Q1 2020 Earnings Call
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Good day and welcome to the Flagstar Bank first quarter 2020 earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Kevin Schellenberg VP Investor Relations. Please go ahead Sir.
Thank you Michelle and good morning, welcome to the Flagstar first quarter 20, Twond earnings call.
Before we begin I'd like to mention that our first quarter earnings release and presentation are available on our website flagstar dot com.
I would also like to remind you got any forward looking statements made during today's call are subject to risks and uncertainty.
Factors that could materially changed our current forward looking assumptions are described on slide number two at today's presentation interprets related and then or 2019 form 10-K, and subsequent reports on file with U.S.P. thing.
We're also discussing GAAP and non-GAAP financial measures, which are described in our earnings release and in the presentation. We made available for that on call.
You should also refer to these documents as carbon school.
With that I like the now I'll turn the call over to Sandro Dinello or President and Chief Executive Officer.
Thank you Ken Good morning, Tricky, one, which remember my apologies for the delay in getting this going today and Fortunately our conference call company, which I mean, some difficulties I don't think it has anything to do with all of what's being remote so hopefully that most of their schools are much smoother than it has thus far I.
I hope that all would be when they loved ones have been able to stay safe and healthy.
As I said in the spirit of proper social deficiency I'm joined them only this morning. So Jim Scheel, We are Chief Financial Officer, Lee Smith, our Chief operating officer, Christy for a koehler president the mortgage some Steve Stricker yellow, our chief risk officer.
Got it spend much time today on our results except for some commentary on our provision.
I think it's more important to tell you how we've adjusted our operations in the face of told at 19, I would say cooperate going forward degree uncertainty that the length of just got them.
With respect to our results wasn't strong quarter earnings of 80 cents for sure stronger still if you look at our pre provision net revenue.
Sales will come from Jim Im leaving their remarks.
We started with some comments about her position, which totaled 14 million for the quarter.
They did lead to provision for the quarter with difficult yesterday, we had no option, but to use a mature model just to make much with them watches and perhaps the most uncertain economic nerd it's true.
You had the unknown impact of government assistance programs to the mix.
I'm seeing endeavor.
I think there is a model that exists that can accurately predict the life of loan loss at this stage of the game.
So based on our current data we're comfortable with our analysis you have a strong commercial portfolio that we ended the quarter had no nonperforming loans and thus far we've seen no weakness I do know reported for meal is diversified it's no outsized exposure any geography or industry, including little exposure to the auto.
I won't concentration policy, it's highly granular conservatively structured built to be resiliency of assumption now we find ourselves in a recession, perhaps a deep one that may linger for them actually two months.
A hallmark of running philosophy has been today only proven operators and they love it commitment that's like southern Bausch allowed them to anyone that has walked away from the bank obligation.
These principles coupled with the fastest virtually all our borrowers other session hardened will help mitigate credit concerns going forward.
Finally, I remind you that while were 27 billion dollar back in terms of assets like commercial credits net of warehouse loans totaled less than $5 billion.
Thus far every borrower is working with US today, they're all positive about their ability to weather the storm and remain a going concern.
As far 252, commercial borrowers representing $548 million, an unpaid balances just 11% direct commercial books every person payment deferrals at all we're in good standing prior to their request.
Thank you requests.
For 71 million Cnine see I read representing 280 $790 million, respectively. It's worth noting that we received notice a request from I won't go decline its thus far.
We arent topics every one of a cat exposed to monitor and there could be managing for the slightest blip.
It's just that many of these customers with the P. people and we will be assisted even more to the needs through Monday program.
They're being careful in much of that.
That's outside of our warehouse business.
We are pulling back on commitments were loops prudent and the opportunity presents itself even inside warehouse.
More conservative approach.
So essentially accepting no jumbo or non QM loans as collateral.
Acquiring a tighter credit box for government loans and lower advance rates for loans that we believe that higher risk.
As to our consumer loan portfolio would consist largely of low LTV, how it's like a mortgage loans and high cycle. If you watch.
As far we've seen no maturity.
I think it's a given that become not at Fourq. After June 30 will be weaker than those at March 31.
Well, we expected or you feel model will suggest the significant allowance adjusting for Q2.
Just how much is impossible to predict.
My opinion, they said GDP will contract, perhaps as much as kind of or something to too so as much as 40% on annualized basis.
About slow growth in two importance.
Unemployment might reach 20% in Q2 and gradually declining as GDP improves so not quite what I would call it the recovery.
I realize this opinion is probably other pessimistic side of the University thinking, but my view is that its most prudent to prepare for the words simple for the best and that's exactly what we're doing.
Next I'd like to speak to how a company responded to pandemic and I'll start by saying I could not be more proud about seeing how we've adjusted.
Not have gone much better we prepared for a possible pandemic in their business continuity plan. That's part of that plant two years ago. We moved the vast majority of our people to laptops. Additionally, we had secured enough.
Please advance to move quickly instead of transition that's really all today over 80% of all employees are working remotely interesting they productivity is not drop.
The last two weeks of them once the process over $2 billion a mortgage loans.
This warehouse balances by over a million ability than have worked out of ranging chip every commercial personal she can a deferral, except the thousands of course for mortgage for Barents built and the technology platform literally overnight launch the paycheck protection program got it up and running 36 hours. After the guidelines release it took them probably.
Especially with 3000 applications for 400 million homes.
Remarkably all these processes.
I want to manage remotely.
Additionally on March 16th we eliminated in BRAF service at select Bank branches that a few days later moved to drive it shows it's only with lobby axis like appointment and not one customer complaints has reached my does.
In fact deposits grew up is encouraging reduced rates aggressively problems. Each suddenly that's still solid deposit balances increased about 900 million during the quarter.
We see the food or increase in deposits in April of over 350 million from a banking customers.
Well I don't know wouldn't normal will be turn or what it will look like I can tell you we will be very conservative moving people back to our facilities. That's the right thing for our team and given how smoothly. We are operating there's no need to get ahead of a clear flattening of the curves.
