FBC - Earnings call transcript Q1 2018

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Operator

Good day, and welcome to the Flagstar Bank First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Urban, Director of Investor Relations. Please go ahead, sir.

David Urban

Thank you, Brandon, and good morning, everyone. First Earnings Flagstar the to Quarter Call. XXXX Welcome

our also like that presentation any our we I available begin, subject quarter forward-looking mention would I would flagstar.com. today's and at to risks are could and our Before statements on first made reports X Slide you that release call described with presentation, to earnings press our the in XX-K our website change and materially to during like remind uncertainty. XXXX and file on in of subsequent Factors on assumptions current are that are Form today's SEC. release forward-looking

this We financial release earnings measures, are our non-GAAP presentation earnings GAAP and in also and which in are for we call. discussing described the available made

You Officer. of DiNello, these I'd call should With that, turn part Executive to Sandro over to documents Chief call. as like and this now the President to our refer

Sandro DiNello

and us thank joining you, for Thank you, David, everyone, today.

joined again, quarter XX consistent business Steve quarter, Once morning diluted second details net to income Jim for the announce strategic I'll and our call Chief segments $X.XX initiatives, Officer; questions. million In we our opening with a earnings. on turn the addition our produced guidance We're or per of and Lee this of lines of for for Jim providing Operating Officer. our over conclude performance to view I'm review financial follow results. up by will our Risk of Chief call high-level solid our share. to a by pleased and I'll Ciroli, Mortgage; with the Financial Kristy Lee the before President Chief to Fercho, start Smith, Officer; Figliolo, I'm for going David, the our then

relationship in first in us lot quality the quarter. loans, We business and expense funding prudent these of with commercial the deliver building a of management Our growing progress helped along efficient high results. based portfolio made

warehouse We continue seasonal and loans. and estate industrial to sale held loans commercial grow and commercial real offsetting and weakness for

branch industry-wide, we were XXX grew And interest also a approximately margin. despite same million. We deposits able maintain net stable to deposit betas

closed acquisitions strategic both balance two also that sides of sheet. the We on helped

mortgage Bank, XXX warehouse our position mortgage balance from a finalized sheet. where purchase bringing loans business lender acquisition more a the warehouse catapults approximately to a Santander warehouse we in leadership million strength already of business we the to us fourth This were of gives us country. largest player and in First, as the the

branches only branch the that Bank, growth franchise million fund opportunities brings eight also our Advisors, mortgage deposits in to in California retail our of Community California. Opes We Desert an growth division and help also synergies but with organic in not acquired about for XXX low-cost

appealing brought we as and and non-Flagstar onboard continue May to a Our servicing on we mortgage will latest sales of accounts. close we contracted June, flourish reach originated in Once servicing business our more down of servicing. outsource servicing rights choice loans new of milestone, our looking portfolio. and accounts an made XXX,XXX quickly our ability scale quality servicing have for in to The servicing over our to their Flagstar up platform buyers MSRs

challenged. chasing revenue mortgage will last until above That still to bit was quarter. quarter, said, was a and first many there too shakes out, last Although that revenue from year's it lenders are few down continue too be loans,

delivering good you consistent year my earnings. start and of a believe sheet model will growing detailed market, our colleagues by community strong more balance capital. on we this origination this us take variable to of a We're a market that, financials our weather continue take will We'll a well-diversified to discussion supported operations. work through hard in With bank, time, platform cost and with dislocation. off diversified help However, clean our and advantage

First up is Jim.

Jim Ciroli

Sandro. Thanks,

Slide X. to Turning

net income adjusted $X.XX $X.XX quarter share of income million was or as last to Our per million, per share net this $XX quarter. compared $XX

in our recall, you'll rates per points reform. resilience environment. fourth resulting basis bank. remain of were experienced the able $XX noncash as expenses, to costs of resulting higher maintain a and very The The margins hold the from deposit quarter line share continue were our lower costs Credit quarter on a loans competition of fallout-adjusted We and declined included as results proved volatile. or As we saw C&I, tax intensified growing for and charge nonexistent. locks we We million quarter to $X.XX dropped production-related rate interest remain and able for despite income expenses impact the taxes was mortgage other the the industry. and XX%, CRE challenging HELOC provision to areas XX earnings a virtually

