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New York Community Bancorp Inc (NYSE:NYCB)
Q3 2019 Earnings Call
Nov 6, 2019, 8:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Salvatore DiMartino -- Director, Investor Relations

Good morning. This is Sal DiMartino, Director of Investor Relations. Thank you all for joining the management team of New York Community Bancorp for today's conference call.

Today's discussion of the company's third quarter 2019 performance will be led by President and Chief Executive Officer, Joseph Ficalora and Chief Financial Officer, Thomas Cangemi, together with Chief Operating Officer, Robert Wann and 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 deposits, loans 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 in its SEC filings, including its 2018 Annual Report on Form 10-K and Form 10-Q for the quarterly period ended June 30, 2019.

The release also contains 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 remarks. Instructions will be given at that time. To start the discussion, I will now turn the 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 and Chief Executive Officer

Thank you for joining us today as we discuss our third quarter 2019 operating results and performance. Earlier this morning we reported diluted earnings per common share of $0.19 for the three months ended September 30, 2019, unchanged from the three months ended June 30, 2019.

We are pleased with the company's third quarter performance given the economic and interest rate backdrop in place during the quarter. The main highlight in the quarter was the stabilization of both our net interest margin and our net interest income. With the FOMC lowering short-term interest rates twice so far during the quarter and the high probability of another rate cut later today, we are starting to see a benefit on our funding costs, which given our liability sensitive balance sheet is a positive for us going forward.

Turning now to our financials for the third quarter, we were very pleased with our net interest margin for the quarter. At 1.99%, the margin was down only 1 basis point compared to the previous quarter and in line with our expectations. Excluding the impact from prepayments, which rose 12% to $14.1 million, the margin would have been 1.88%, also down 1 basis point compared to the previous quarter.

At the same time, net interest income of $236 million was relatively unchanged compared to the previous quarter as our asset yields remained stable, while our funding cost declined modestly. We believe that this quarter marks an inflection point in the net interest margin and net interest income and we expect further improvements as our funding cost continue to trend lower.

On the lending side, our loan portfolio was up nearly $700 million or 2% on an annualized basis, compared to the level at December 31, 2018. Led by our multifamily and specialty finance loan portfolios, but on a linked quarter basis, total loans held for investment declined modestly. During the quarter, a number of multifamily loans refinanced away from us as other financial institutions were willing to provide them with more credit than we were willing to extend, given our stringent underwriting criteria.

However, on an average basis, average loan balances increased 5% annualized to $40.8 billion compared to the prior quarter. Notwithstanding, our loan pipeline remains very strong heading into the last quarter of the year. Our current pipeline is $2.2 billion, up 10% compared to the pipeline at the end of the second quarter. The weighted average yields on the multifamily and CRE pipelines was approximately 3.7%.

Looking at our funding, as detailed in our press release, our deposits were lower this quarter as we strategically decided to let approximately $1.6 billion in higher cost institutional deposits roll off, opting instead to focus on lower cost retail deposits and other relatively less expensive funding sources. This had only a modest positive impact on our deposit cost during the quarter, but we will have a more meaningful impact in the upcoming quarters.

In addition, most of our deposit growth over the past year has been centered in CDs. The majority of these CDs are short term and mature in under one year. Given the interest rate environment this should provide a benefit to us going forward. Likewise, our wholesale borrowing cost have been positively impacted by lower market interest rates. We should continue to benefit from this over the next five quarters. Moreover, we continue to aggressively manage our funding cost lower and are proactively reducing higher cost deposit relationships.

Moving on to our expenses. As you know, we have been extremely focused on reducing our operating expenses over the past six quarters. And our operating expenses this quarter declined further. Excluding certain items related to severance costs of $1.4 million, total non-interest expense on a non-GAAP basis would have been $122 million, down 4% annualized, compared to the prior quarter and adjusted efficiency ratio would have been 46.83%, down 137 basis points compared to the prior quarter. Compared to our peak annualized run rate of $660 million in the second quarter of 2017, our operating expenses are down 26% based on this quarters annualized run rate.

On the asset quality front, our asset quality metrics remained solid during the third quarter. Non-performing assets totaled $68 million or 13 basis points of total assets, while nonperforming loans were $56 million or 14 basis points of total loans.

More importantly, we are not seeing any negative credit trends in the rent regulated portion of our multifamily portfolio after the passage of new rent control laws in June. The weighted average LTV for our total multifamily portfolio was 57.16% at September 30, 2019. While the weighted average LTV for the rent regulated portion of this portfolio was 53.54%.

Lastly, this morning 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, 25 to common shareholders of record as of November 11. Based on yesterday's closing price, this represents an annualized dividend yield of 5%.

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 conduct a question-and-answer session. [Operator Instructions] Our first question comes from Ebrahim Poonawala, Bank of America. Please proceed with your question.

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

Good morning, guys.

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning, Ebrahim.

Thomas R. Cangem -- Chief Financial Officer

Good morning.

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

So, I guess, first question, if you could just start with the sort of margin outlook. Tom, in terms of -- Joe mentioned the run-off in deposit this quarter didn't really show up in the funding side in terms of the cost. So if you could give us a sense of; one, your expectations for the margin in the fourth quarter and maybe a little bit ahead as you think about the October cut, all of this flowing through into 2020 that would be helpful? And just the magnitude of what we should expect on the cost of interest bearing liabilities heading into 4Q?

Thomas R. Cangem -- Chief Financial Officer

Sure, Ebrahim. Good morning. I would say that, obviously, we're pleased that our guidance still holds, we will see margin expansion starting in the fourth quarter. So that's been a significant shift as far as the fundamentals of the constant decline over the multiple years. So our guidance as far as guidance for the fourth quarter, margin will be up, NII will be up as well as in the same quarter, which is a very favorable shift for the balance sheet metrics. We're looking at probably anywhere from, let's say conservatively 2 basis points in Q4 of a margin uptake. But what's interesting, as you recall, we didn't have -- we had two rate reductions forecasted in the middle of the year. Obviously, that's now three more likely with today's expected cut. And next year we have an additional one and one-and-done. So that's going to bode very well for 2020 as far as the continuation of a quarterly margin expansion. every quarter throughout 2020 based on a flat curve. So assuming that the yield curve does steepen, if that's one of the scenarios you can see more of a powerful benefit to the margin. But clearly, even with the flat yield curve environment with another cut today and possibly one in the first quarter, we're seeing margin expansion every quarter throughout 2020 in a pretty meaningful way.

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

Got it. And you said 2 basis points of expansion is what you expect in the fourth quarter Tom?