As always.
We've always been there four communities to date, we've contributed almost $600000 in markets across the country to support the cold it might be clogs, including 300000 to a cut and sew company, but shifted to manufacturing masks that are being donated to hospitals.
Only 17 about 4700 flexible employees and contractors have tested positive for called the 19 and basketball, we all have either recover or appear to be on the road to recovery.
We believe that's in large part because we started are associated with since you've early on March 13.
It's a very pleased to tell you that we surveyed achieving 98% self that's like sounds positive secondly to both employee and customer concerns.
Difficult. It's the last six weeks again I do think we're changes its really feel good model in action Here's why.
First I think we can sustain net interest income.
That cover warehouse business, which currently has outstanding balances.
Auction was 3.8 billion.
Up to date average balance of over 4 billion.
Where else flying to now almost entirely secured by conforming agency in government products.
The portfolio provides strong returns with virtually no credit that's 91% of these loans had rates was.
Even without booking new commercial loans outside of warehouse, we expect to grow net interest income.
Second the mortgage business continues to be strong our gain on sale.
Wants to date is over $90 million and shows no signs of weakness.
95%, there's a lot slippage I mean informing shimon.
One of the time on how long. This performance will continue I think it demonstrates the power of this business in the current environment.
Well, we're not guiding on net interest income or locks, which you want to Fannie Mae's. Most recent projection for the type of Chevy Cruze originations for 2020, that's compared to 2019 holds true.
Our warehouse in mortgage businesses will fly.
We'll be in a position to build the war chest without dipping into capital should it be needed.
I couldn't mildly given guidance right now is too much guesswork.
However, I believe flex there as well position to weather the storm and come out stronger on the other side.
Profitability strong a capital strong our allowance is strong.
Our liquidity is strong in a business model is working precisely as we designed it.
Finally, I'd like to make it clear that we don't expect could change your dividend posture in the near term.
Contemplate in stock buybacks at this time.
I would say my comments today had been on like anything before because they are an unprecedented times. My goal has been to give you my perspective on how I see flex up with some of your future in the context of the FCC recent guidance and safe Harbor protections in doing so im drawing on more than 40 years of experience, it's like certain abuse.
Understanding of the company in the quality caliber of its employees.
We are committed to doing the right thing for our employees customers and our communities protecting their health will feature flagstar told.
We will focus on the opportunities this environment gives us and though we will continue to manage the risks we face conservatively.
I'm not dwell on them, if we do that I firmly believe we've introduced the best possible results for shareholders.
With that I'll turn it over to Jim.
Thanks, Andrew.
Turning to slide seven.
I didn't come this quarter was 46 million, where 80 cents per share.
This performance compares to the 58 million worth dollar per share last quarter.
The climate linked quarter basis.
Works when you do it with a 14 million dollar credit provision this quarter.
We had adjusted net income of 37 million.
Q4 cents per share in the same quarter last year.
I think deeper into this quarter's performance.
Pretax pre provision earnings were 70 million this quarter compared to 69 million last quarter.
That's interesting probably down 4 million or 3% over the prior quarter.
Average, earning assets grew 442 million.
Along with our expectations net interest margin decreased by only 10 basis points, it's like 150 basis points of weakest in March that were unexpected.
This performance was driven both by our strong core deposit franchise, consistent with granular retail customers and by a well position well diversified loan portfolio has a large proposition to fixed rate assets.
Wars on very variable rate loans.
Review these numbers for going over the next slide.
Mortgage revenues were 96 million, a decrease of 2 billion or 2% compared to the prior quarter.
During the quarter, we felt gave them feel margins increased significantly its primary secondary spreads widen to historic levels and lenders work to manage capacity.
However, in the second half of March extreme market dislocation in volatility occurred we experienced 45 million that hedge losses, which I'll discuss further in a moment.
Asset quality remains strong.
Our jobs were eight basis points nonperforming loans were relatively flat figure in.
Our allowance for credit losses, where you feel which includes the reserve for unfunded loan commitments with 152 days at quarter end.
One I'm.
And then at yearend.
At this level or coverage of loans Hfive, there's multiple 5%.
This was the result of our January 1st people adoption in the 14 million dollar credit provision this quarter.
We'll provide more details will be good quality slide it took a deeper dive into season.
Capital also remain solid.
Right or balance sheet, ending the quarter at 27 billion up from 23 billion at year end all capital ratios were made about the stress losses to be the stylish they've done or do you guys models.
Total risk based capital was 11.2% at March 31st proceed to one ratio was 9.2% or.
And our tier one leverage ratio was equaling one person.
We'll go into more details on capital later, so let's turn to slide eight dug deeper into the income statement.
Net interest income decreased 4 million to 148 million this quarter, which was 3% lower than last quarter.
Really out of the decline resulted from having one less day in the quarter.
The results reflect a 2% increase in average earning assets led by investment securities loans held for sale in commercial real estate loans.
Deposit cost cutting down 90 basis points <unk> average deposit balances were relatively flat quarter over quarter, excluding a decline brokered deposits.
Deeper into net interest income.
Let's see additional the next slide.
Noninterest income decreased 5 million or 2%.
Third and 57 million due to lower mortgage revenues.
Okay, I don't feel revenue.
It was any decrease of 11 million or 11% from the per quarter.
Fallout adjusted locks increased 36% 11.2 billion the gain on sale margin decreased 80 basis points.
Joe margins were strong, especially in our delegated books channel.
Bonds of mortgage backed securities beginning on March 16.
Pushed prices on MBS much higher.
Price change impacts the values of the TV a mortgage backed securities. We fell short of your pipeline close loans held for sale.
But the pipeline and close loan did not experience the same level price appreciation.
Our position declined in value more than the long position increased in value waiting 45 million of hedge losses.
Yes, that's like 40 in the appendix to provide more details on what we ended the industry experienced.