As the minutes. negligible, their a balance loans of in X.X% total nonperformers allowance sheet into dive net at stayed strongest delinquencies and few charge-offs low our among levels, were We'll peers. and at coverage deeper very our the was

strong. was position capital our Finally,

Our and X.X% Tier ratio leverage expect simplification be are the capital leverage adopted. to X X ratio X.X%, our regulations we Tier proposed was if

and balances the slight in let's income $XXX earning book assets net for at as billion while was income interest fewer deeper held Slide continue costs. compared steady managing remained million stable our Average margin in loans X to attractively and CRE the last quarter. quarter. decline quarter turn as assets remained warehouse dive into deposit this as declines we and margin consumer X.XX% days So interest to at reflected C&I sale to seasonal stable in net loans. earning The assets interest spread offset $XX.X statement. two higher Net were The

spread, and net growing next income duration accordingly, grew interest loan This quarter, quarter. continue portfolios, to low expect we higher

warehouse and next business of should late the also in nice occurred earning the quarter Additionally, provide growth the quarter. lending in acquisition for assets

The it the costs banking while to at a this we've were as Our Overall, points community pricing continued the rates. was Flagstar. increases rose costs performance a have any our earmarked fires and deposit X in quarter. small Credit XXXX, average lack occurred, short-term quality. that third total by At uncertainties provision disasters to had modeled of negligible X%, have deposit that X betas Florida hurricanes continued only cover of team deposit grew strong expense quarter we the due balances might we we and Texas the outperform California. strong in in portion of natural had reflected asset basis end that some to despite of entire allowance

originations compared quarter. of to Fallout-adjusted from gain XX% from servicing originations. those quality quarter mortgage in locks a reflecting on drop revenues $X improved fell basis or Now primarily on by mortgage volume $X million. while assets seen resulting percentage fell sale decrease on XX% of Non-interest this as of improved last in gain The as XX% revenues net by mortgage servicing two margin $XX from $X a impact The in allowance on million our $XX a of quarters this net mortgage quarter, quarter. million return return later, a points. the quarter and on reduce quarter million minimal on reflected this fell of The competitive margin XX%, sale in a seasonal of pricing loss million sale net revenue XX gain million we've million. rose $XX The income originations to gain last to rates gain sale net this on pressures. credit $X to decline due risks million, mortgage lower fell the largely $X purchase

This was costs. million quarter's return $X impacted transaction of by

last loan Moving Bank expenses. acquired expenses were merger-related the will volume, lending flat expenses later now compared branches million the quarter. were, mortgage closing quarter and presentation. the this expense fell to lower the despite $XXX expenses last warehouse to X% business. compared Otherwise, associated processing million Lee to Community the compared million and commissions last Noninterest $X the quarter more of Reflecting down to with current $XXX Desert million of conversion together, $X relatively as provide and quarter. detail to in in quarter

Finally, the was with bill tax consistent tax quarter rate company's effective and expectations. new reflecting our reform XX%, the this

Slide for now $XXX loans were a X%. commercial investment highlights solid X, average average to which or X%. rose quarter. as assets million balance rose this combined a loans our and Let's estate real average steady and held Average earning commercial turn basis, sheet On industrial

deposits. CDs to the deposit modeled. a slight We'll than $XX.XX Despite equity-to-assets the of saw sale the Growth in strong average cover warehouse perform quarter remained late HELOC government X% or duration million $XXX capital the these million, pricing acquisition fell CDs, quarter a we've mortgage led common decline a average grew quarter recent for government the with tangible rose XX, in our deposits portfolio. of retail ended with higher control per business, in us $XX percentage savings as offset million the deposits growth portfolio billion of retail portfolios to a ratio acquisitions. average deposits levels strong earning regulatory of shortly. lower and position continued of loans our $XXX and lending from retail held extension under warehouse $XXX book our in higher X.XX%, We at to better by higher value while from assets, costs deposits. while offset quarter. also X% rose we remained levels in the tangible loans. or At nice When betas Average Average share March retail a and second putting in start combined

unchanged $XX points. the loan Let's prior nonperforming the basis XX Nonperforming end now quarter, the to ratio million from were the turn to asset X. quality of quarter, on Slide loans at while dropped

any from $X March loans of XX were of stronger and the of loan XX% in still At accruing banking is which commercial days our of unchanged collateral. of XX, days at remained coverage were coverage and loans delinquent and nonperformers. secured hold well early-stage is December still at warehouse loans, commercial loans. above accruing fully of over X.X% million Only coverage because low. and consumer are no allowance March XX. There loans, commercial Importantly, no peer. even was the strong HFI and loans consumer X.X% portfolio total XX X.X% delinquencies XX, that mid-sized we over remains levels This delinquent other Coverage commercial