Thomas R. Cangem -- Chief Financial Officer

Yeah. Conservatively it's probably up to for Q4 with the NII going up as well. Which was consistent with what we talked about in the previous quarters with additional one quarter -- with additional run rate with adjustment is also favorable outlook for that. So we are having another rate cut to help that as well.

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

And what's the debt, you mentioned about $5 billion at 2.06%, what is that repricing at over the next five quarters, what should we assume for that?

Thomas R. Cangem -- Chief Financial Officer

So, I would say right now, you're looking at -- without using any options you're looking at, let's say, the upper one, so, let's say, 1.62%, 1.70% if you put options against that low ones. We did some restructuring throughout the summer, I mean, like 1.15% was the rate that financed over a financial year period.

So, clearly a much more attractive rate than what's coming due. We have approximately $1.6 billion coming due in the fourth quarter at 1.90% and if you look at 2020, that's about a total of $3.4 billion at about 2.15%. So there is clearly upside for having more liability repricing on the cost of funds for the home loan bank advances that we foresee coming due.

But I think the real opportunity here is on the CD side, we have substantial CDs coming due. I know in Joe's commentary, we had the vast majority of all our CDs are within one year. We just slowed our rates this morning's, so the best often we have in the long end of the CD offering is about 1.35% going out 12 months and the short end is at three month offering at 1.65%, money market is around 1.5%. So that's going to meaningfully adjust our cost of funds and then will be clearly one of the catalysts for 2020 in this rate environment.

We had significant beta risk on the -- when rates were tightening. Now that we have an easing strategy going into FOMC, this would benefit some of that beta coming back to us favorably as far as higher net interest income as a result of lower cost of deposits.

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

Got it. And just moving to loan growth, so we had slightly negative loan growth during the quarter. Just talk to us in terms of, like, I was reading some this morning sales activity is down 30%, 40% in the five borrowers. Just in terms of what gives you confidence of getting to 5% loan growth this year. And looking into 2020, given what's happening with the market and the competitive landscape.

Thomas R. Cangem -- Chief Financial Officer

I think Mr. Ficalora's commentary about the fact that we had underwriting standards outside of the Bank. When we see where the bonds are going to, dollars that we're not willing to finance is a real indication of our conservative view of credit. So clearly we typically refi close to 80% to 85% of our current portfolio.

We saw a much lower refill rate, that number was sub 40% in the third quarter, that had a lot to do with absolute dollar. It's not rate, it's really absolute dollars and we're not going to sacrifice our credit underwriting standards because of dollars. We're going to be very clear about that. With that being said, such refinance had a very strong quarter and year and it is being growing very nicely for us, but we're going to be mindful that this is one quarter out of the rent control law change, so obviously as people trying to figure the marketplace as far as their directional move, we've had very little purchase activity.

So absent purchase activity significant refi away because of absolute dollars. We are not going to support because the math doesn't work for us on their underwriting standards. We're cautious.

However, with that being said, it's only one quarter of post the rent reg. So we think that eventually in the fourth quarter activity, such should pick up a little bit here. The pipeline is relatively strong, north of $2 billion, $2.2 billion. And we typically -- we typically are the place to refinance, especially in the yield curve environment that had a slow in the five year belly of the curve. So in the event that the agency backed off a little bit with the customers look to what's the portfolio opportunities we're a very attractive offering to them at the appropriate dollar. So I would say, the growth rate may be slightly lower as of this year. Obviously, if you do the simple math, we're growing at around 2%, 2.5% as of 9/30 annualized. We like to hold there, so we would like to see some growth by the end of this year and next year we'll reassess our growth expectations, but mid single-digit growth is reasonable level for us given our dominant in the space.

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

There is no question. There has been a material change in the value of this class of assets and many people as we sit today have non-performing assets. The reality is, there are owners that will not pay a loan that they know is at a higher value than the property is. So properties have had readjustments in value. We have a totally performing portfolio, because we lend at the existing values, so we're not being jeopardized, but many of our peers have non-performing assets, many buildings are going to be foreclosed, values in this sector are down, so the refinancing levels will be down and we are likely to continue as in the past have a widening between us and our peers during periods of stress and this period in front of us will clearly stress this segment of the market. There is going to be losses taken by many lenders that we're overzealous in giving too many dollars. We're not going to lose dollars because we lend on the existing cash flows. All those other lenders are today more likely they are not looking at non-performing assets or those assets have already gone through the Street has foreclose.

So that's going to continue in the period ahead. In every cycle turn regardless of the reasons why they begin, in every cycle turn we typically lend more money because we lose less money. So we are a lender in the cycle, whereas others lose so much money in some cases, they're actually driven out of business. So that is on the future horizon. The values in this niche are going to go down. There are excessive lenders that are already looking at significant losses in their portfolio. Expect headlines. We're not going to be among the headlines as a loser. We will be a funding source through the cycle.

Got it. Thanks for taking my questions.

Operator

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

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning, Steve.

Steve Moss -- B. Riley FBR -- Analyst

Good morning. On the loans that refinanced away, just wondering where those were located? And were they rent controlled or non-rent controlled buildings?

Joseph R. Ficalora -- President and Chief Executive Officer

I mean we would assume that the vast majority of our portfolio is rent controlled or rent regulated. So clearly it's a wide mix, but now the government is been very active. The yield curve environment was, obviously, at a lower level during the quarter. So we had a much lower opportunity for them to get a lower cost of financing through the government and that was -- they were very active. They also had pent-up demand with the government as far as showing out their annual cap. So clearly there has been some work there with going to the agency and interesting enough, a lot of smaller institutions are taking some of these credits at level that really didn't make sense for the buildings cash flow expectations.

So we're not going to lose the credit on interest rate. We will lose it on dollars. And I would be short to tell you that most of these loans left us on because of absolute dollars.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then on loan spreads, just wondering if you have any updated thoughts as to where spreads are today and where they could go given the change in rent control?

Joseph R. Ficalora -- President and Chief Executive Officer

I think what's exciting for us here is that, since the rent regulatory changes has been a meaningful widening of the spread. So we're looking at consistently being at around 200 basis points of the five year. Historically during an environment where the rent control laws were in place, that are much different than today. That was more like 150 and when things were very aggressive right before the crisis of the Great Recession that was at 110. So we're seeing a very nice economic spread, 200 basis points over the five year, seven years, 10 year, that goes a meaningful spread that were much different than it was in previous years.

And when you model that forward, given that we have a substantial amount of our loans coming due next year, now $4.1 billion of multifamily loans at a 3.16% rate, that's is still -- that current offering is still in the money rate for our margins. So we're excited about that, but no question that the retinal law changed had impacted spreads and favorably for the company. And we're going to be there for our customers at higher spreads. As we indicated back in the summer that this -- we look this as an opportunistic economic benefit given that spreads have widened somewhat.