Reacted quickly the this phenomenon.
Look actions to rebalance or hedge profile.
Okay pricing changes, which improved our position by month then.
In April the fed modified their purchases and are actually took hold it stabilize or gain on sale.
The last Friday, we recorded over 90 million of gain on sale revenue for April.
Well, we won't forecast for the second quarter gain on sale revenue will be.
Partial month result indicates the hedging issues have not persisted.
We also had 9 billion dollar improvement, Indiana solid returns it resulted hedging gains this quarter.
Oh, the administration income improved 4 million.
Higher average loans serviced and a decline in the LIBOR based credits that we provide to our subservicing customers custodial deposits if they control.
Non interest expenses to be 35 million gallon 10 billion from the prior quarter.
The decrease was primarily related to 5 million a balance sheet cleanup and discretionary expenses.
Places a fourth quarter and did not recur.
Expenses were also down its mortgage loan closings declined 8%.
Overall mortgage expenses as a percentage of closings were consistent with the prior two quarters, we will provide more color on expenses later.
You got its like money to provide more details on our interest rate risk position at the end of the quarter.
But we will provide guidance on net interest income.
Yeah that we're in a good position.
Looking at our commercial loan portfolio, maybe 5% of the loans are variable.
First said buildable personnel bugger mentioned over 90% of our warehouse loans have floors.
We also have floors in many of us see like and feel you loans I don't floors that doesn't allow whiteboard receptor lose zero.
More supply more at a higher level.
Oh sequentially, we don't see a lot of with the spread compression coming from the outside of the balance sheet.
Looking at deposits you move pricing down of our portfolio reaction to be aggressive actions taken by the fed.
<unk> short term interest rates.
Quarter and see the retail CD book.
We had a billion eight Cds.
Sure the remaining vital to this year and reset the lower rates.
We also had 900 million of savings that money market accounts at quarter end.
We're under some level of promotional rate cut off that promotional rate.
It has an average cost of mobile diapers done.
I don't get repriced lower in the latter part of this year.
Approximately 85% of workers failure deposits are controlled by or sub servicing clients and that's really breaks down as those rates are based on weibo.
In summary, we believe that the deposit rates could be a tailwind for the remainder of figure.
Also on the liability side, we've executed interest rate swaps entering into long term FHLB advances to lock in lower wage something lottery goes out between three to seven years.
We got executed 1.5 billion at this strategy securing long term funding at an average cost of 61 basis points fell below our cost of funds in Q1.
Oh, it's difficult to predict where rates might be for the remainder of this year.
We feel that our interest rate was position is that a good place, especially considering the liability sensitive nature of the mortgage business.
Feel that we can protect our net interest income net interest margins. This environment I believe that our net interest margin should be relatively flat to the first quarter.
His perspective also contemplates the impact of the PPP loans do you have originated a deferral of yet do you see on those loans.
Illustrate how positioned us I would show that while the first quarter net interest margin was 2.81%.
<unk> net interest margin was 2.84%.
On the effectiveness of the actions we've taken to protect net interest income.
Let's turn to slide 10, which highlights our average balance sheet this quarter.
Average loans held for investment declined due to a point threebillion driven by decreasing outage warehouse long residential first mortgages.
The decline in warehouse with seasonal and a decrease in average residential mortgages.
Goals of loan prepayments.
Quarterly and full higher levels of warehouse loved the loans held for sale.
The higher levels of warehouse loans, resulting from our actions to continue to support customers in the mortgage finance business.
Even as we took a more conservative approach non QM and jumbo loans and tightened the credit box or the government loans that we would support on a warehouse lines.
Hello sell for sale.
Elevated levels of newly created mortgage backed securities it could not be sold at reasonable prices due to supply imbalances in the market.
Let me we delivered the Bosworth PB AIDS in April.
This inflation, if a balance sheet and compressed our spreads a bit.
Able to hold these assets without sacrificing execution.
That's it will continue to have relatively higher balances in our warehouse and mortgage loans held for sale portfolios in the second quarter.
Average deposits decreased your point 1 billion, driven by lower CD and wholesale deposit balances.
Higher demand deposits, partially offset this runoff.
We continue to how these strong liquidity position given by the strength of our deposit base and access to multiple sources of liquidity both on balance sheet with our high quality securities portfolio, It off balance sheet with our Undrawn FHLB facilities.
We also plan to fall more PPP loves either the feds PPP facility that have ample access the bar with the discount window.
Finally, we continue to demonstrate significant capital generation capabilities with growth or tangible book value per share to $29, a 52 cents at quarter end.
95 cents from yearend.
Let's turn to asset quality on slide 11.
Credit quality of the loan portfolio remain strong.
Delinquencies continue to be relatively low only 40 basis points of total loans were over 30 days delinquent.
70 basis points from year end.
Our allowance for credit losses couple of 1.1% of total HFI loans.
This coverage now includes a reserve for unfunded loan commitments.
Excluding warehouse loans for the denominator, given they're relatively clean credit loss history.
And considering that substantially all of these are collateralized with the agency and government backed loans.
Coverage ratio to stand at 1.5%.
That does what we see other banks Hattie under seasonal.
Considering the economic hundreds or uncertainties related to coated.
Monitoring our entire loan portfolio.
Additional analyses within certain sectors and relationships, it's saying it close communication with our significant borrowers.
12, we wanted to share with you our exposure to those industries that we believe we're more likely to be most impacted.
In total.
We have just under 1 billion of outstanding category, representing only 7% of our loan portfolio.
The commercial loan portfolio.
These balances totaled 328 million.
It does this group, we're focused on our exposure to automotive hospitals, and leisure and entertainment businesses, which include restaurants.
You can see that the exposure here is relatively low.
I feel oil and gas exposure.
And our commercial real estate portfolio, we have 647 million outstanding in the areas, most likely be impacted by coated including loans secured hotels.
Retail properties and senior housing.