Slide XX. Capital Turning robust. to remained

stellar typically basis range stress risk X.X% regulations up with leverage points buffer, quarter, at long At the XXst, enacted, capital a ratio. of have March by resulting sales, offset of robust from total basis a add over from point X XX.XX%, X our Tier XXX%, it acquisitions basis strong the now X XX the of stands stress we partially retention for to level. Tier tax level increase basis and simplification a is the quality had XXX% enacted, rate line target business, March in above points earnings growth risk-based the the capital total to continue our with a points weighting to asset risk points at in Our minimum in the coverage points basis liquidity ratio would to needed ratio position two capital last leverage for the mortgage combine allowance and leverage which basis in risk-based in excess capitalized. loans, approximately target risk we in approximately weights minimum ratio. XX.X% of would If considered well-capitalized X simplification level. capital leverage which of Tier XX commercial capital above a its the XX.X% buffer the and deferred XX% our and expect term XXX of continued management If well-capitalized a well Tier buffer assets the quarter. MSR proposal low XXst, ratio leverage neutral impact risk this roughly the both and Tier risk rights is with Considering servicing to be XXX was range ratio, from leaving XXX expect to level for function, strong on minimum have our to with If of capital XX levels, X of combined

viable constrained If NOLs. recover capital capital more Given of capital more trapped our deferred these effectively they still more even most hold comfortable ratio, in do provide would sheets. to capital, assets Since we the turn regulatory lower allowance the XXXX both return that these points become level the that coverage, ranges. strong each could make as and and we our of risk-weighted we'd earning options lower total of could balance of operating it of profile in Further, risk-based by assets be we appropriate utilize will now of XX tax the more residential mortgages end for assets, lower we expect basis in for other a us low-risk grow level I'll our of is Lee continue we to an businesses. assets. giving in on to insight our for

Lee Smith

mortgage per quarter everyone. operating earnings diluted despite $X.XX Thanks, share Jim, the and good our a with challenging of for pleased morning, very We're market.

by this and community bank I the illustrates years. last further how them diversified earnings our predictable think made the growing more we've few over

Our in both natural each against businesses rate a act means rising consistent declining and as our other, more interest are environments. less hedge earnings also which volatile and

country In who Michigan agreed means and initiatives in San commitments and complementary retail, family. team an million integration team, Desert also at including the Flagstar fourth broker, rights addition which welcome we loan billion XX earnings, business delegated of footprint X our to last of correspondent, some acquisition direct-to-consumer additional the and from we've the expansion from the deposits from to of Community quarter to testament mortgage that class growth the with Bank acquisition Bernardino warehouse produce fund the County and solid the of warehouse to the and We our us Bank. we correspondent on existing announced billion This lending outside branches The The Santander credit into sold servicing business. closed and asset loan mortgage a of work quarter California, strategic approximately risk. this quarter. bulk. billion non-delegated West closed expand channels mortgage we These our Bank. closed was executed spreads eight rights our good ability warehouse lender business, residential to to quarter, direct-to-consumer provided or Community low-cost largest our the our banking on in makes seamless, the strengthens distributed platform to of in have largest and mortgage all Desert in transaction an key mortgage East is in and of is have further thorough We state. mortgage and $XXX meticulous Bank lending mortgage diversifies we mortgage sale mortgage includes branches and our The of sell scale the low servicing high-quality, to the approximately in portfolio of announced and transition $X.X also origination on on

Mae XXXX, XXX% also We have we won which STAR of team. Servicing award awarded best-in-class consecutive the retained our this on the accolade. these testament performer platform third sales, servicing the we've illustrating subservicing and General in were is point, Further to this the Fannie year for category

exceptional X community the million the that Our by warehouse a of bank. just net strong a loans loan well ratios Average has capabilities XX We're year feel executing and to seasonal are strategic over continue XXXX. growing Of across start been be as XXXX we segments X also XX on remain capital metrics banking strong CRE commercial continuing XX. but income this to community not I this growth investment. driven business earning grow some and real transition and beyond. held major strong million consumer X%, commercial versus a last three the for It's a asset-generating increased ended after higher only and business referred X%, was of our our at and and to growth, been interest we quarter. X.XX%, by now the grew this with grew has Tier acquisitions successful offset of billion I believe all lines highlights while billion, Average X for business in commercial QX in earnings plan closing to have billion loans model and QX steady our to was XX% XX and ratio XX key industrial commercial estate of interest this to our C&I, solid to. year will is positioned loans million diversifying increased two a leverage illustrates operating the outline in include: Slide during bank. Operating I turn each from the Please decline the commitment XX% segment assets X.X or XXXX. balances. or the loans by or months, community Average or