Steve Moss -- B. Riley FBR -- Analyst

That's helpful. And then one last question on the CD repricing. Most of it is less than a year, just wondering if it's evenly spread out or if there's any waiting to a particular quarter?

Thomas R. Cangem -- Chief Financial Officer

Yeah. I would say, it's something like about $1 billion per month, it's almost $13 billion over the next 12 months. It's a significant benefit, $13.5 billion with an average rate of 235. If you recall back at this time last year, that was the highest offering. We had 285 offering back in October of 2018. that offerings in the one's now. So the highest rate are going out past 12 months [Indecipherable] right now is 1.35. So I think the reality is that all these customer deposit, which by the way are holding very well. We'll probably end up going into the shorter term buckets, three to five month type buckets and that ranges from 1.65 to 1.85 within our portfolio and eventually if they continue to be in an easing strategy they will just rolled down to lower interest rates.

Steve Moss -- B. Riley FBR -- Analyst

All right. Thank you very much.

Joseph R. Ficalora -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Mark Fitzgibbon with Sandler O'Neill. Please proceed with your question.

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning, Mark.

Thomas R. Cangem -- Chief Financial Officer

Good morning, Mark.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Good morning, guys. I'm curious on the expense front, is it reasonable to think that you can hold operating costs in 2020 at a similar level to 2019?

Thomas R. Cangem -- Chief Financial Officer

Mark, we've been very proactive on keeping the expenses on this tight control. We've had a substantializes -- Mr. Ficalora indicated in his opening discussion that we had a $660 million run rate when going into CCAR and SIFI. That's behind us and 500 was always the target. low 500s has been the target. We met our target at this type balance sheet with the anticipated growth going forward. Even if we hold that level we'll still get significant operating leverage. So we've been estimating around 125 a quarter, I guess for the fourth quarter, somewhere between 123 to 125 will be the number, but again, it's been consistently stable throughout 2019 calendar year. And I don't envision significant increase in cost next year as we complete our conversion and we focus on more efficiencies over time. But that level with a revenue growth on operating leverage and margin expansion, you'll see the efficiency ratio hopefully into low '40s, right now we're below 50 which is a breath of fresh air for us. We have a lot more work to do as far as on the revenue side. And the revenue side for us will come from margin expansion and NII growth, which will eventually benefit the efficiency ratio. So we can run an efficiency ratio somewhere between 42 to 43 ,44 next year that will be a very good, obviously, result of the bottom line.

So no question, margin expansion, operating leverage and more importantly EPS growth for the first time in a long time that we will be in a very neat spot all their -- all volume of credit discussion. Obviously, I know it's a bit of the future about our credit book is holding extremely well, assuming that continues to hold well, we should have some very strong EPS growth when you look at ' 19 versus '20 .

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

And then secondly, I know there have been a lot of transactions yet in the multifamily buildings. But can you give us a sense for how much you think multifamily values have changed since the change in regulations? And how you...

Joseph R. Ficalora -- President and Chief Executive Officer

Yeah. That's not overly easy to accomplish. Well, it depends on where the building is and the exact nature of the building. It's a 10 unit building, it's 150 unit building. The reality is, there have been changes in the market trade valuations. People who had product for sale saw the buyers disappear for some period of time reassessing the likely appropriate values.

So all values are down and the reality is that, some existing loans have already gone to nonperformance. You're not going to see that until there is a a financial statements generated that actually shows those kinds of losses or otherwise significant change in valuation. We know that the market has already devalued. The important thing for us is that, we are at levels that are driven by cash flows not by market speculation.

Thomas R. Cangem -- Chief Financial Officer

Hi, Mark. It's Tom. I would just add to Joe's commentary that the lowest cap rate we saw was more likely not in the Manhattan market. Our lowest LTV is the Manhattan market. So if we look at our public disclosure this morning for that on page 10 on investor presentation material that, in the Manhattan market our rent -- our entire portfolio which includes rent regulated and non-regulated is at 47.9%. That's our LTV and that was our current LTVs. So my guess is that, in this environment the absence of lots of transaction is really hard to gauge how much that cap rates have moved, but if you think about interest rates and cap rates in general throughout the US, you're probably had some movement, a little bit in the borrowers, depending on the type of properties. And even though the dynamics of the actual streets in Manhattan, each area has a different uniqueness as far as value. But there's no question anywhere from 25 to 75 basis points of cap rate movements is reasonable. Now, I wouldn't expect a substantial change in the Bronx versus Manhattan, given the dynamics or the upside potential in the Bronx

versus the upside potential in Manhattan, but clearly the absence of property transactions is giving appraises, they are scratching their heads. They are trying to figure out what truly is the adjustments in value, but what's good about NYCB portfolio is, as you can see from our disclosures, we're well insulated for an adjustment and when there is an adjustment there'll be opportunity for buyers to come in at the price that they can buy on a cash flow basis that makes sense of their portfolio.

And a lot of that stuff is a tax-driven transaction, these are predominantly long term generational holders that have deep 10.31 exchange benefits that want to tax deferred the next transactions. They will look to buy assets on a cash flow basis, that works for them based on cap rates and hurdle rate of returns.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

And then lastly, guys. Given the average life of your CRE and multifamily portfolio shortened up, do you expect that prepayment penalty income will continue to rise in coming quarters?

Thomas R. Cangem -- Chief Financial Officer

We've been pretty excited throughout the year. And I know a lot of our competitors have been saying that prepaid has gone. But we think it can be relatively consistent. So here we are mid quarter and it seems like it's been consistent. So we're excited that the prepay levels are within reasonable range of that $10 million to $15 million type quarter and it's lower than we would normally expect given the maturity of the portfolio.

These loans have waited a long time to refi, as I indicated a few minutes ago, in 2020 we have $4.1 billion that has to -- they have to reset. It's a $3.16. A lot of those loans will not have prepayment penalties with it, but they'll have a rate that goes to 8% if they choose to go to the market. So they're not going to go to 8%, they're going to go to somewhere at market, which will be for us 200 basis points off the five year. In the event the curve starts to steepen, that will be a meaningful benefit to the asset yield. So we have both deposit costs going down, borrowing costs going down and loan yields now still rising. This could be a good opportunity for 2020 to have goods benefits of the margin because of that.

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Thank you.

Thomas R. Cangem -- Chief Financial Officer

Sure.

Joseph R. Ficalora -- President and Chief Executive Officer

You're welcome.

Operator

Our next question comes from Steven Duong with RBC Capital Markets. Please proceed with your question.

Thomas R. Cangem -- Chief Financial Officer

Good morning.

