

Dave Rochester -- Deutsche Bank -- Analyst

Got it. And then I guess just switching to the funding side have you seen any softening of the competitive pressures there, where you bringing in new money on the interest bearing side of things?

Thomas R. Cangemi -- Chief Financial Officer

I'd say again, we are targeting our growth and then that absent an acquisition was going to grow deposits versus borrowings, borrowings more expensive than the environment. So we're very pleased to be able to lower our deposit rates. We've been very targeted subsequent a significant first quarter growth quarter and if you look at what we're offering in the market, we have a 5-month program out at that at 240 basis points, that's kind of the rate to join that people are putting money and they want to go longer they get 10 basis points. When I offering 280 basic points to 290 basis points , it's 250 basis points is the highest offering we have for CD customers and we're going to catch a lot of repricing over the next year and a half . It may not be this year, but next year or in assuming rates are relatively flat and potentially declining. This could be a nice tailwind for the company, because we have a tremendous amount of CDs that would have to reprice and the magnitude of the beta risk payer is the deminimis given where the current interest rate environment. So we're excited of the fact that you know customers that 1 year CD plan, going to the 5-month category 240 basic points versus 280 basis points a year ago.

Dave Rochester -- Deutsche Bank -- Analyst

And then as the other borrowings roll through this year. I know you paid some of that off with cash, last quarter from the first quarter, how much more can you reduce cash going forward to pay those down and then if you have to enroll the rest of them, were you saying the cost of the wholesale callable advances, right now still in that low 2% range, is that we, you rolled to?

Thomas R. Cangemi -- Chief Financial Officer

See we've done some interesting transactions both of the home loan bank in the low $2 billion as low as $2.02 billion. So that's it to be anywhere from 18 month money to 3.5 year time money, very attractive some pullable transactions. But, if you think about what we have left $2.9 billion is the risk and at 1.8% cost of funds and then next year, but we have a lot more coming due in the mid $2 billion to upper $2 billion opportunities. So that, l have indicated in my previous commentary, that could be another tailwind on the funding side and given the interest -- assuming the rates are these levels.

Dave Rochester -- Deutsche Bank -- Analyst

Can you bring cash down anymore to fund some of that?

Thomas R. Cangemi -- Chief Financial Officer

So if we had our druthers, we probably want to put cash in the securities market try to we get the average balance up, but we were very cautious given the duration risk gap there, because we had a significant bond routing in Q1. So, we took advantage of selling some assets. So, we were very like, we bought in lot of deposit flows and we opted to take out some of this, what we'll call it a very tight carrying and we're going to wait and see. But, I think my guidance that, we anticipate in $300 million to $500 million per quarter of securities growth and we'll be opportunistic. And again securities did move a whole lot in Q1. But, we should see a little bit of an uptick this quarter, depending on market conditions and cash will be deployed more importantly into our loan portfolio, that's the goal. Our the long-term goal is get that loan portfolio up to let's say 5% to 7% growth, I think 5% achievable, but no market is still. I think on the sidelines waiting the find what happens with the New York City results on any adjustment, they may make in the regulatory laws.

Dave Rochester -- Deutsche Bank -- Analyst

Right. Which we should find out by mid-June. Anyway, right?

Thomas R. Cangemi -- Chief Financial Officer

Yeah, I think we'll know next time on this call, where we stand, because by the end of June, it will be finalized. And the good news I think, a lot of borrowers, you have brokers, you have work constituents working real hard to make sure the cooler heads prevail here and not New York City.

Dave Rochester -- Deutsche Bank -- Analyst

Yeah. Can I have just one last with, you talked about NIM expansion next year, a little bit of pressure in 2Q for the back half. I would imagine you still expect to get reach some kind of stability by 4Q, is that effectively the (inaudible) back half?

Thomas R. Cangemi -- Chief Financial Officer

Yeah, the question is that Q3 and Q4 , we were looking at NII expansion and I guess, beginning of the year at the second half of 2019, can come soon depending on market conditions and where we deploy cash in the life, but no question that the visibility is very bright and the margin compression is de minimis. So we were guiding down 3 bps for Q2.

Dave Rochester -- Deutsche Bank -- Analyst

All right. Thanks, guys.

Thomas R. Cangemi -- Chief Financial Officer

Sure.

Operator

Our next question is from Steven Alexopoulos from JPMorgan. Please go ahead.

Steven Alexopoulos -- JPMorgan -- Analyst

Good morning. So at the start, if we look at the loan growth in the quarter. It really strong specialty finance growth and I would think that would be higher risk content in the New York City Cree. What drove the reserve release in the quarter?