both Following we Santander, quarter million the lending consumer XXX the of grow the as jumbos acquisitions at portfolio. in warehouse to business can and to our we loans added future. Average high-quality in Community continue and Bank of Desert we a similar from believe increased the home lines equity rate credit

strategic gain to a Bank, and opportunities putting bringing increase led We and executing on or branches and are revenues growth, on leveraging in in by Desert so size points, result. initiatives XX remain execution, business million forward Desert organic given commercial deposits our on strategy, focused fell The drive environments. now quarter-over-quarter in million points to environment; an quarter-over-quarter, in-house deposits like XX $XX competitive subservicing government inorganic a we and refinance this loan million from on the pricing decline out originating Bank difficult end deposit increase interest acquisition $XX channels purchase mortgage in HELOCs moving as rising is will the for We're through very volume potential excess pressure price exacerbated Operating certain $XXX reduction basis the jumbo rising our highlights and is given the in digital a of had retail increased future were issued increasing sale mortgage third drop including interest rate to very mortgage average the securitization rate bank on rate net further originations HELOC environment which us as index. building seasonal activity, Community given a and gives conforming and originations basis We our XX% the versus due fell customers of in greater emphasis existing and margin clearly in X% see consisted putting lock the We quarter, program further Community we which include: volume as by of quarter, We for QX the Slide XX% meant inventory through closed a volume balances. fell QX pleased our primarily Fallout-adjusted of QX, well Please clear performance rate high-balance loans bank, and increase fully lack sale decreasing Average mortgage deposits. the capacity, is this operating amortizing, margins. our market; originating. turn with were total for which a in escrow the market multiple positioning deposits. is on pressure by given the an encouraged outlet It's towards little is pretty refinance quarterly billion in another acquisition It's to XXX it fixed in and XX. and gain business and to is origination community geographies, in a qualified rising environment mortgage impact for in $X.X continued growth. on at the to slower million several loans. than believe of

us believe also conforming loans, the given our and fourth and priced for smaller platforms mortgage which dislocation mortgage in to in competitive fifth more the a securitizations bank of expect most We're We high-balance the securitization originator regular take two nation. one industry market, well activity as and fixed have in further our advantage any consisted of throughout positioned position best qualified the XXXX. the largest diversified to ago, be country. We again of the very origination consolidating we jumbo and we weeks

award Servicing the XX on servicing. servicing We to STAR third the operating in the segment General the awarded were be for to Mae Fannie category year. mortgage Quarterly highlights consecutive thrilled Moving performer for Slide include:

well loans, customer which making loan servicing outstanding customer biggest sub Fannie subservice positioned us best-in-class and is of largest service country. our the or XXX,XXX to have XXX,XXX engagement servicer a currently sales, in attest the service teams and and our others, exceptional subserviced that platform for As excellence. operational Mae for eighth to drive for We are relentless customer servicing

billion in will the we these sold retain of we've the which XXXX, subserviced scheduled unique complementary second are with far second expertise of and originated onboard all these non-Flagstar were XXX% above closed and So we together in XXX,XXX and quarter, combines $X.X MSRs, will in After close, or ancillary platform on servicing subservicing $XX sales. billion serviced May and in loans the comfortably quarter. to be by operational the loans our of offerings. quality, we I end June, believe sales

lending advanced to a We and for shop assets. compressive also offer MSR lending, of services one-stop owners servicing MSR recapture

during risk and The can value our combine see If offering you quarter, bank, us a compliance in and billion escrow reliable and generate robust fund also we you by the solid count. the is infrastructure reduction and slightly as this higher activity proposition these as a and offset the from with help sheet, such $X.X refinance loans our QX partially our counterparty. balance a deposits attractiveness down strength well-capitalized a held of of deposits loan

allow capital capital MSRs to CETX was of proposal ratio of and up to simplification us the MSR Our before became XX%, capital it would to XX% CETX punitive. at to end March hold the

is of previously Tier points discussed, increase significant positive enacted development basis X if As for obviously XX approximately and as proposed. March and would XX by Flagstar as very leverage a this

sales, of subservicing loans our boarding of the and grow originated to continue we given the loans will platform strength MSR offering. through underlying on non-Flagstar combination a our where We subservice

on loans We XX% MSR we period, through same have and increased of of the subservice and of by months predominantly continue the platform next growth number over we can this XX the over XX% believe our over the number rate XX increased months. loans last the by sales time