Unidentified Participant

Hey, Good morning, guys. Good morning. Just going back to the alternative lenders. Can you just give us some color on the terms that they were offering? And how long do you see this dynamic playing out for?

Joseph R. Ficalora -- President and Chief Executive Officer

Well, there's is no question, we're at the beginning of a cycle turn. The field evaluation of this market is going to continue over the period ahead. As I mentioned, there are many properties today that in fact are not paying on their loans.

So there are a lot of foreclosures out there that you're just not aware of yet. In normal cycle turn, and it doesn't matter what the trigger may be, the consequence of cycle turn is a revaluation of the marketplace. Those lenders and there are many, those lenders that lend on future values have portfolios of non-performing loans today, there are not necessarily talking about it, they may have one month, two months, three months of non-payment. But the reality is, the market is devaluing down. So new trade, new buys are at lower values, because the owners know that their asset is less valuable and the lenders, whoever they may be, know that their assets are less valuable. The important thing for us, there is no change, we never lend on the market trade value, we'll always lend on the actual cash flows.

That's why we're so different than everybody else during the cycle. What makes us better than our competitors is the consistency with which we do not take risk. The consistency with which we actually understand the fundamental value of the asset that we're taking into our portfolio. So the reality is, you're going to see prospectively evidence of significant losses in this niche. You want to know how much money is going to be lost, go and check how the value of trade has occurred.

What is the difference between what properties we're selling for last year versus this year. The change is discernible, the meaningful adverse change in the future values of this real estate has been governed by political decision that was extraordinarily bad, that changed the relationship between parties.

Look, owners are citizens just like tenants are citizens. The reality is, that tenants were given significant benefit over the owners, that changes the value of that relationship to the owner.

Steven Duong -- RBC Capital Markets -- Analyst

Understood. And then, just want to -- I just want to make sure I heard it right, did you say you guys are putting on -- your coupon was 361. Was that right?

Thomas R. Cangem -- Chief Financial Officer

The actual portfolio coupon, that's for the actual current pipeline portfolio [Indecipherable] we're looking at approximately -- I think the average of all of our loans is about 870.

Joseph R. Ficalora -- President and Chief Executive Officer

Right now the current portfolio Pfor [Indecipherable] is about 369, 370.

Steven Duong -- RBC Capital Markets -- Analyst

Okay. And can you remind us...

Thomas R. Cangem -- Chief Financial Officer

Pipeline is -- pipeline rate is about 3.77. So a nice healthy spread versus the current treasury curve, 3.77.

Steven Duong -- RBC Capital Markets -- Analyst

That's pretty nice. What was it last quarter?

Joseph R. Ficalora -- President and Chief Executive Officer

And so last quarter it's probably at 4%, close to 4%, closer to 4%.

Steven Duong -- RBC Capital Markets -- Analyst

Okay. And then [Speech Overlap]

Thomas R. Cangem -- Chief Financial Officer

[Speech Overlap] significant shift on the yield curve environment from [Speech Overlap] besides 409 versus 376.

Steven Duong -- RBC Capital Markets -- Analyst

Right.

Thomas R. Cangem -- Chief Financial Officer

But I think maybe that the dynamics today that could be obviously, if is the current starts to steepen we're getting 200 spread and customer start to back off of going into the 10-year I/O program that start with the government and more toward the portfolio lenders that could board well to get more of our customers in that five year bucket.

Steven Duong -- RBC Capital Markets -- Analyst

Great. And then can you just remind us what was the 2015 vintage that was coming -- that's coming off.

Thomas R. Cangem -- Chief Financial Officer

It's significant. I mean, I would say, the vast majority of that 2020 number that we talked about that $4.1 billion, most of that is 2015 vintage and that's the one that will be scheduled to repriced at a 3.6% yield.

Steven Duong -- RBC Capital Markets -- Analyst

Great. I appreciate the color, guys.

Thomas R. Cangem -- Chief Financial Officer

Sure.

Operator

Our next question comes from Peter Winter with Wedbush Securities. Please proceed with your question.

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning, Peter.

Thomas R. Cangem -- Chief Financial Officer

Good morning, Pete.

Peter Winter -- Wedbush Securities -- Analyst

Hi. As you guys lower the deposit cost, can you just talk a little bit about your deposit strategy going forward?

Thomas R. Cangem -- Chief Financial Officer

So Peter, this is pretty focused and obviously we have to be very aggressive in the rising rate environment because we were growing for the first time in a long time coming out of the $50 billion threshold issue that we dealt with multiple years. And we have to fund the balance sheet. So we were proactive on dealing with a very low cost deposit base in a rising rate environment. And we were growing. So we had the combination of retaining the customer at the market and we were at the high end of the markets retention because every members in the market very aggressively. What's changed today is that, the beta risk that we had in a tightening environment should benefit us in a book neutral to easing type environment.

So the very good success that we see today is that, the customer deposits are sticking very nicely. We were strategically targeting in Q3 the exit of very high cost money, and we expect to what these relationship wanted to business out as far as the benefits of this environment. So for example, if we were Fed funds flat for a mortgage provider who does warehousing and whatnot. They were looking for Fed funds plus 3/8.

So that we bought that money of 114 versus 250, those are really significant adjustments toward our strategy to get exit out the higher cost funding, focus on the true retail deposit base, which is a customer, the mom and pop in the neighborhood and those deposits have been growing very nicely over the past 2.5 years. So that's the focus of the company going forward. We like to do more for the commercial real estate side, that's an ongoing phenomenon for us for multiple years with so much opportunity there, but that's going to be all hands on concept of really putting real investment into that and we're looking at that over time, but clearly we had less deposits with our commercial customers and we are by nature thrift with most of those funds coming from the retail franchise.

Steven Duong -- RBC Capital Markets -- Analyst

And with the CDs maturing next year is the expectation that you will retain [Speech Overlap]

Thomas R. Cangem -- Chief Financial Officer

Yeah. Absolutely. And we're within the middle of the range. I don't see us losing CDs and we are very -- are we're tracking it on a daily basis, and it's been performing very nicely and we've been pretty much proactive with the FOMC adjustments. We reduced our rates this morning. Like I said previously, the highest rate if you want to go into three month product is 165, but they cut a few more times, actually that's going lower with maybe 85% of the move of the Fed expectations.

So if you want to go along, you're 1.35%. So we're still all sub 2% now, where last year, as I indicated, our rate was almost 285 and we were taking new money at 2.85 that's all been repriced very aggressively lower as we go into 2020. So there is no question that our cost of funds will drop significantly next year, which will benefit our EPS growth and margin expansion.

See we envision margin expansion every quarter throughout 2020, assuming a flat yield curve. If the curve steepens, that's only be better for us assuming the shortened stays currently where it is.