Thomas R. Cangemi -- Chief Financial Officer

We had a number of construction loans has left the portfolio on the allocation started construction is dramatically higher than anything we have in the portfolios with the highest risk asset class that NYBC have in this portfolio, that's what was the release was coming from. And on the C&I logistically, we've never had a late pay. This is a solid book of business, it's been category in the 30s. We had a very strong Q1, probably a little bit of seasonality on the positive side there, I'm not envisioning 67% CAG is on, the C&I book, but we'll probably well as well as 30 percentage year 28% to 35% right now, we're running at 35% versus 20% conservatively 25% for our growth, but we are very selective. Steven. We look at every deal we see we turned down 97,% 98% of what we see. So this is household transactions that you would know, by name is a solid companies, all super senior secured and you know we're very selective, what I'm getting deposit relationships just participating with the best deals in the market and selectively and that's been the strategy and will be nice we have deposit relationship. That's not the business model. So what we had. This is a credit by upshot they've done a phenomenal job on selecting these credits and it's a Board process, it goes a Board of Directors into approved by the Board. For the most part. So we're very excited about the growth. It's got tremendous returns the coupons, about 4.36 right now. The return on invested capital of around 20%. So we're doing well with that business and it's continuing to grow. And remember, we started from 0 and we have the same team that's been in this business for multiple decades with zero losses. So we're excited that lead to some of these cash flows to work alternative asset classes besides multi-family.

Steven Alexopoulos -- JPMorgan -- Analyst

Right. So I wanted to explore the prepayment penalty income, because your peers have reported a really sharp decline this quarter, obviously you see what's going on in the market, why were you able to hold that steady versus most peers not being able to do so? And are you expecting a big drop here in 2Q.

Thomas R. Cangemi -- Chief Financial Officer

Again, I'm not expecting a drop. I would say that our portfolio. Not that with different ways, but we, the largest player portfolio in the country on total dollar amount. So, you have different dynamics that move prepayment. Like I said, we have a lot of money coming due on the from '15 vintages so that particular book will not have a lot of prepayment benefits because it's getting close to its role, but will have don't have the coupon benefits going forward. But from time to time prepayments always lumpy for this. That number that we reported is still is at this moment, but we should be dramatically higher given the size of the book. But the encouraging number is that consistent with Q4, which was a tough number. So I think you start the year out with Q4 number. Then we're sitting here going into May, and April doesn't look to bad. So we're pretty confident that prepay is going to be consistent, but unfortunately low given the lack of property transactions, given market conditions, which could change by the way very rapidly in July, things do finalize themselves and we expect to borrowers want to take more risk on going back into it into that into the New York City marketplace given as a complete understanding of what potential changes they may do regarding regulation.

Steven Alexopoulos -- JPMorgan -- Analyst

Right.

Thomas R. Cangemi -- Chief Financial Officer

So again, we don't guide for Steven, we never guide for prepay, it's kind of a benefit of the portfolio yield that we book but we break it out for analysts to understand that we don't control it. But we're pleased that it's lease a decent number compared to the previous quarter.

Steven Alexopoulos -- JPMorgan -- Analyst

Right. In time thinking through the rent regulations, which are really causing a slowing of volumes, what are you seeing on building valuations understand quite a bit of pressure but what are you seeing there?

Thomas R. Cangemi -- Chief Financial Officer

I would again cash flow, Steve. So we think about what we do, we will lending to customers that see the opportunity upside on embedded cash flow. So clearly, when you have, when we were discounted cash flow lender. We're not a market players. So the valuation that we underwrite in our LTVs are dramatically lower than our competition. Okay. Or are based on cash flow and we look at the opportunity of upside potential, and that's why they choose the structure of they're dealing with their financing 5 years out, instead of going along to the agency or other types of opportunities with insurance companies are alike. So obviously the MCI a big issue out there. Major capital improvements and IAI increases could have impact, but I think that could impact the current portfolio, but we're still underwritten those portfolio based on in-place cash flows and to get to 50% risk-weighted. We have to go back to the previous year's cash flow. So not only they're insulated, underwriting for with the target to get 50% risk weighting eligibility, what other institutions, look at the potential, we're learning on the historical, which is always a more conservative view.

Steven Alexopoulos -- JPMorgan -- Analyst

Okay. Got you. And Tom, if I could squeeze one more in, what date did the sale of the Peter be Canal transaction occurred?