Moving Slide expenses on to on XX.

than by lower And in mortgage our careful closings, our categories. provided the driven in XX% cost processing mortgage and were expense lower quarter. with key in given better management, decreased adjusting model other to last some this was guidance variable quarter-over-quarter, together million managing are $XXX commissions Our came prudent why expense reduction we closings quarter-over-quarter. to expenses, million which We noninterest the $X loan primarily also

$X.X in million million forecast be remainder $XXX variable the the QX, increased a very to the in second being the focused in the on $XX cost particularly executing XX% mortgage our in quarter. create quarterly predominantly our through how efficiency it improving increase our for reduction acquisitions and we've I'll We're new with initiatives With increasing believe revenues our we million pleased the in and is of we've to remain continue XXXX. of second will and businesses during our will to value due We Sandro. of XX% expense ratio plan efficiency We growth sale quarter invested while ratio on maintaining gain growth revenues, on quarter-over-quarter. strategic of started businesses We're X% because we with significant support million estimate where quarter-over-quarter, from in between being noninterest hand back or Our the core to expenses XXXX. to shareholders. originations closed across that, organization. cost $XXX discipline

Sandro DiNello

Please to remarks and guidance QX, the open close XX. now to I'm for turn some with Lee. prepared our for you, then Slide Q&A. going call Thank

We expect the net acquisition on a net interest large interest in of income margin. a from loans will Santander and rise warehouse to increase back fairly XX% steady the X%

from closing We the to gain sale points. an We basis on MSR a seasonal XX% to X sales. basis X% income XX% of X% sale transaction of costs XX in mortgage on annualized the increase return net loan to a on MSRs approximate anticipate XX% in before will an margin by locks gain XX% to increase on in expect of led and increase

as will $XXX closings, decline now will the fees loan million prepared $XXX all other charges Brandon? and approximately remarks, from questions This expense on noted, income will And concludes while to and loan rise we'll We between higher Lee rise listeners. our call XX%. and XX% expect open million. to X% our non-interest mortgage noninterest

Operator

At Instructions] time from question first question. go Siefers you, Thank with this The questions. ahead the sir. and will we’ll for Sandler Please floor your with come open Partners. O'Neill Scott [Operator

Brendan Nosal

for second actually on gain Brendan from margin the on the team I to is on sale Scott's quarter. morning. start the expectation just this out wanted This line

thoughts view? Just Is mix will want is you easing a in basis curious. Or get it to to think X your your drive on what improvement. an competition that point XX it of issue? Just

Sandro DiNello

I'll get benefit combination bit say, more. would little it's things. level, a I of normally business high think let Kristy But see it. so it that's in a QX, I seasonal we a part into in a of

we as the a that also the will think little -- grow. we this competition see think that as I ease

So we're can history, an at think past look anything If to see increase. we add confident Kristy, makes I we there? it pretty sense.

Kristy Fercho

us only the Brendan, the is retail important thing market. be and expand platform just better growing growth continues I'd us. other growth Yes, the in distribution us a but for really in for continued rising the add, environment to Retail the positions allows purchase not to our rate system, and

sale as grow mix margin. that continue think continue kind on gain we so to we And of retail really will that to help

Brendan Nosal

of And question on top-level then a just expenses. kind

function in road come with tapers of higher investing the a couple growth rate the origination natural is of and course where base volumes underlying then think over expense mostly years, been just the has you guys of which some down for point past expense business then the a spend you'll You a Do reach of and have off investment time. growth?

Sandro DiNello

necessarily efficiency will the way off, but think of expense kind tapers that Well, I in Lee positioned significant think than has I be growth. don't that's I ratio that the think revenue Well, growth expense quicker past. more growth or the

Lee Smith

QX. just at invested of is the improvement Yes, in guidance the we've And growth to efficiency date. $X.X in to the that $XXX expense, I faster looking for given that's made from a right. acquisitions the ramp-up for in $XXX revenues the noninterest we million time think QX, be in million that will The of million

investment, revenues to is there come So a would we example primary the in growth and expect through of time.