Peter Winter -- Wedbush Securities -- Analyst

Got it . And then separately, Joe, just I was wondering if you could give an update on the M&A environment, especially with the improvement in your value [Speech Overlap]

Joseph R. Ficalora -- President and Chief Executive Officer

I'd say there is no question. There are people that are very smart out there that look at their business model and recognize that they would be better suited to be part of a viable large entity. We do compare well with regard to choices banks can make. So there is no question, we are having active dialog with the marketplace and there are many people that would like to join the team. This happens to be the best of times to join because the difference between us and others with regard to equity performance widens during cycle turn, and we are in the beginning of the cycle turn.

So, as I've indicated, there were many banks today that have embedded losses in their portfolio that they may be aware of. But the Street is not yet aware of. So the nonperformance of their assets is something which is evident to them, but not necessarily evidence to the market. Values have changed, the day-to-day trading in the market has already changed, there are foreclosures that are occurring, there are non-performing assets in particular, in this large class of assets that is quite evident to the lender. The reality is, we are not having nonperformance because we lend on the future values. So we are going to be in a very good place prospectively, not having the kinds of losses others have. By example, over our public life, it's about 26 years, we've charged off 103 basis points. That compares to our peers that in the same period of time charged off 1,198 basis points and the SNL bank and Trip index charged off 2,356 basis points. That is not a year's performance, that is performance over 26 years, a 103 basis points compared to 2,356, that is a meaningful difference in performance over an extended period of time. Prospectively, we see the exact same thing happening.

Peter Winter -- Wedbush Securities -- Analyst

Great. Thanks a lot.

Operator

Our next question comes from Ken Zerbe with Morgan Stanley. Please proceed with your question.

Thomas R. Cangem -- Chief Financial Officer

Good morning, Ken.

Ken Zerbe -- Morgan Stanley -- Analyst

Good morning, Tom. I guess, Thomas. Is there a way to quantify, I don't know if you guys even think about it this way. The extra prepayment income that came from those multifamily loans that refied out to the non-banks?

Thomas R. Cangem -- Chief Financial Officer

Quantify in dollar amount or...

Ken Zerbe -- Morgan Stanley -- Analyst

Yeah. In dollar amounts will be fine.

So Ken, what I would say in categorize that, we're pleased that we're getting the prepayment opportunity, I think we have more of the uniqueness is that, they are seasoned loans, they are not one, two years with the cash, where they are coming back at you very rapidly.

This is getting closer to their roll dates. We're getting less economics because as you get closer to the replacing turn, they go to zero, right? So next year, like I indicated, we have a substantial slug of both commercial real estate and multifamily coming due as a matter of maturity or repricing at a very low rate. So we will get them to go from a 3.16 to somewhere, hopefully, north of 3.5 that's beneficial.

However, they're not going to be paying point as they wait for the last minute and if they don't refinance, that's going to be paying percent type interest rates, which is going to be very temporary.

So I would say that the categorization of the prepaid has been less prepay on a percentage basis per loan, but still active, because as you can see we had a lot of activity, we've had good originations. Our origination numbers have been very strong every quarter, but when you have more refi and it's going away from us because of dollars. As I indicated in the growth, however, the prepays tend to be lower as a percentage basis, because they are more seasoned loans that are prepaying.

Got it, OK. And just sticking with the non-banks. Are they still being as aggressive in October as they were back in 3Q?

Thomas R. Cangem -- Chief Financial Officer

I would say, I category that as the I-O program is very attractive for customers that they want to go to the government and/or other means of getting financing. We typically do not allow a second mortgage as a matter of policy. So if you think about how we look at our lending, we're first lien lender, we focus on low LTV. So I would say, being the A type lender. Then we have these customers in our portfolio for multiple, multiple years, multiple refinancing cycles. We have the information, we understand the dynamics of that building. We really know what that building can actually support. When it goes elsewhere, they get a, let's say, a dollar bid, that information is in our filings.

They go out and trying to get financing. They may be looking for an opportunity to get more dollars. And again we are going to be extremely conservative as a matter of culture to ensure that we have impeccable credit quality. So that will drive some of these customers trying to get those absolute dollars, and more importantly the government facilitating that at an IO perspective, it could move to the government.

However, when rated start to spike a little bit on the back end, they tend to go back to the five and seven year structure, which as a portfolio lenden is an attractive alternative than going to the government process.

Joseph R. Ficalora -- President and Chief Executive Officer

But remember, the government failed in 2008 Fannie and Freddie went under. The reality is, that all lenders that are lending aggressively are in fact looking at non-performing portfolios. It is not necessarily evidence to you, but to the people that are buying and selling these properties, they know they can get funding as readily as before. There will be fewer and fewer lenders in the market. We always lend up during cycle turn because the other lenders disappear.

So as we look to the period ahead. Next quarter, the quarter after. You're going to see more and more example of two things. People that are in the market last year won't be in the market next year. People that are in the market taking losses are going to be reporting those losses. In every cycle as we see in this cycle, we're not going to be reporting losses. We in fact have fully performing portfolios, even with this as egregious change in prospective valuation, because we don't lend on the prospective valuation, we lend on the actual.

So the reality is, what makes us different is performance during adverse periods and we are on the verge of a significant downturn in the valuation of a very large segment of the New York market.

Ken Zerbe -- Morgan Stanley -- Analyst

Got it. Understood. And then maybe one other question, in terms of the NIM, obviously your guidance is 2 basis points higher in fourth quarter. So when we think about 2020 and I understand you don't give 2020 guidance. But should we expect a similar pace of NIM improvement over the sort of the course of the year or is there any kind of acceleration or deceleration in terms of the NIM as we progress over time.

Thomas R. Cangem -- Chief Financial Officer

Yes, I would say, it will be a higher acceleration given that we have the multiple rate adjustments that all took place in the back end of 2019. So that's going to bode very well, what's coming due on the liability side for 2020. So the magnitude of the increase in the margin will be higher. And I believe that's going to be a quarterly phenomenon each quarter, which I'm seeing -- we're running numbers with flat curve, sloping curve, inverted curve. All different scenarios. But in a reasonable scenario you can have a meaningful margin uptick every quarter throughout 2020. I'm not going to give specific guidance, but we've had a lot of pressure on our margin. We're not going to earn 76 basis points on assets -- on tangible assets going forward.

That's not in our traditional way to make money. We were always at somewhere north of 1% and we're seeing -- we think that deposit cost had peaked in the second quarter of 2019. We trend that going back well over seven, eight years. That's the peak of our deposit cost and now we're going to enjoy the benefits of the beta risk on the way down, where we will get benefits of a lower rate environment, given the current short end of the curve.