Thomas R. Cangemi -- Chief Financial Officer

It was throughout the middle of the quarter. So we actually anticipate to get it done at the end of last year. But given current market conditions, I think there was a lot of business into equity markets, but the good news is that we're able to successfully complete this and we're very pleased that there are -- they are in a good place and they're going to run their private company and it was a good long-term relationship. We are very disappointed to see them go, but I think it was best for both parties.

Steven Alexopoulos -- JPMorgan -- Analyst

So there's still a fee and expense impact flowing through?

Thomas R. Cangemi -- Chief Financial Officer

No, it didn't, it's netted out to 0. So there is no impact in Q 1

Steven Alexopoulos -- JPMorgan -- Analyst

Okay. Thank you very much.

Operator

Our next question is from Collyn Gilbert from KBW. Please go ahead.

Collyn Gilbert -- -- Analyst

Thanks. Good morning, Tom.

Thomas R. Cangemi -- Chief Financial Officer

Good morning, Collyn. How are you?

Collyn Gilbert -- -- Analyst

I am good. Thanks. Just want to drill into some of the behavior this quarter on the loan book, just to get a sense of what kind of where the depositors, I'm sorry, the borrowers mindsets are? Do you have the actual dollars of roll-off and what the corresponding yields were and then what the role on? I know you indicated what your pipeline?

Thomas R. Cangemi -- Chief Financial Officer

I do. I'll give you that. So we had for the quarter, we had approximately origination that have at about 437, were paid off as the 391, so it's about 45 basis points benefit. Now, that's a good number but unfortunately, we'd like to see higher numbers, but going back to Q3 of 2018. That was 25 basis points, so Q4 was 50 basic points. So it's consistent with Q4 within 5 basis points and the trend could be stronger given the current average yield coming up to move to roll, but the good news is that is moving in the right direction with 3 years ago, that was a negative 175 basis points. So as far as what we originate versus what paid off, it's been a positive delta for us and we continue to experience that going forward and we think that's going to be the trend given the current interest rate environment. Now rates to be substantially inverted that may change, but given where we are today, having anywhere from 45 basis points to 75 basis points change to be very meaningful impact to the go-forward not margin outlook.

Collyn Gilbert -- -- Analyst

Okay. And that's --

Thomas R. Cangemi -- Chief Financial Officer

Shift to move, right sir. So it's depending on how much volume and activity occurs but as you know our pipeline right now at a $1.5 billion, is more $435 million coming off,

Collyn Gilbert -- -- Analyst

Okay, So the blended those rates of 391 to the $437 is that a blended rate or -- I was curious, especially for multifamily specifically, do you have those?

Thomas R. Cangemi -- Chief Financial Officer

I can probably can follow back to you with that. I don't have in front of me.

Collyn Gilbert -- -- Analyst

Okay. Just again.

I would I think the big picture that's been coming on, on average probably about 4% multifamily on average and commercial probably 25 bps to 30 bps higher.

The multifamily that was coming on, you said was at 4%?

Thomas R. Cangemi -- Chief Financial Officer

Last quarter last quarter, in the low fours you still you always about a 90-day lag. So we priced that booking you try real hard to to close the rate that you, that you have an agreement with your customer and rates are that will say declining rapidly rapidly. I just have a number in front of me, 4.25% was the actual number, not a 4.25% with the multi-for the quarter, but again that 5% that could have been a 4.5%, that ended up closing if one quarter given where rates are. You have to accommodate the environment because we are very focused on the asset quality side and and looking at very strongly underwritten credit. So rate is going to be, we're going to be writing there with the rates more on the credit size, where we choose to be very selective. Let's put it that out right.

Collyn Gilbert -- -- Analyst

I guess you just trying to again kind of back to question on prepay, just trying to understand the borrowers sort of sensitivity, here. So the multifamily onboard rate was 4.25% and then what was, do you have what the roll-off rate was on the specific multifamily book?

Thomas R. Cangemi -- Chief Financial Officer

I would say probably the 3.80s.

Collyn Gilbert -- -- Analyst

Okay

Thomas R. Cangemi -- Chief Financial Officer

Moving back to 3.7%. I'd say about 3.80%.

Collyn Gilbert -- -- Analyst

Okay, Okay. And then, so just to be clear on the Peer B Canal move. So we should assume like a $20 million drop in fee income, right?