Sandro DiNello

by organically, pick say go of we it you earning doing $X billion and add to buy assets, that years, five of we that. alternatively, expenses that three billion course, way, because, a a the there grew this has think we assets, expenses if could bunch $X next, it, bank, And would with hypothetically over of be would to along growth

as So efficiency getting the grow the ratio improve is key company. to that here you

Operator

for will question. the Please Jaffray. Kevin you Barker next with from The question ahead. come Piper Thank go

Kevin Barker

the do to out channels? you to then market, the in in it regards shake competitive the In takes think how also corresponding dynamic mortgage long in retail the and

Sandro DiNello

I a mean, answer. and some business know. that's Kristy? ball. the know, crystal outlined the challenges have just to with don't issues of question in so and don't don't such, I I tough inventory Kevin. a I Lee

Kristy Fercho

don't Yes, meeting kind actually board We question of that either. week. had I last in

the exited of quarter. one think of last things I kind point I'd Capital One to is

the mean, Financial MB a lower I margins this quarter. be think fall think the saw to just out. I in others exit will people as to origination continue environment. pressure will market continues on follow You I

So we'll of but you matter and it's a know as not soon let we know. when, as if

Kevin Barker

And continues and to push there the it of Or it out that's regards stay then smaller of to lot competition? looking a something to some the is they else market the some continue continuing push that competitive dynamic, players larger players is the in and on Or are? liquidity for to have share? where push

Kristy Fercho

have both dynamics. Yes, Kevin, I think you

think have about smaller you've And scale even really each a to then market, being is margin system lower I loan. staff got aggressive if incremental opting to what do so I that's fighting terms that pressure it keep and at players cost the model; right be channels, mean, built excited and the in continuing. and have pricing. cost who we advantage productive the people a their you really variable have diversified some the size have so The really have we and to think the you to, I we have and originators of some busy, for now, are in is are invested on are we people think the scale; we're the on and about that larger in. business of which over we thing lower one think, range, I and the definitely, of showing on margin others able their

advantage have So the take still as think volume business although narrowed, the we is it margins and positioned we're and to really shakes out. down of like dislocation

that take sure this storm, focused really until our happens and the we during weather shakeout of We time to on use making well also costs can that. that were just we're really scale the advantage and to positioned being

Operator

Next with go KBW. Bose George will Instructions] question Please [Operator come from ahead.

Bose George

the gain sale a margin. on follow-up Just on

more in of of it terms area? the the is pressure channels? In in Is particular in industry, pronounced kind that it any all is

Kristy Fercho

it's segment that's all a those where mean, the I we able in this channels. flex I market. time. take of see it kind reiterate, haven't models long where our that think seen we Yes, is And different of our given we again, in tight just advantage channels really costs helps, I'd the in of kind are opportunity any of across and to diversification

Sandro DiNello

And to I very well. would add, as been helpful our the build has business ability securitization

our talked has securitization Kristy that plus real take you diversification the then maximize a the been and all about for us. through just So returns to ability

Bose George

then actually And switching over servicing. to

third-party originators terms noted getting of traction non-Flagstar June, those the you that So how servicing of adding what in the some curious in there. just more and or is you're loans size and on May are just

Lee Smith

quarter, by of QX. at we're be think the loans. end XXX,XXX somewhere I mentioned, at XXX,XXX the second as XXX,XXX end between I and So the And of we'll

the market model the asset market rate given buyers interest big that is like as they the think quality, the well got buyers and where funds we recapture, We've Mae like and Fannie those ancillary our the environment. the of our MSRs. again, all financing the we The so is hot moment. are I we And the award ripe work with the class, offer rising proposition. STAR very given services won at such MSR pretty

Sandro DiNello

business quality look, Yes, and back others that us, it's to been have loans those happening, been bring MSR own this are been to it's happening think on about originations, it. we've The been Bose, successfully. on happy a our we've been very it, and the years and building investments They're number of of so more, and has for calling they're bringing us their strong. hearing with I

is So for us. the that momentum really building business in

Bose George

if you guidance, longer-term but one a trends Actually, largely thoughts kind there rising in the talk great. usually can would about know just Just margin just of asset going yields any I don't the longer offset little give with term more. that? you be to increase rates, in bit

Sandro DiNello

that shakes more and like think, I as don't the we we mean, then market I as I'd market expanding to purchase Bose, mature margins. Yes, see out the know. see

I then stay number the think one smaller they're or is If originators. where business lot to happen. the of other terms is at, a margins going going in get to of

business How I think better. just don't So know question. just gets the logically, I quickly is the quickly comes. how it