Hello. This category our average LTV is 55% in our average debt service coverage.
It's like six times.
We'll be analyzing all of our relationships this quarter.
Well, we know this would be a challenging time for many people. We believe that are low levels of exposure to these industries is the result of or well diversified loan portfolio.
The strong Ltd, and debt service coverage ratios the results of our credit discipline.
Let's turn to slide 13.
I will walk you through how we implemented Cecil how we got to the sequel balance at the end of the quarter and how will be thinking about seasonal in light of the uncertain economic outlook you have right now.
Overall, we ended the quarter with 152 million allowance for credit losses, consisting of 132 million of allowance for loan losses, and 20 million and the reserve for unfunded loan commitments.
It was over unfunded loan commitments is included in other liabilities on our balance sheet.
Both are available to cover credit losses in the loan portfolio.
Total our allowance for credit losses at quarter end represents 30% increase or what was reported to be it a 2019.
In our adoption of Cecil we used three different forecast over the next two years, which then reverted to a long term average over a one year period.
These forecasts included an adverse projection that reflected severe economic distress.
We laid that model 30 day, 30% or do you want to gosh.
Our quarter end estimates, we elected to use the March 27 movie baseline.
Let's see economic distress caused by Cogan and also contemplates some impact the government actions taken to mitigate the stress.
The forecast it seems that you're in a sudden shark severe recession only partially recovering later in the year.
This scenario GDP contraction cheaper said Q2.
<unk> decreased 3% by the end of year.
And unemployment spikes and 9% and moderates a percent of easier.
We also judgmentally increased reserves in our CRT homebuilder and see like portfolios to provide additional coverage for industries and customers. So we thought could be more exposed to the stressful conditions that are forecast.
We provided the portfolio by portfolio break down at the resulting NPL coverage ratios in our appendix.
We also continued to maintain reserves for loans that government guarantees.
Typically measured loans, who themselves are not impacted by the sequel methodology change.
I mean, if you'd expect we've elected to defer the with the toward capital impact of adopting Cecil until the end of 2021, after which taken at 25% per year.
Turning to slide 14.
Despite tremendous balance sheet growth or capital ratios remain solid and nicely above our stress buffers.
Total risk based capital was 11.2% at March 31st down only 31 basis points, well RCT one ratio of 9.2% was relatively unchanged.
Tier one leverage ratio of 8.1% actually increased nine basis points at the same ratio performed with capital simplification. As this ratio was based on average balances and the balance sheet growth in loans held for sale and warehouse loan happened towards the ended the quarter.
I expect our tier one leverage ratio to be lower next quarter.
Clean loans held for sale in a warehouse loan portfolio, we have approximately 540 basis points total risk based capital and over 400 basis points tier one leverage capital dedicated to these two asset categories that have very little less content.
And we'll have Monday, which has 100% recently, we've had another 5 million of losses cumulatively over the last 12 years, and we took a more conservative approach during the quarter for certain product categories.
I'd remind you that we also hold the collateral for those loans, while they are on our line and that collateral consisted almost entirely of agency government backed loans.
Well, it's held for sale also has very little Wisconsin that over 2 billion of these balances at quarter end with Fannie Freddie or Fannie Securities.
Were reflected in our trading portfolio.
In summary, we believe that we're operating strong capital levels, given our low with balance sheet composition is more than half of our assets at quarter end were in categories that have very low bus content that is loans and trading securities held for sale warehouse loans investment securities loves that government guarantees in cash.
I'll now turn to lead to more inside that each of our businesses.
Thanks, James Good morning get Rewalk, we're very pleased with net income of 80 cents per diluted share for the first quarter, which increased tangible book value 20, $1.62 cents, but more importantly, I couldn't be more proud of how we respond beat as an organization for the kopec knowing.
Pandemic.
Nothing he's more critical then the health and safety of the Flagstar family and we were able to pivot quickly uninsured. The vast majority of our employees working from home buying Monday March 16.
They didnt just happen we conducted a 2500 employee remote work text on Friday March good thing.
And expanded our network capacity in the dice, leading up to stay at home or does the putting play.
Which increased our remote connection capacity for 10000 users.
For those employees still needing to work from flagstar facilities, we moved to implement distancing standards and enhance cleaning regimen and provide necessary protective equipment to ensure they felt was sites as possible wall on selling.
[laughter] element to the morale and spirit Blackstock team. During this transition we didnt mix at the I continue to serve our customers and partners with the sign exceptional standards they come to expect from us.
Its government really programs are being rolled out we'd move quickly and efficiently to ensure our customers can participate and benefit.
We took over 3000 applications for the Paycheck protection program I don't want thousands of bar was requesting forbearance friendly format mortgagees.
We've been Creekside cool things the capacity.
I don't see material whites will hold times throughout this period.
Furthermore, there has been no lie also for loves that black so.
A lot because being thrown at us over the last seven weeks, but the team has stood tool and all I believe the journey we've been on over the last few years, including the multiple acquisitions, that's help prepare us for this moment.
Now more than ever I believe out between small the were showing we previously talked about how active beats me flowing acts as a natural hedge I mean, these low interest rate environment mortgage originations because of increased refinance volume has performed exceptionally well.
So because warehouse lending on these two businesses have been well supported by our Subservicing operation.
52% about revenues in the first quarter, what from noninterest still theme can business and I believe big deliberate a well balanced mix winning show continued strong performance as we move forward.
There were several other notable developments during the quarter, which included.
Average interest, earning assets increased 442 million all 2%, primarily a result of an increasing investment securities well on net interest margin decreased 10 basis points to 2.1%.
Effectively manage net interest margin compression through timely goal actions on the liability so I get the balance sheet.
We adopted Cecil increasing our credit reserves to 152 million at the end of the course of 18 million of which was the result of Cobiz, knowing thing and its potential impacts on our loan portfolio in the future.
We maintain a diverse apollo lending portfolio quality credits no significant exposure in any one industry.