Thomas R. Cangemi -- Chief Financial Officer

Yes. Again, and also $20 million of non-interest income going down. Of that $60 million to $70 million of the expense removal. We will grow the balance sheet to offset that and obviously this has been part of our ongoing initiative on how you're going to get to that $500 million number. We're there and Iwe were actually targeting this to happen in 12/31 last year, but we are there. This part of our strategy on the compensation structure dramatically different. And they are growing and they're going to invest in their company, it's a private institution and we're going to look at other alternative ways to grow fee income items over the long term and in the short-term, we always, we are, and more importantly, the expense number, which we feel very proud to be at $500 million, will be the operating leverage that will run off into 2020.

Collyn Gilbert -- -- Analyst

Okay and then just a question on capital. I know your outlook for securities growth is holding. But if the curve stays unfriendly or in the dynamics within the loan book don't allow you to get to the 5% target or whatever. How should we be thinking about share repurchase appetite and just your kind of capital targets from here?

Thomas R. Cangemi -- Chief Financial Officer

So we always truly believe given our risk profile. We have excess capital. So when you look at our capital analysis, we have saved significant excess capital amount. Remeber, we pay a very substantial dividend back to our shareholders, which is a large portion of our earnings, but we still have excess capital in our targets, and our warning levels not close to, so we're very confident that if we continue to be active growing the balance sheet, which is a priority. The repurchase opportunity $300 million authorization, which we have about $72 million left. When that's behind us. We'll deal with that going forward. But I think the priority for the company is to maintain a very strong dividend and over time utilize that opportunity to be a strong dividend payouts, we've always been and with the expectation over time as we grow the balance sheet to growth through acquisition that we offer a unique -- we'll call it payout for shareholder want to join our team as part of our M&A strategy. So it's always been helpful to understand that some of the smaller banks that we've acquired and some of these books a large institutional large owners of stocks have the opportunity to get a very sizable uptick in the cash flow on yield of their investment as they become part of the NYCB be family. So, no question. The dividend is very important. We're going to continue probably around that and obviously buybacks will come, depending on market conditions, but we got the one approved last year, given very volatile Q3, Q4. We felt that was appropriate and the Fed was accommodative us for us. And we'll evaluate markets as we go forward. But if things don't grow as fast. We have excess capital ,buybacks would be potentially on the table to be utilized in a different environment. But no question, but we are in growth mode. We're very focused on growth, we're looking at the opportunities to consolidate other opportunities within the marketplace, we think there's lots to do out there and we'll be very proactive.

Collyn Gilbert -- -- Analyst

Okay. Just one final question quickly sort of tied to that. Any preliminary guidance you can give on season?

Thomas R. Cangemi -- Chief Financial Officer

We're not going to give a number, but I will tell you that we're in a very good place. I mean, we've been working on this probably for going back to, when we becoming a CCAR bank having this modeling and all the, one of the things that we were required for us to be like a Citibank. So we were, we are very confident that our backlog was able to get our models in a place to switch over to a seasonal strategy. And given that we have a very low average, very short average life and a history of no losses, we believe we'll be in the de minimus impact to the company.

Collyn Gilbert -- -- Analyst

Okay, that's great. I will leave it there. Thanks, Tom.

Thomas R. Cangemi -- Chief Financial Officer

Well.

Operator

Our next question is from Matthew Breese from Piper Jaffray. Please go ahead.

Matthew Breese -- Piper Jaffray -- Analyst

Morning. I was just hoping for some clarification. On the Peter be Canal sale sounds like $20 million in fees coming off around $16 million, $17 million in expenses. But in the release, you know that the will be substantially offset by cost saves related to the subs. So Is it $16 million, $17 million or is there anything in addition there that will come out?

Thomas R. Cangemi -- Chief Financial Officer

Well, we're going to have. I mean obviously some of that will have some additional book, we'll call related party, probably go back and forth. The more importantly, it's not just one strategy, we've done three strategies announced in the quarter. We looked at branch optimization. We looked at our own internal people that are selling financial products to our customer base, that's now being rolled off the P&L, we take this all collectively. This is going to be a positive impact to the bottom line for the company, driven by our cost initiatives. So yes, dollar for dollar, you're taking off $20 million and you've taken of income and you're reducing around $70 million of expenses. The net of that before tax for that particular line of business is just under $4 million. However, when you take all of these strategies into the end of the quarter, we will have and net income benefit for the year.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. And can we talk a little bit about the other strategies. So the the branch consolidation. I think you noted, there was 12 closures or relocations and what was the exact number of branch?

Thomas R. Cangemi -- Chief Financial Officer

Closures.

Matthew Breese -- Piper Jaffray -- Analyst

Closures. Okay. And what is the cost saves from that?