So I think it's going to be meaningful. We have a lot of borrowings coming due as well and meaningful there. And obviously if we are able to look at the funding mix slightly different over time. Historically, the company has grown its deposit base through acquisition. So we haven't had a close transaction in quite some time. So we're in a very unique spot as a public entity. But we've always were able to change our deposit mix via through our other funding sources, through other retail franchises. So we're still battling with that change in the business model going into SIFI and the CCAR, you know that's behind us.

So we're very optimistic that this will be a up margin year next year, up EPS growth year or borrowing credit. In the credit, as Joe said, the credit book is holding very strong, we're pleased. And we are going to be patient on making sure we can make the right moves at the appropriate time.

Ken Zerbe -- Morgan Stanley -- Analyst

All right. Great. Thank you.

Operator

Our next question comes from Steven Alexopoulos with JP Morgan. Please proceed with your question.

Steven Alexopoulos -- JP Morgan -- Analyst

Hey, good morning.

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning, Steve.

Thomas R. Cangem -- Chief Financial Officer

Good morning, Steve.

Steven Alexopoulos -- JP Morgan -- Analyst

So first on the deposits. If we look at the quarter-over-quarter decline, you guys called out exiting several large relationships. Who are you seeing competition from in the quarter, were these banks are non-banks?

Joseph R. Ficalora -- President and Chief Executive Officer

Casually there are many players, Steven I would say that from the largest banks in the country that are looking at these types of relationships. So, for example, the mortgage relationship were a small player there, we were a player in the business, we've been out of the business for a while. So we have lost that relationship, just given the expectation of what their economics and what they expect from us. However, when they latch on to, let's say, a major player is different type of economics with a share as a partner. So that's one of the large relationships that went to the one of the largest mortgage providers in United States. At the same time, a lot of smaller community banks that are aggressively looking at bringing in some funding and people will optimize that opportunity. And again, like I said, Fed funds plus 3/8 versus Fed funds flat, and that's just too expensive for us. So there is a cadre of players, not so much the JPMorgans of the world, but there is other players that have been large institutions that are enjoying this mortgage-related business and they have different unique combined business where they can create a value proposal to them better than we can for those past partnerships, because we're not in the mortgage residential business.

Ken Zerbe -- Morgan Stanley -- Analyst

And then, I'm trying to understand the connection between the pipeline and originations. So if we look at the prior quarter 2Q, you saw a big increase in the pipeline for multifamily loans right away from $833 million to $1.4 billion last quarter. But multifamily originations were $1.2 billion this quarter, down from $1.8 billion last quarter. How do we connect those two, do you just have a much higher percentage of loans in the pipeline not closed?

Thomas R. Cangem -- Chief Financial Officer

We actually got -- as far as total loans that we anticipated for the quarter, we closed our origination. I think like I said in our opening commentary, a lot of loans will flat away. And these are loans that typically would stay with us. However, the economic dollar did make a whole lot of sense. And I go back to the concept that we know these buildings, they are in our portfolio, we have the financial information, it's $10 million, it's shouldn't be $20 million, but it goes way for $20 million, that's not -- we're not going to lend on those types of relationships, so there has been interesting dynamics there, but having a typical retention rate for us in a normal environment of 80% go below 40%. That's why the portfolio hasn't had a significant growth quarter-over-quarter.

I'm assuming that dynamic is not going to be an ongoing trend. However, that's pointing out why we didn't have the meaningful progress. There is very little purchase activity. So it takes lack purchase activity, refinance away because of dollars and a very strong pipeline and originations, you're going to be in a relatively flat, so the pipeline is not driven by a date. The pipeline is driven by what happens to be available to close within that 90-day perspective period.

The reality is, a loan to go into the pipeline on the last day of, let's just say, the last quarter and that come out of the pipeline for eight months. The difference is real, it's not a pipeline that says every loan in that pipeline was made during that quarter. It says, this is what we expect to close during that quarter whenever it might have begun, its processed. So don't misunderstand, these are not fixed to a data, these are loans isolated individual relationships that will take a varying amount of time to close.

Joseph R. Ficalora -- President and Chief Executive Officer

I would just expand on that. I can't remember a time where our origination number that we closed was less than what we put on the previous pipe. We have always historically go with our pipeline, even though as Joe indicated, it could be a cadre of the other loans coming from the previous pipeline. You have the holiday season, right now, the Jewish holidays do impact the timing of the closings. But we clearly have net -- I don't think I can ever remember missing the closing numbers versus the pipeline number. So I think our pipeline report is $2.2 billion, and we'll close at least $2.2 billion

Steven Duong -- RBC Capital Markets -- Analyst

Tom in terms of loans being refi-ed away it seems more customers are now go into the agencies, right? Which are offered longer term, it seems like [Speech Overlap]

Thomas R. Cangem -- Chief Financial Officer

Combination of both. Steven, I'd say, combination of both, I wouldn't be that clear. There has been some smaller players that make these mistakes. We've seen this movie happen before with the banks that on now growing this book of business. They see some other players exiting, they are moving into this space. Again we're very conservative on the dollar side. The agencies would have a very big appetite. Let's hope they try to tone that down as they deal with their mission statement, but smaller banks have played a role on making mistakes.

And we have to be mindful of that. We're not going to sacrifice credit, especially after coming off the substantial change in the rent regulation market, this is only 90 days post the period when this was changed. This is going to have a meaningful impact and customers still assessing where they're going to take their cash flows. Some customers may take their cash flows, may sell their buildings and go to other markets as a 10.31 opportunity, but clearly the city has been adjusted for this rent control change and customers are trying to figure out a multi-billion dollar portfolios and where going to put the proceeds.

Joseph R. Ficalora -- President and Chief Executive Officer

There's no question. The federal government does not fund Buick's and the federal government should not be funding multi-family loans. And reality is, there are meaningful players in this administration that have previously in their early life trying to restrain the excess of the Fannie and Freddie and are prospectively likely to again try to restrain the excess of Fannie and Freddie. Lt's recognize, Fannie and Freddie is not immune. They went bankrupt and took the money from the Treasury. In 2008, they can Overland, they certainly do not have a license to dominate or steel marketplace. So the change in their activity is a decision made by a government entity that just says, we're going to do less. There is no profitability driving Fannie and Freddie to the treasury.

The reality is, that this is a moment in time, prospectively in particular, a moment in time in which Fannie and Freddie can't be restrained. There is no legitimate reason for Fannie and Freddie to take the market.

Steven Duong -- RBC Capital Markets -- Analyst

Got it. Thank you. I just want to ask one follow-up question on your M&A commentary earlier. If we look at your M&A deals more broad, whether it's a small deal or larger MOE deal, it really doesn't matter. The stocks of the acquirers are not reacting the way they did in the past, really none reacted well even for well priced deals, doesn't that change your thinking around M&A as a long-term strategy.