Mortgage banking revenues decreased 2 million or 2% to 96 million in the first quarter versus 98 million in the fourth quarter as we continue to take advantage of the strong refinance market.
I Subservicing business remained relatively flat in terms of long so it'll be still sub service and at the end of March we were Servicenow sub servicing approximately 1.1 million loans, which generates consistent noninterest income for the bank.
So the big consecutive years, we were rewarded the Fannie Mae Star performer within general servicing which is testament to the exceptional work and commitment about servicing call center on collections things.
Finally, our capital position remained solid and we maintained strong liquidity, particularly given that brought the Baltic bikes and our access to federal home loan bank funding, which means we're well positioned to not only whether these pandemic, but also support our custom doesn't business partners, who are not support you know.
It's in down to the being a trolling tolling, but we have rallied exceptionally well, it's an old can always <unk> as a result.
The key employees team oriented approach robust business model.
I will now I don't want some of the key operating metrics from each of our major business segments. During the first quarter. Please turn to slide 16.
Quarterly operating highlights for the community banking segment include.
Which commercial and industrial and commercial real estate loans increased 127 million Oak Creek are saying with the growth being driven by the C already lending group.
We've been actively managing that commercial loan portfolio seems to be yacktman, kuzbass, knowing team and working closely with our customers given out relationship based approach.
Line of credit usage increased from 14 aren't consent to 60% or 249 million between March 13th in April 2nd thing.
We continue to be thoughtful in terms of new facilities I believe that strong credit policies and diversified portfolio will be strength as before last from me pandemic becomes more power.
Average consumer loans held for investment decreased <unk> million, a 1%, let's we ended the quarter with approximately 4.9 billion up consumer loans on our balance sheet, we'd like 2% the residential pursley mortgages and he logs.
Through April 24, we have received approximately 2000 request the deferrals on a non mortgage consumer long portfolio, which amounts to 119 million, we'll follow up <unk> percent the whole outstanding balances.
Utilization levels on he looks at remained fairly flat throughout the pandemic period.
I will talk about forbearance activity on closely in mortgages shortly.
Average warehouse lending loans decreased 437 million, 60% to 2.3 billion in the quarter.
It's a few at dice online, resulting from the seasonal slowdown in mortgage activity, particularly in January and February.
However, we made changes to our warehouse credit box at the end of the quota as a result at the volatility in the mortgage Maki.
We all know all loans that were on the allowing us to talk of announcing we were going to stop financing non QM and jumbo loans.
Furthermore, we talked about polycom limits around several other products in response to the market uncertainty.
Protect sat wrong position.
I would add the during the month of valuable we've been encouraged to see continued high outstanding average balance using warehouse lending and given the positive correlation to the mortgage business you'd axis and don't like hedge in a low interest rate environment when refinance activity for all of it.
Overall this means average loans held for investment decreased 345 million, which drove a 4 million <unk>, 3% decrease in net interest income quarter over quarter.
In order to help our customers we participated in administering B.S.P.I. I checked protection program just after the call to Randy I'm received approximately 3000 applications totaling approximately 400 million.
This program was introduced very quickly on the Flagstar team did an outstanding job of standing so and ensuring that customers right. It's a tight benefit.
150 about 160 bank branches remain open the tender the close do not have a driver I located in close proximity to another branch. So we chose to close them supposed to protect our employees all about rights Yemenis remain operational.
Average deposits, which include all interest bearing and non interest bearing retailing custodial accounts decreased approximately 100 million, but we did reduce the cost of interest bearing deposits 13 basis points during the quarter as we move quickly to compensate for the lower interest rate environment.
We will continue Tonight tie not disciplines and relationship based approach within the community Bank.
We feel we have long portfolio with strong credit qualities and we'll continue to work closely with that customers throughout these pandemic.
Please turn to slide 17 quarterly operating highlights for the mortgage origination business include.
The last adjusted loss volume increased 36% to 11.2 billion quarter over quarter, while the net gain on loan sale margin decreased 43 basis points to 80 basis points.
As a result gain on sale decreased 11 million to 19 million in the course up.
The increasing fallout adjusted locks volume was driven by the robust refinance market due to low interest rates, particularly during the month of March refinance activity accounted for 64% about loan volume during the quarter.
Mortgage closings were 8.6 billion in first quarter, an 8% decrease from the fourth quarter due to the anticipated seasonal slowdown in purchase market.
The big stories happened towards the end of the quarter when we incurred a substantial loss when I talked long hedge for the reasons GM has previously described.
Which reduced our marketing for the call to materially but he was a short term phenomenon on the hedge volatility settle down Reits have to corn, Iran has been stable during the month of <unk>.
Similar to what we did on the warehouse. So I brought around quarter end, we moved to stop originating high risk products I'm talking the credit box in certain areas to protect proposition and minimize any future brought down so losses.
He spoke moving to work from home, we borrowed on our mortgage operations team continues to excel and keep up with the additional volume we've not seen any degradation in productivity levels and I believe the she's due in large part to our underwriting staff the 98% remote prior to cope ignoring.
See this means the shifting work environment wasn't on familiar.
Furthermore, we have not been affected by offshore shut downs as almost all of our operations. The here in the U.S., we continue to run a compliance and efficient operation of Sky.
We're pleased with how we reacted quickly at the end of the courses to protect our mortgage earnings both now and in the future on a very encouraged by what we've seen during the month of April.
We have already booked over 90 million of gain on sale revenue through April 20 could.
Mortgage has always been a key component about business model and strategy. It generates significant non interest income for the bank and he's a natural hedge to some of our other businesses in a declining interest rate environment.
Moving to servicing quarterly operating highlights for the mortgage servicing segment on slide I see include we ended the quarter Servicenow Subservicing approximately 1.1 million loans up we chose to 917000 or 85% sub service for other MSR on those.