Thomas R. Cangemi -- Chief Financial Officer

Approximately $4 million or $5 million bucks a year. And we think that we feel highly confident. Most of those deposits will be coming to the bank. So we're not looking at any real attrition here.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. And then from the outsourcing of your folks selling financial products. What's the cost saves there?

Thomas R. Cangemi -- Chief Financial Officer

Approximately around the same $4.5 million to $5 million.

Matthew Breese -- Piper Jaffray -- Analyst

Okay.

Thomas R. Cangemi -- Chief Financial Officer

And the yield give up, I mean that revenue up as I is less than a like $500,000, $600,000 year. So it's not a big number.

Matthew Breese -- Piper Jaffray -- Analyst

And are these items included in the $16 million to $17 million from peer B cancal stand-alone. I'm just wondering if it's really like $20 million?

Thomas R. Cangemi -- Chief Financial Officer

That's separate, that's separate.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. So it's really that --

Thomas R. Cangemi -- Chief Financial Officer

Yeah. At the end of the day you're looking at we'll call a strategy. When you take these three particular announcement. We put in Q1 that will have a positive impact to the bottom line and expenses. Healthcare costs like and dealing with payroll-related expenses are significant. So like I said before, we got our headcount down of FTE equivalents down 20% since we've announced our initiative going back to '17. There are M&A transactions that on the get your 20% cost saving. So it's not just cost things we're exiting lines of businesses given our profile. We had a $660 million run rate when we embarked upon this this journey and now we're in the $500 million, that's a tremendous, not only down 20% on headcount but the 25% on actual expenditures. So we're very pleased to be where we are. We said operating leverage is going to be the story in '19 and that should continue to '20 as we grow the balance sheet as margins open up and NII starts to grow ,this could be -- always a positive tailwind for the company, which we're excited about.We had 12 quarters of declining margins NII. So we see visibility in the very short term.

Matthew Breese -- Piper Jaffray -- Analyst

Okay. And then the second of the loan portfolio that grew the most this quarter the specialty finance segment. I was just hoping to learn a little bit more about that. So could you give us, a breakdown of how much of the $2.3 billion are in the 3 verticals, the asset-based lending the dealer lending, the dealers?

Thomas R. Cangemi -- Chief Financial Officer

ABL about 30%. The $727 million and the equipment finance is about $1.061 billion, so just about, just under $1.1 billion, which is about 43% of the portfolio and dealer financing is about 26% to $633 million and that's including our LC as a total of $2.4 billion outstanding of $1.7 billion. So $2.4 billion is including LC. So, all in, it's been over the long term, we were trying to look at 30% allocated each bucket, right now we're probably a little bit more in the equipment finance side, about 44% for equipment finance.

Matthew Breese -- Piper Jaffray -- Analyst

And how much of that book is syndicated?

Thomas R. Cangemi -- Chief Financial Officer

All of that. We are a credit shop we do not drive the deal, we like I said previously, we look at the best transactions that work for the bank. Our Board is actively involved in picking those credits and we turn down 97% of what we see. We haven't had a late pay, we haven't had a delinquency, we haven't had a credit downgrade.We are laser focused on asset quality, because not driving the deal. We're not bringing in deposits, which is participating in significant syndications where we take a small piece of a very high profile senior secured deal.

Matthew Breese -- Piper Jaffray -- Analyst

And what's the average size of the deal and what's the average size of the loan in that book?

Thomas R. Cangemi -- Chief Financial Officer

I'm got to get back to them, and I have in front of me, but we can follow up the. Coupons about a 436. I would say that probably between $15 million to $20 million but I don't want to give you this information there.

Matthew Breese -- Piper Jaffray -- Analyst

And is there any vertical that is is more pronounced than others?

Thomas R. Cangemi -- Chief Financial Officer

No, it's widespread out we've avoided you know when we had issues we got regarding the oil markets, we tried to stay away from any oil credits, but we are very cognizant of what's going on throughout the GDP of the economy and what areas to be a risk profile and we avoid and, like I said, we see a lot of paper and we turned down about 97% of what we see. So we have that flexibility. We are not driving a deal, we don't have headcount, that's based on commission or bringing paper and employees. We have a small group of variable -- smart major focus is on the right to do a great job for the bank. And pick and choose the best deals they can see and we participate.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. Okay. My that's quite, you mentioned a couple times just just M&A and the strategy for M&A, can you give us that on activity in the market, conversation flow and just remind us of your appetite for geography deal size and deal metrics?