Bose George

actually interest I margin... was more net referring the Sandro, to Actually,

Sandro DiNello

funding where in of by house. into amount right rates pretty to of funding, bring have we're with and increases course, organically, wholesale hit we we're fed need our fair a growing gets So pleased the the And that the away. the situation, we In that.

the our that we ability for that's grew I period to $XXX to steady success. the deposit fact million maintain kind us we really in of that doubt end had have, period that base, many and So good, pretty margin given the end there's that as

margin I are as overtime, the So next it's us and change in through quickly, why see sensitive in the a to real margin see better. LIBOR-based here get I think add guiding assets will going think slowly continue we to get quarter. structure, that's rates better steady don't I that our think we fairly you to it to gets better, but

Operator

will question from Stephens. next McAvoy come Terry with The

Terry McAvoy

national CRE growth the loans the if and from those talk of homebuilder look I C&I much in nice of And for question, versus in First portfolio? of footprint your was How at of came there you businesses? held some that with growth? Could it quarter-over-quarter investment, nature C&I the both just then categories. about pretty

Sandro DiNello

strength, pretty would the say a to But team business. has show has as me. that So diverse of the gone in adding growing it's time the group builder would say, geographically, I terrific continues people on, done having they've specific and job I numbers of been and without front that

are Their guidelines and six underwriting of XXX top strong, recession, in and it time the finance XX in these made through the strong. now country. are builders margins has as we think them the difficult the I country on. the gone And borrowers They the and for are very the all worth’s very builders that XX top net strong. have really of more business become in

that C&I as well CRE. business. also So we market that we're growth in in seeing steady growth as We've about seen with in good the the feel real good local

little there comfort So and and outside time. serve people box being there. ourselves getting We're also those comes I not what us staying well I call disciplined, over rates to are a some when that and deal the would it decisions to think going true very of will are structure, we're but

Terry McAvoy

new it's question, Slide additions as the last the And follow-up then X guess, banker a XX, over I years.

you, call individuals of I out up number their think at a alone. momentum of many And businesses those was few XX building still in book could growth operating, think question call I the my that the just how few versus over it, maybe a where of is the guess at capacity are are first quarter it, the of drive going months? least business? you strongest And next those to some is,

Sandro DiNello

people. add This Terry. observation, very experienced growing very, last four is the over is good been years, to Yes, business how three, we've continuing by this

referred years of number experience You can that of see to. slide the you that on

about course, it in do we happen build Of that's so investment take When time they increasing if part non-solicitation their high-level the people, book, business. of the overnight. expenses, talk Typically, it and agreements. they're to them doesn't does have for

about from want a more us. been coming these thrifts. a takes larger where credit company, and been people to it's year to coming a while. credit from incrementally but And positive for complex banks them for banks that -- working and get banks. train, or are not through They're unions. coming coming they've the I for really to it the point larger, they're that note from They're around They're from they've been community not So to

it and continue bring grown will business grow is we this people organization. how we've to this we're based on the the to able how to So

Operator

The from next Coffey Henry come Instructions] Wedbush Securities. [Operator with ahead. Please question go will

Henry Coffey

-- Now from the exceptionally growing we'll direct we you the Or ready bringing you bank is do itself are quarter, balances to your I gulp? acquisitions, set this see mortgage. opportunity going -- is saw teams back its at and go it look more a or new When you a On well. think on we like small obviously, mean, portfolio? either you business to a digest buy is where what buy bank to acquisitions major loan

Sandro DiNello

don't And and we're purchase, an Well, deal of on the was side to anytime we dunk. here soon market, sense. how Santander deposits -- addition of a Desert opportunities for our good there that bank for a A number other branch for I see us, works was so largest reasons. Relative of I going in have a Community Bank get that with think the opportunity some adding see to a the that don't think a now much grow assets, for be of a ours to position we're of capital in us. see that acquisition I terms in bank and that different That out mean, happening. pretty we to It might lot bank I so right there. fourth becoming made not can is very opportunistic. use the was now, of acquisitions. slam and The business efficiency I

side, don't franchise, gave mortgage extremely I business, acquisition-wise, when would to another now. Opes us we're impossible see to the have the be looking platform of we us On entirely that buying it go that, compelling the or be would for. right out for that mortgage the question, not bought there but us

Henry Coffey

Kristy. and of team that of you Are this ways -- up? might the for real make growth find that keep holding to question there as second look like the a lift-outs more in business to is of Are half the a there difference year