Of the 1.1 million loans, we still have peaceful subservice, 94% Backhauling Fannie Mae Freddie Mac once Union Matt.
The number of long service the self service remains relatively flat in the quarter. Despite the high levels of refinance activity as we are able to replace Renault with new loans from our mortgage origination business.
Today, we'd have to capacity to service was Subservicing 2 million loans as well as provide them salary offerings, such as recapture services and financing solutions to witness all around us.
Offerings are proving to be very beneficial in this current environment.
If you look at slide 13, knowing you will see that we're achieving that goal to 6 million up operating profit before tax guidance for 300000 loans, we after the platform.
Nice to reduce the servicing right now a full barents activity and liquid.
First I equal 20 to 110320, Paulino Barros, representing 10.7% up the portfolio that we the service for sub service have requested full bad ones for leap because of koby knowing city.
Interestingly, 50% or half of those borrowers have naive rightful pinemont not taking advantage of the forbearance option.
So effectively means but right now 5.3% of the long, but we service was sub service is actually in forbearance as part of the forbearance period. We're also whitening certain fees and there will be no negative reporting to the credit bureaus.
But you May recall, we acquired the default servicing operation in Jacksonville in September 2019 in order to leverage our industry, leading oversight monitoring I'm bring default servicing back in house.
Operationally, we couldn't be better prepared to handle the spiking coal volume because of these pandemic.
We've been monitoring cold White Collins, Cogs, Italy, and have been quick somebody activists falling to ensure we operate within I want me to average speed to answer service level requirement.
Furthermore, we accept the hardship really task force, we've been at default servicing team to proactively reach out to borrow it was in forbearance and well count when appropriate loss mitigation solution. After they exit forbearance. This will streamed on the operation and allow us to get ahead of things rather than just letting these loans.
Run through the normal process.
During the quarter, we sold 6.6 billion, if I Miss sauce 2.2 billion. The bulk of 4.4 billion via plugs sales I'm retiring the subservicing on 85% of the sales.
However, right now the reason I'm off premise off given the recent market volatility and uncertainty surrounding liquidity on the advances.
We do believe the Maki premise AWS will come back in the near future, but in the meantime, we're very comfortable with tightening B.M. installs, we created through our origination business on our balance sheet.
Our next off the C.P. Wong rights you always currently 13.6%. So we had plenty of room before we start to approach the 25% annex ought to see see want capital level I mean tend to use the runway we created through the end of the year if necessary.
Of the 1.1 million loans, we service or sub service only 9% RMS saws Blackstone runs, it's a small percentage on the liquidity need on the advances is immaterial given our overall strong liquidity position as a bank.
Finally, custodial the policy, it's averaged 4.8 billion in the first quarter, which was flat compared to prior quarter. The game. If you just want additional benefit we get from mass Subservicing business as it provides liquidity that helps fund that balance sheet.
Now more than ever strength of our Subservicing business within a bank well catalogs and has plenty of liquidity stands alone I mean, the industry and I expect you must continue to see ROI in the future.
Moving onto expenses on slide 20 <unk>.
Total non interest expenses decreased 4% 10 million to 235 million quarter over quarter. On total revenues also decreased by 10 million to 305 million generating positive operating leverage of 1.4% in the cool so.
The main driver of the decrease in expenses was lower mortgage closings.
Look as far 20 long core non mortgage noninterest expenses were 139 million. If you walk we Didnt X amount is a warm tong rois off of 2 million, which relates to in 2013 legacy style, meaning the run right. He's 137 million a slight increase of 1 million from.
Last quarter.
Expenses talk directly to the mortgage origination business wouldn't 96 million a decrease of <unk> million versus Q4, given mortgage closings, which strike mortgage expenses were down 8%.
As a percentage of mortgage closings mortgage expenses have been very consistent for the last three quarters as you can see on slide 20 walk.
Our efficiency ratio was 77% for the first quarter, which was an improvement of 1% from the prior quarter for the reasons I just outlined.
Given the uncertainty around the mortgage market competing on Phoenix Fancies, we will not be providing Q2 non interest expense going to be phone.
It's an unprecedented calling on the health and safety of the Flagstar family our employees customers partners communities and stakeholders you found number one priority.
The way the team has adapted to the ceiling pharma without pricing steroid has been exceptional.
We will continue to work relentlessly to help our customers through these difficult situation and we will come out the other solid strong before I.
I believe the strength of our business model, a multi capacities and strategy will prevail in these uncertain environment.
This concludes our prepared remarks, and we will now open the call to questions from Alison Us.
Thank you the question and answer session will be conducted electronically if he would like to ask a question. Please press star, but they kept one you are using this because I'll make sure your mute function as it turned out to allow your signals heavy truck like once again star one.
And we'll first hear from Scott Hi, first with Piper.
Good morning.
And Scott.
Are you personally if you're taking my question something I'm sure.
I guess first question I wanted to ask is just on that increase in the trading securities of about $2.1 billion and I guess that presumably related 2 billion dollar increase.
A short term and long term FHLB advances, maybe a little more color on what the strategy is there and then as a follow up between you know they just 2 billion and trading Securities and then of course, the the 1 billion plus junk and the warehouse they really kind of doing the TC ratio. So just curious what your.
Thinking is on the balance between strong regulatory ratios, but a comparatively stay and Tc ratio.
Well, let me address.
The two going into 1 billion, then I'll, let Jim.
Chime in on their capital piece of it. So the 2 billion worst securities are kind of trapped in that period of time, where there was a fed action going on and we weren't able to get them off the balance sheet at the end of the month, we did the lives of them into the hedges or their edges in mid April I think and on this important 15, so they're off the balance sheet.
Now so that's what the that was and then the warehouse I mean, we've just seen the.
The ability to increase our warehouse commitments or grow as other warehouse providers happen in a position to take on more and that's because you know we've we've kept a fairly low concentration limit on our warehouse business historically and so you know given the fact that the opportunities is there.