Thomas R. Cangemi -- Chief Financial Officer

So we're very excited about the opportunities. But most importantly, we've been disciplined. Right. So we're not going to take down our tangible book value. So anything we look at is going to have a benchmark to have a tangible book value creation, not dilution. So we don't want to be be in a call making an announcement about earn back, that's not in our DNA. And we're not looking to do transactions that have any meaningful earn back, I mean obviously you never say never, but the reality is that part's of our M&A philosophy. We see lots of opportunity in all scale, small, large and we're very cognizant of what's out there and we are very focused on our business strategy, which has been the hallmark of growth from $1 billion $1.52 billion has growth in mergers and acquisitions. So in the past 2 years, we've grown our deposit base to fund our growth and we are off laser focused on helping finding a partner that could continue bringing in finding and perhaps in the long run. Also bring the businesses and we're not discounting any line of business. However, we are very focused on asset quality, we're an asset quality shops. So we're not going to take away any of our quality of our assets, but the reality is that we are right to be in a position as we focus on M&A to do our strategy, which is accretive transactions that don't impact tangible book value. And obviously with a biasedness toward bringing it front.

Matthew Breese -- Piper Jaffray -- Analyst

Understood. Okay. That's all I had. Thanks for taking my questions..

Operator

Our next question is from Christopher Marinac, from FIG Partners. Please go ahead.

Christopher Marinac -- FIG Partners -- Analyst

Thanks. Good morning, Tom. I just want to ask about funding. Do you think this year, there is a time with the funding mix continues to evolve toward more CDs or it stay about stable?

Thomas R. Cangemi -- Chief Financial Officer

I could be more mix. I think given where there has been a lot of interesting competition pulling away from high rates. So the good news that some of the Internet players are, we're very focused on bringing their rates down. So I think if you look at where treasuries are trading on let's say the 1 to 2-year basis and you have an inversion going on, I think customers that won't go much shorter so they looking at products that of the offered by financial institutions, the brick and mortar franchise, which, that's what we are -- we have a very small Internet presence there. So I think the fact that the competition is weighing should bode well for us as targeting our customer base, but more importantly, we haven't really seen the the non-customer based come through yet. So like I said on my previous commentary 80% of every dollar bought into the past year and a half, has been from our customers. So it's only 20% is new money, so we hope to now tap into the new money. We hope to get our commercial real estate personnel focused on bringing in some more customer deposit base, which could be more demand time, money and lease money and rent rent income flows from these buildings that we have a major presence in and that will be helpful over the long term. And I guess that's more of the long-term strategy. But the reality is, it seems like since the the Fed pivot going back into the fourth quarter where we are today. It seems like deposit flows are more toward the shorter end of duration. And I think that the cost has been coming down throughout the nation. So that will be helpful for us as we were going to fund our balance sheet.

And so we find of a partner to look at on the M&A side. So we're going to continue to grow our balance sheet with the best possible funding sources, which in this environment would be retail deposits in the event that wholesale becomes more attractive in the Fed is an addition of current rates that we may go back to the wholesale markets, but we have the refinance wholesale book that's obvious. It's less material than it was 2 years ago and the fact of the cost structure is much lower. It was lower last year and to be higher in the future will be another positive for us. And when we go into 2020, you're looking at mid to upper, well let's say we'll call mid-2s that has that's coming due. So it's not as painful if rates are low 2s and maybe potentially with buyer toward going lower.

Christopher Marinac -- FIG Partners -- Analyst

Great! that's helpful. Are you incenting folks in the branches more than you had in the past is just curious on work there?

Thomas R. Cangemi -- Chief Financial Officer

Yeah. Again, I would say nominal. I mean, we've, again we are very retail-focused. So we advertising and regional pricing. We have a unique presence in Arizona, Ohio, down South Florida, New York Metro, these are all regional pricing opportunities. Some markets are more competitive in the other. We're going to be in line. We're not going to be the highest rate payable, we're not going be the lowest. We're going to be in the market. I think that we'll get a lot lease deposit flows, continuing to grow. We just reduced our rates recently about, a week and half ago and deposit on the CD side as coming in are you're going to have money coming in and out regarding tax payments and the like. But the reality is that people that are putting money in the bank right now it's still adding to their position of deposit growth right now as we stand in April. So we're going to make some strategic decisions on getting some of the higher cost money out of the balance sheet as we go into Q2 depending on growth, we're not to sit on excess cash, if we can save real money on the margin by reducing our cost of funds on what's on the portfolio, we have some higher cost institutional type money that you know, we're I'm going to take, we'll let them roll off and benefit on sales on the retail side.