Joseph R. Ficalora -- President and Chief Executive Officer

I think it certainly evidences the reasons for doing a deal have to be solid. We do not do bad deals. Every deal we've ever done has created a better bank. Substantively if we do a deal it's not going to be size, it's not going to be Street trade expectations. It's going to be to create a better bank. And we have high confidence that we understand what will create a better bank.

So we could do a very big deal. We can do a very small deal. The issue is, the relationships of currencies decide the economics of the deal, but the substantive reason for doing a deal is, have we created a better bank? Prospectively to create better value for shareholders, we know how to do that. We've done that many, many times. We're not accidentally the best performing stock even though over the last period. And in particular, since we were denied the ability to close the story, we in fact have not been valued as we've historically been valued.

So the good news for us is that, we have the open opportunity to do a good deal. When you see it, you know it, it will be a good deal because of the bank we create. Our Bank will be better because of the deal we do .

Thomas R. Cangem -- Chief Financial Officer

Steven, I would just add one other additional comment to Joe's discussion is that, obviously, tangible value is not going to go down on the transaction. We've been very clear as we evaluate opportunities, we protected of our tangible book value dilution. There hasn't been many deals that have been announced, where there has been tangible book value creation.

So I think that also bodes well for our strategy. And I think the marketplace understands that and if we do something that's meaningful, it will have a meaningful benefits of our book value, tangible book value.

Steven Duong -- RBC Capital Markets -- Analyst

Okay. Fair enough. Thanks for taking all my questions.

Thomas R. Cangem -- Chief Financial Officer

Sure. Thank you.

Operator

Our next question comes from Moshe Orenbuch with Credit Suisse. Please proceed with your question.

Moshe Orenbuch -- Credit Suisse. -- Analyst

Great. Thanks. Most of my questions...

Joseph R. Ficalora -- President and Chief Executive Officer

Good morning.

Thomas R. Cangem -- Chief Financial Officer

Good morning,

Moshe Orenbuch -- Credit Suisse. -- Analyst

Hey, good morning, gentlemen. So I guess to -- at the risk of kind of reasking pieces of questions that have been asked a few times before. And recognizing that from a fairness standpoint, we all agree that the GSE should be limited, but that process takes a long time. And I guess looking at that $4 billion that you've got, that's repricing next year. I mean, the question is, given your comments Thomas, are you going to see a rate retention rate of 80 or a retention rate of 40. And how should we think about that? I mean, they don't have some of those triggers that you kind of alluded to -- that you've alluded to in terms of the signals from the market, I guess. So I mean, can you just talk a little bit how you think that progresses?

Joseph R. Ficalora -- President and Chief Executive Officer

Moshe, I would say that obviously the rate environment does also play a factor. When you have a very attractive interest only product, but we tend not to be an interest only player at NYCB, we're very more inclined to traditional amortization transaction, five year type structure, sometimes seven. But we're not really a long-term lender when it comes to this product mix.

So we've been shying away from being the IO provider versus dealing with the government, who has a very attractive IO structure. So depending on the shape of the curve, if you look at what happened in the third quarter. Rates have come down significantly. It made the -- that particular bucket very attractive to go out long and get financing equivalent to a five year structure, given the rally and the tenure. So we're pricing this spread over the 10-year and what the government was offering and then putting through a DUS program and whatnot and investors are taking on -- the seller is taking on the risk and the government is basically provide liquidity.

It was an attractive alternative when doing a portfolio alone, but what's interesting is the dynamic of the competition. It went through also some of the smaller which I was surprised to see. Some of the smaller players that really haven't shown up that much in the past few years have shown up, some of our traditional competition has publicly backed off, which is expected, which should be a benefit for us for getting more share. So we are seeing a lot of loan coming from other portfolios based on our cash flow dynamics. We feel the building is valued at what's comfortable on our perspective of underwriting. But the government definitely played a role here and I think there has been a unique opportunity here going forward. In the event that -- depending where the curve ends up next year.

We have a very attractive offering. you may put more money in the seven year bucket. But we have to make a decision if we want to be an IO provider and historically that becomes where people are taking a little bit more undue risk. So I think there is a possibility that that 40% type of refinance rate was something to do with the timing of the rent control laws coming into place and some of the new launches of the market.

I wouldn't call it a trend yet, it's way too early to call that. But we've been doing this for a long time. Historically it's been between 65% to 85%. So let's hope that it doesn't become a trend, but we're monitoring it and we're going to be sold and we're not going to sacrifice our underwriting standards. And that's something that we'll deal with. I mean absent any real growth the company is going to have EPS growth next year and margin expansion. It throughs some operating leverage and growth, it becomes much more powerful EPS story.

So we are -- we historically grow the book around between 5% to 10% a year. We believe we can do that next year, but the jury will be out once we get closer toward the fourth quarter, end of the fourth quarter, when we report in January and we will have some more color there.

But the reality is that, we feel that we have always been in the market -- we are a portfolio player in the market and we're committed to the market. I think our spreads have widened, maybe that has something to do with it, we're not going to be aggressive on the spread side. We should getting better economics since there has been a change in the dynamic of the rent control markets. So the 150 is no longer 150. It's more like 200. And I think that many of the larger banks are at those spreads too. So we think that there'll be more of a repricing of that opportunity initiative bode well for the common coupon we have in the portfolio with and without.

So we hope to have those, we run the bank loan growth expectations and mid single-digit loan growth is not at the realm of possibility. The next year, I mean, obviously, this year is almost wrapped up, we are running around 2%. We hope to hold the portfolio up a little bit at the end of the year, but we'll see how that all pans out as we monitor these refies away.

Moshe Orenbuch -- Credit Suisse. -- Analyst

Got it. Thank you.

Thomas R. Cangem -- Chief Financial Officer

Sure.

Operator

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

Collyn Gilbert -- KBW -- Analyst

Just on balance sheet, Tom. So you obviously just gave a lot of color as to what you're expecting on the loan growth side. Cash securities, do you anticipate to hold at those levels going forward where they are this quarter, just talk about how you're seeing those segments unfold?

Thomas R. Cangem -- Chief Financial Officer

So have too much cash right now. So we're going to put it out to work and we've been very reluctant to put on very low treasury -- low security yields. So we've been mindful of that. But we said that it gives an opportunity in the securities market, we want to at least at a minimum hold the securities portfolio. That's been the strategy over the past three or four months, we have had a lot of calls that came through in the third quarter was significant. So we replaced that, I think, it was like a 334 that rolled off and put on a 280 on structure, more structured paper, not callable paper. And we want to hold that portfolio and in the event of a steepening of the curve. We'd like to grow the securities book to even 14% to 15%. So we have some work to do there, but we're going to be patient.