In the market and the and then we we narrowed the collateral that we accepted on our warehouse lines and then even.
I do see advance.
Levels on on certain collateral so even though we're at a higher level and our warehouse balances you know the risk associated with that we feel very very comfortable with in fact, if you. If you look at that page in the slide that's on our warehouse business and I think it's a kids through before you can see the loss history, there and it's virtually none.
And so even if you go back into the financial crisis was $1 million a year there for four years. So no. We're really comfortable taking the the level of warehouse exposure up given the spreads in that business in the low credit risks. So it does impact assets, a little bit, but I think a tradeoff is a very very.
Helpful to us so I'll, let Jim them pine about capital piece of that.
Yeah. Thanks, Sandra it's just going back quickly Scott just to remind you at the ended the quarter.
A lot of dumping of mortgage backed securities going on be especially with like the Emirates, because there were there where margin calls going on and those entities needed liquidity.
That supply imbalance I think helped some of the dealers in that space getting a lot more aggressive with their bid.
We saw the bids for our Fannie Freddie Ginnie Securities and that's what comprises about trade Securities line is newly created we created they'll be up that that we weren't able to sell off our balance sheet at places that we expected to get we always had the option to deliver those securities into our TV age.
And so rather than look we didnt have to sacrifice execution at quarter end just to get those off the balance sheet. We had that we let our capital levels down a bit and our balance sheet balloon that'd be hasn't liquidity would have to capital to be able to do that.
And deliver those into the TB age, but so that's a big part of it you know Mike My remarks at the end.
We continue to emphasize that when you look at Flagstars balance sheet between warehouse loans and Sandro elaborated on the credit loss content that we've seen historically, there and I think we've strengthened it even more so this past quarter.
And loans held for sale.
Between those two portfolios I think you've got you know some pretty pretty strong categories not to mention 97% of our securities portfolio are getting securities. So there's no credit risk.
Implicitly in that portfolio and then just look at some of the other categories. We have our balance sheet, you have roughly half our balance sheet more than half our balance sheet and then category.
It really.
Either no or very very little a credit risk credit loss content. So.
You know.
The sits on a quarter Tc ratio at the end, but I think it's a little low if you look at of on average basis, because as you're aware.
Warehouse spikes at the end of the month. If you ended the quarter and also we had that ended the quarter back up in our on our trading securities.
But as you're aware.
If you look at.
I'll just pick up during the quarter. If you look at an average basis than the ratio is seven at the quarter several hundred basis points higher.
Okay perfect guys. That's good color I think particularly on the those 2 billion or securities because I think right estimated that was just alone 60 basis points. There are so yet so I'm just if I go ahead. So all of those are all those things that you mentioned art or kind of.
Not not related so.
The ballooning of of the balance sheet due to the backup of of trading securities on the balance sheet is different from what we're trying to do in terms of the long term FHLB advances, which is we think that rates are just attractive at these low levels and given the our rate position I walked you through from a deposit.
And alone perspective.
We think it's the right thing to do now to lock in these low rates for you know that that three to seven year period of time.
Yeah, I agree I think it.
Can be interesting, though just looking at the outside from the outside without that color you know that almost dollar for dollar match you know so it looks like more of a conscious a conscious decision from prison things end up being you started mutually exclusive.
That callers tremendously helpful. I appreciate it.
And then separately was just hoping to ask on the.
The gain on sale revenue. So I appreciate the color on the 90 million, so far and it certainly sounds like that transitory type stuff will not impact. So I can back into what sort of a core gain on sale margin would be but just given all the.
Fluidity in the mortgage market right now maybe any any sense for what sort of ongoing.
Gain on sale margins might look like and then the big factors impacting I mean your minds.
No no I'm not going there Scott I don't have the Crystal ball I can't tell you what are the margins are gonna be going forward, but you know what I said in my prepared remarks, I'd, just reiterate and emphasize.
If what Fannie thinks is going to happen happens and by the way, it's not much different than what the India or Freddie things are just picked Fannie for my prepared comments, if we have that kind of strength in the mortgage market going forward. This year than the opportunity to have gained I'd say, maybe not at these levels, who knows but they have come.
Taking a gain on sale a strong again at some numbers I think is a likelihood of editas with a strong and then similarly that does that does great things for our warehouse business.
Well, we did say was over 90 million, it's actually not only 95 million. So you know this right now it looks very good but.
You know, we're just not going to speculate on where it might go up and not affect your guess is as good as Mike Yeah, [laughter] fair enough. So good stuff. Thank you guys very much.
Well that's on the.
Thank you next summer Bose George with KBW.
Good morning magazine.
After a decade or I mean, it's almost doubled.
Yeah, when asked about the belonged Subservicing business.
That's a bubble being citizen delinquent loans and monetizing non performing loan acquiring more hands on approach how does the contract rolls in terms of what you guys get compensated for that.
Yeah. So Leo obviously answer that one that's that's a deal but I'll just start by saying you know it's different when you're a subservicer versus a servicer and I know that Lee will highlight that difference for you. So they went to take this one.
Yeah, Yeah, I'll, just let me just pick up on the last point, you made him and I might be to my prepared remarks first of all you know of older loans, we so subservicer service only 9% around in black Black saw so that's a very small percentage and from a liquidity point of view, it's gonna be immaterial.
Just given our position as a bank and be available liquidity, we have I've been something about subservicing contracts. So there's a couple of things sort of going on as lungs become more delinquent a ban the fees that we can't do increase.
But obviously given the haul ya requests for full bad currencies.
That activity, we've obviously had to increase capacity first of all on the collection side or the pacemaker I'm with now and have been increasing capacity in terms of loss mitigation activity, because we know that he's coming further down the line. So while the will be a an increasing revenue.
The why the contracts are structured there's also an increase in at cost bags, just given the the higher activity levels.