Christopher Marinac -- FIG Partners -- Analyst

Great, Tom. Thanks very much.

Operator

Our next question is from Steve Moss, B. Riley FBR. Please go head.

Steve Moss -- B. Riley FBR, Inc. -- Analyst

Good morning. Just on the mid single-digit loan growth front originations for the quarter were down year-over-year in the pipeline was down as well, go into the second quarter, just kind of wondering, how do you get there in terms of mid-single digits or could we may be at the low end of our range?Yes

Thomas R. Cangemi -- Chief Financial Officer

Yeah. So I guess the new money pipeline is encouraging. We look at that $1.5 billion. And of that $1 billion of its new money that's new that's growth. So we know we have a $1 billion coming on, depending on how much we retain on refi, which typically is high. We typically we came around 85%. So we're encouraged by that. But I think what's most encouraging about the growth in the past year. If you think about the property transaction and the lack thereof, we're getting money from other banks. And I think there is a lot to do about where we are with the statement ,that we are in business to be the premier multifamily rent regulated lender and we've spent a lot of money on credit risk management practices to ensure that. So we don't have a capital of they AP50 CapEx listed. So we're very comfortable on managing our capital position and our credit risk management position going forward here. And I think that's a positive. I think a lot of other banks that have to get there will have to spend some money on OpEx to catch up and we're going to take advantage of the opportunity. So as far as the level of property transactions, not only has the market been rich for the past decade. It's probably stabilized in value. But more importantly the property transactions are not happening. But we are getting money from other banks because for various other reasons. It could be rate -- my view, I think it's more driven on their own internal view of the business, and what they can put on and what's, what they can do with capacity of the capital, we're in a very good place where we need to be. Last year, last 2 years, we ran without cap. We raised capital to be in business now, that was a painful exercise to go to raise preferred stock to be in business. And the good news that restriction is behind us and we're focused on on being the premier brand regulated lender in the marketplace.

CEO: Joseph R. Ficalora -- BANK QUARTER -- Analyst

Okay.

Thomas R. Cangemi -- Chief Financial Officer

If we get it throgh refi our portfolios. it's still growth.

Steve Moss -- B. Riley FBR, Inc. -- Analyst

That's helpful. And then just wondering. And are there any further branch rationalization plans coming up?

Thomas R. Cangemi -- Chief Financial Officer

Yeah, Over time. Yes, I mean we took a hard deep-dive in the past year and half. We will look at, does it make sense now versus what the true cost to exit and what's the earn back. We try to get the earn back within a year and a half. So we were there in this particular first batch. We will from time to time. I think that may come to consolidation in the event that we look at the environment on acquisitions and perhaps we join with some other institutions, whereas some branch overlap perhaps, but no, we like that's part of our DNA. When it comes to looking at what makes sense on a financial point of view. So, realistically, the '12 was the first real to wheel to it, a lot of it has to do with the fact that these are compelling reasons to. We have a branch of course the street and you have $20 million on a deal, $100 million and we're losing money and given where the current environment is and our exit costs are de minimis, we will exit and that's what we not, that was the first 12 is very focused on financial driven. It was really in earn back analysis we did and we think it was like a 1-year earn back.

Steve Moss -- B. Riley FBR, Inc. -- Analyst

All right, thank you very much. Sure.

Operator

Our next question is from Brock Vandervliet from UBS. Please go ahead.

Brock Vandervliet -- UBS -- Analyst

Yeah, sorry, just a follow-up on the FHLB that rolls next year. You mentioned that in passing its mid to upper 2's what's the, how much of that do you have for next year?

Thomas R. Cangemi -- Chief Financial Officer

But it's about $5.2 billion at about a 220 basis points. And then we model go to '21. And in 2021, it will be in exess of 242. So that's encouraging because we're doing trades below that right. So that's going to take away some of the pressure that we have to deal with. And obviously that's a long way out in the long term. We would like to replace our overall wholesale borrowings mixed with retail deposits, either through our internal growth or through M&A. The long-term strategy will be to be less reliant on wholesale funding over the long term.

Brock Vandervliet -- UBS -- Analyst

All right. Just follow up on that $15 million NPA loan, what's the outlook and loss expectation there?