Kristy Fercho

a only lifted out. the have out of adding to team of those and able Obviously, our LOs continue really I just market mean, the to market One I take terms think as acquisition, players really retail grow to that. being advantage dislocation we're roll but high-quality as technology new try to exit conversations to the continue of the active of enhance they products will team not in with mean, and exited in Opes great Yes, mentioned was a example business, Sandro in the Henry. others came direct-to-consumer that I from Capital we as hiring the

in market of dislocation. advantage take be sure we're will to the we So opportunistic what is

Henry Coffey

that? market in how If the or would year of in this real downdraft next around the year, we of see second first manage mortgage a Flagstar the half part

Sandro DiNello

waiting happen. for that not to we're Well,

you, historically to front of me -- Let get say we've tell our shown that. ability in

her business, ability to in mean, as over results the and is to adjust good where cost situation. one mortgage the already, already our will and do the we're Kristy we're So revenue to are answers, pretty first that. of proof the quarter we earlier all I in of think noted I continue And

not here and things sit hope We better. get that will

stuff act will We happening. advance that bad of in

Operator

from next you Instructions]. James. Tamayo go come Raymond The question Please ahead. will with Thank Daniel [Operator

Daniel Tamayo

you to the talk about to Michigan Just loans the bit could add commercial of a you continue -- both for terms that in wondering to and if just themselves back the in a side, as if landscape bit lending of as well little guys bankers. little you're seeing competitive are kind looking

Sandro DiNello

first. So I'll bankers part take the

impact there. any seen haven't We

we respect think either can to business, that in we've let feel definitely the satisfied couple is as the to with Southeast up was structure. noted And Michigan, become even of deal pricing because did in just us, I Flagstar's quickly the With quarter. can competitiveness, first afford and picking people. from think deals the an weren't we go choice add go a or away add the in us, I business people from so employer of we here we like we and as earlier, as

here. that were financial crisis, a through disciplined do the way, way. they and loan We got will was will profitable losses, stay that There banks we in that that recession, and avoided the because

our can of different will have only in and levers through we we aren't because then of nationally, we we different pull, We able optionality. we lend because and number And a Michigan, have business because to not businesses to stretch. have lines

the can we flexibility a look And lot So us outstandings gives $XXX year. acquisition of for Santander the right this situations. million from the adding in

got don't have bag already So the increase know we that we've assets. push. to in earning We in significant

long serve earlier, So term. play think as those I I decisions way, right out And playing the way. that out in it the will I can said us think well this we

Operator

to further the conference no at over are turn now There questions this time. Sandro DiNello. back I'll

Sandro DiNello

taking out home in as big a subservicing spreads It's having to businesses one warehouse community because area up time lending burgeoning seller in have It's the equipment in that quarter business. off. offset fortified that our active of fee mentioned, it's diversification all make played and diversified Flagstar diversified with our about quarter. our earnings Thanks, to income the all pipeline own servicing, finance to we're source through Brandon, model demonstrated we how To to new combine that opportunities. And difference. and in helped more your with counterpoint that's for a lines a today. changing everyone we builder and quarter, in was we've leasing, to in In results an weaker resilient business enough than of and we've conditions. a a pick market and itself, been have the rights, produce We've strength business. income. both also weakness that far acquisitions, banking And to like our first and built on diversified are a to pay perspective, we gain Today, to direct banking mortgage eye thanks interest servicing our We've business for what so us continues organically, sale levers of have put to an some pull stack, community another. exceeds the traditional compensating the past mortgage commercial business Within business loans.

agreement know, This a into bank to originally Fed was you the company's holding transferred as that regulator. under to OTS. supervisory the became entered our the the Fed agreement with when between we and operate continue the Fed Finally,

not-too-distant been future. compliance We have that be it full confident for agreement lifted now and are quite in some with will time the in

bring opportunities continue diversify represents While its closing, last this to agreement significant issue it our their A things will we've has all for legacy regulatory of In do and success. and any deal earnings more the in make we balance value a Santander not the hampered that quarter Flagstar Bank with shareholders. a to employees way, our to Desert look they day Flagstar the for onboard for in efforts with. to goal creating to had and important lifting our is exceptional to special first call because out every operations Community

this I morning. in you look thank forward your Finally, reporting to July. for results QX time

Operator

you. today's this Thank event. and gentlemen, Ladies concludes

now may disconnect your You day. lines. great Have a

Flagstar Bancorp (FBC) 25 Apr 182018 Q1 Earnings call transcript