I think on respect to the portfolio characteristics, it is predominantly government of which we have about one-third of that portfolio as floating rate so as rates were declining that did impact the security yields negatively, but it's floating rate of interest rate risk reasons. And then the other two-thirds is fixed rate. So we hope that we evaluate that opportunistically as this sloping curve will put more money to work.

Collyn Gilbert -- KBW -- Analyst

Okay. That's helpful. And then just on the CD side. So you had indicated that their highest rate that you're paying now is 135, if I heard you correctly.

Thomas R. Cangem -- Chief Financial Officer

165 in the three month category. It's more of an attractive rate for someone wants to go relatively short. But if you want to go out one year, it's 135 and if you want to look at something in the nine month category, it's 185. So that's significantly lower than what we were doing a year ago. About 100 basis points lower. So our entire portfolio is pretty much coming due within a year. So it's about $1 billion per month that's repricing within the new rate term and we're seeing customers gravitate to the five month and over to three month structure, which is significantly lower than the current coupon.

Moshe Orenbuch -- Credit Suisse. -- Analyst

And what was the operating...

Thomas R. Cangem -- Chief Financial Officer

165 for three month money.

Moshe Orenbuch -- Credit Suisse. -- Analyst

No, no. Sorry, I just wanted to compare that to what you are offering earlier in the quarter. Like at what point, did you drop it to those rates and where have you been offering it throughout the majority of the third quarter?

Thomas R. Cangem -- Chief Financial Officer

Well, I'd say probably 20 basis points higher, still below 2%. Yeah, I mean we've been pretty active with the FOMC adjustments as they adjust. We've adjusted within -- we've adjusted our rare this morning, to be frank. As we anticipate given the probability, there'll be a rate cut. So we're going to be very proactive as we said publicly, we took a lot of deposit money in in the second quarter knowing we have this significant outflow expectations of high cost money leaving the bank. And we took in some retail deposits in Q2 knowing the outflow. We're going to probably end of the year around 4% type deposit growth, which is right on budget, until we start growing the balance sheet aggressively with loan demand, we will manage that accordingly.

Collyn Gilbert -- KBW -- Analyst

Okay. And I appreciate the thought of not necessarily giving NIM guidance for next year, but obviously that's a big part of the story, it's the big driver of earnings. I mean as we look at and as you -- you know you indicated, obviously, the refinancing dynamic on the funding side is going to drive NIM acceleration. I mean, is it unreasonable to think you guys could achieve like a 225 NIM or to 215 core NIM by the end of next year?

Thomas R. Cangem -- Chief Financial Officer

I don't think it's unreasonable depending on the shape of the curve, Collyn. So again, we don't give forward guidance. But I give pretty bullish view of what's going to happen on a quarterly basis. I'm envisioning the margin going up every quarter throughout 2020 based on a flat yield curve environment. So let's get a slope and that will be even better.

Collyn Gilbert -- KBW -- Analyst

Right. Okay. All right. I'll leave it there. Thanks, guys.

Thomas R. Cangem -- Chief Financial Officer

Sure.

Operator

Our next question comes from Christopher Marinac from FIG Partners. Please proceed with your questions.

Christopher Marinac -- FIG Partners -- Analyst

Thanks, good morning. I wanted to ask about the changes on the deposit mix going toward. More retail and less wholesale, is that going to give you relief on some of your regulatory liquidity ratios. I'm just curious if that's a positive byproduct?

Thomas R. Cangem -- Chief Financial Officer

Again, I don't think it's going to be a negative by 5. The reality is that, we're very confident given our business model, our structure, who we are, our traditional thrift model. We fund most of our liabilities through the home loan bank in the retail platform. Like I indicated, we like to get more from the commercial customers. But this is nothing news, this has been how we've always ran the institution. When rates go lower we tend to have a liability sensitive position. And it's very greatly in a declining rate environment. We paid a significant price when rates are rising, we had about $200 million topline negative impact toward revenues because of the tightening cycle, we should get a lot of that back.

Christopher Marinac -- FIG Partners -- Analyst

It sounds good. Thanks for that, Tom. And Joe, you had mentioned the changes in LTVs and just valuations in general, does near communities LTV get reset every quarter, do you do that once a year. What's the timeframe and how you look at values?

Joseph R. Ficalora -- President and Chief Executive Officer

We do that all the time. There is no question that we're constantly reassessing the market.

Thomas R. Cangem -- Chief Financial Officer

Well. Yeah, let me just be clear, that's a current LTV. So on an annual basis we see financial information from our customers, we reevaluate those financial statements, and we update our LTVs on an annual basis.

Christopher Marinac -- FIG Partners -- Analyst

Okay, great. And there's still a meaningful chunk, I think 40% of your loans have a 50% risk-weighting. So that's not going to change [Speech Overlap]

Thomas R. Cangem -- Chief Financial Officer

We've actually had a slight improvement quarter-over-quarter, but no question, we've always been known as a 50% risk weighted. That's kind of the sweet spot and we think there's opportunity. So when you think and talk about capital, we're very mindful of our risk weighted capital as more of a determinant versus other metrics, because obviously we can have -- if we would lending, let's say, aggressively against the government in the IO markets, those are mostly 100% risk-weighted loans.

Joseph R. Ficalora -- President and Chief Executive Officer

The best property owners we have know us over the course of long periods of time, they don't come to us to get the most dollars, never.

Christopher Marinac -- FIG Partners -- Analyst

It sounds great, guys. Thanks very much.

Thomas R. Cangem -- Chief Financial Officer

You are welcome

Operator

Thank you. At this time, I would like to turn the call back over to management for closing comments.

Joseph R. Ficalora -- President and Chief Executive Officer

Thank you, again for 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 January when we will discuss our performance for the three and 12 months ended December 31, 2019. Thank you.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Salvatore DiMartino -- Director, Investor Relations

Joseph R. Ficalora -- President and Chief Executive Officer

Thomas R. Cangem -- Chief Financial Officer

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

Steve Moss -- B. Riley FBR -- Analyst

Mark Fitzgibbon -- Sandler O'Neill -- Analyst

Unidentified Participant

Steven Duong -- RBC Capital Markets -- Analyst

Peter Winter -- Wedbush Securities -- Analyst

Ken Zerbe -- Morgan Stanley -- Analyst

Steven Alexopoulos -- JP Morgan -- Analyst

Moshe Orenbuch -- Credit Suisse. -- Analyst

Collyn Gilbert -- KBW -- Analyst

Christopher Marinac -- FIG Partners -- Analyst

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