Thomas R. Cangemi -- Chief Financial Officer

Again, it's a little too soon to tell. We're doing our work on it, it was a one-off our customers is an important wholesale of not a fashion apparel. This goes back to legacy Atlantic Bank long-term relationship, probably multi decades. Guys never had a problem, never had a miss payments. He just gotten south caught up I guess in a very turbulent fourth quarter and one of these customers went bankrupt. So we had a large order that just went bankrupt and put them in a very difficult position. We're evaluating collateral. We have our people out there. Accounting, the inventory. We have cash collateral. We have the all receivables. We have the inventory, but again at the end of the day, we don't think it's going to be any material loss. But it's $50 million in total. So just the exposure.

Brock Vandervliet -- UBS -- Analyst

Okay. And is there anything regarding the Fiserv transition that would knock you out of the box in terms of a deal M&A?

Thomas R. Cangemi -- Chief Financial Officer

Not at all. No, we're super excited about the opportunity. This is going to deal with years of consolidation, lots of patents that we have in our current system. We chose Fiserv, they chose us. We're partnering. We're going to get the conversion done this year. And if you think about the long-term, we will be on the one platform for all our systems. The loan table, the GL loans online or what was going to have a unique opportunity here to be on one platform and deal with our multiple patches of too many years of growth. So we think that we have tremendous cost savings opportunities and eventually we get some as we go into the cloud only further cost-saving initiatives that may not happen in the 2019 that could be 220 story, but this should be very good for the company. Because, historically, we've utilized our partner relationships to get benefits when we consolidate other institutions, so if we have -- and by the way many institutions on Fiserv, they aren't make it that much easier for M&A conversion opportunity as well. So historically we typically get preferential arrangements on growing the balance sheet with the contract, and that's part of our strategy with them.

Brock Vandervliet -- UBS -- Analyst

Got it. Appreciate, Tom.

Operator

Our next question here is from William Wallace from Raymond James. Please go ahead.

William Wallace -- Raymond James -- Analyst

Good morning, Tom. I'm sorry to kind of beat a dead horse here just want to make sure I understand some of your commentary around the expense. You're guiding $125 million in the second quarter. So you're at the $500 million run rate. Are you saying that you think you're going to get $500 million for the year or you're at where you're going to be in the second quarter?

Thomas R. Cangemi -- Chief Financial Officer

Well, in simple math $125 times four, you have to $500 million but bear in mind, the first quarter, you had the onetime $9 million charge. You take the 1 times out possible, but I think $125 million is and multiply by 4, it gets to you $500 million. I don't see our expenses growing. I see your expenses being laser focused to reduce overtime. I'm giving you a 1 quarter guidance and I kind of chew up the 2019 scenario. I wouldn't if I'm an analyst, I back out the onetime expenses on the severance and the branch closure expenses. And we look at 2020, I'm kind of saying that, I don't anticipate to grow the expense base in 2020 because we're going to have further opportunities as we focus on the company's P&L going forward. So again the operating leverage story is in place now, we have to get the asset growth and NIII up, then we can have some meaningful benefits and EPS growth.

William Wallace -- Raymond James -- Analyst

Okay. Thank you. That's helpful and then just housekeeping on tax rate. I think you, you're suggesting 25%, it looks like you had 24%. Did you change your expectations on tax?

Thomas R. Cangemi -- Chief Financial Officer

I would run a 25% in a quarter is fair, we're probably somewhere 25% to 25.25% in the quarter but conservatively 25.25% for 2019.

Operator

It concludes the question-and-answer session. I'd like to turn the floor back to management for any closing comments.

Thomas R. Cangemi -- Chief Financial Officer

Thank you again to taking the time to join us this morning and for your interest in NYCB. We look forward to chatting with you again at the end of July and we will discuss our performance for the 3 and 6 months ended June 30 2019.

Operator

It concludes today's teleconference. You may disconnect your lines at this time. Thank again, for your participation.

Duration: 47 minutes

Call participants:

Salvatore DiMartino -- Director, Investor Relations/Strategic Planning

Thomas R. Cangemi -- Chief Financial Officer

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

Brock Vandervliet -- UBS -- Analyst

Ken Zerbe -- Morgan Stanley -- Analyst

Dave Rochester -- Deutsche Bank -- Analyst

Steven Alexopoulos -- JPMorgan -- Analyst

Collyn Gilbert -- -- Analyst

Matthew Breese -- Piper Jaffray -- Analyst

Christopher Marinac -- FIG Partners -- Analyst

Steve Moss -- B. Riley FBR, Inc. -- Analyst

CEO: Joseph R. Ficalora -- BANK QUARTER -- Analyst

William Wallace -- Raymond James -- Analyst

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