And Scott you are not get out and I'm, sorry Bose. The other thing I would add is if you look at our servicing portfolio and then we noted that it's under 10%. So the total loans and service it's not much different than your typical bank. So when you look at our servicing our own servicing it is very comparable to what if any bank would have.
It's the Subservicing, that's the big number and articulated that's very different dynamic.
Thank you and then he has also just give a little more detail on annual credit positioning within the CR yet stages, let's just say hey, Paul.
King, they're all going on just sort of what do you think that is on the division almost exactly so that's better than the stress scenario.
Yeah, So I can't I can't kind of like gain on sale I can't tell you where the provisions Gonna go I just know I just feel like I said in my comments that were going to be looking at.
Economics forecasts that are much much different than and worse at June 30, compared to March 31, but if you look at our portfolios. So go go to page.
31, and you see the commercial lending and then 32 the detail on commercial real estate and 33, the detail on she and I I mean, especially look at 32 and 33 and look at each of those categories and you just don't see any big number in any one category and that's where we talk about relative to diversification.
As those wells concentrations are the biggest numbers and homebuilder at 900 million and we haven't had wonderful request from our homebuilder clients. Thus far so you know when I look at this portfolio and again as I as I said in my comments.
She was 27 doing our balance sheet that has less than $5 billion and commercial exposure that I don't think there's any other $27 billion bank in the country that can say that and and that's that's pretty low. So and then you look at the diversification that's here and even in the and the syndicated Ah portfolio.
It's over 90, plus credits you know that that that number comes from and so the average balance I nature is relatively manageable and when you look at the loan to value ratios in our creep portfolio. There, they're low so I mean, who really dig into the detail we provide to do a lot of detail on these pages I think you'll see that.
The Wisconsin is on the low end of the scale and you know we're we've always been very conservative when it comes to allowance and we're not going to change that posture today, we feel very good about it based on the economic scenarios.
At the end of March and we'll we'll do the right thing by the allowance come the end of June.
But I don't have that puts the bottom end to tell you what I think.
Provision could be in Q2, I just don't know.
Okay. They started down I think it.
You're welcome back.
Next I'll move to Daniel Mayo with Raymond James.
Hi, Dan Hi, Hi, guys how are you.
HM.
Just on the on the NIM and then how the a the PPP program impacts that I I think you you'd mentioned that the NIM should be relatively flat in the second quarter, including the P to P.
That oh, how much benefit is assumed from PPP and that if I heard that right and that does.
Flatten them.
Yeah, I like just answered, but I don't think there's a benefit from PPP to the NIM Jim.
That's correct now that it's it's dilutive to the NIM, but we would expect Danny.
Right. Okay. No I would also say, it's not going to be material.
It's and then there's okay I was assuming that there was some kind of recapture of season, there, but but if it's in the material numbers and that's fun.
Alright, and then and then the floors in the warehouse business.
Did you benefit from those at all in the first quarter.
And then how much or would you how many how many or how much what percentage. However, much he said disclose or in the money at this point.
[noise] I don't know if I know the answer to the how many are in the money per se, but we have bumped into the two a lot of the floors.
It's not that I don't want to give you that information I, just don't know that I know it off the top of my head.
Jim does okay Jim.
But again, if you look at if you look at slide nine.
Let me, 1% of those warehouse loans.
How's LIBOR floor.
That's something higher than zero.
So I think you can safely assume wipe or where it is today and it just is to continue to come down to.
Hi, Ted spreads.
On the difference between where life or is one month Laguardia and fed funds.
So as that comes down even more of those that you look at that 71%.
Portfolio.
Likewise, something north of zero, a floor level, Florida office zero.
Okay. Thank you.
And then.
Sorry go ahead.
No those.
And then just one last question on the on the theory portfolio do you you disclosed how much of that as construction.
Did we disclose how much of that its construction.
Well if you go to page 32, and Jim check me on this but if you go to page 32, you see the book value is $3.1 billion commitment levels 4.8.
It takes a homebuilder piece out of its the total commitment would be 3.9, so it'd be something less than 800 million I don't know Jim If you know what that is.
I I don't have those answers specifically Danny by to keep when you look at our.
December called reports and when you look at our seem to be filed March call reports it'll breakout in Ah the long section RCC it'll break those melts out for you.
Alright, perfect. Thanks for answering my questions Chris.
You're welcome.
And next move to Henry Coffey with Wedbush.
Yes, Hi, Henry.
Hello, everyone was about to say good morning, but it's lunch time.
So no one thank you very much for taking my call a three questions number one that's probably an editorial as well as a question.
Given the reliance everyone has particularly on on Moody's cohorts Kogut forecast for there.
Diesel adjustments is there any risk that that becomes counter cyclical and starts affecting your lending decisions.
You know, obviously your and your portfolio doesn't reflect.
The reserve that it's all see so related and and so we know that the Moody's forecast is more negative in April that probably gets worse and in May and June and does that that that could affect your reserving because you're stuck with the models, but does it affect your lending behavior.
I don't think it directly affects on Monday behavior, I mean indirectly if the economy is continuing to weaken and that has an impact on our.
Decisions and the commercial areas you know whether its business banking fee and I are CRV right now I don't remember the last time I looked at that's.
Commercial loan for approval and we've tightened our approval process down such that three of us that chief commercial officer Chief.
Better officer myself have to sign off on every new commercial long right now and I like I said I can't remember the last one I signed off on.
As time goes on mass things started to better get better you know will make decisions to make commercial loans really feel like a business has revenue confidence that allows us to have underwriting confidence. That's the problem right now, it's just very difficult to have confidence in a in cash flows with most businesses and so.
Therefore, we believe drawn back quite a bit.
So I think our lending activities would probably be ahead of the Moody's.
Analytics in terms of when we start lending.
One more opportunities come about that make sense, but I don't think there's a direct correlation.
Right. Thank you then and then two more questions, but obviously a $90 million gain on seven get gain on sale revenue in one month.
It's quite.
Spectacular [laughter].
You have enough insight into the pipeline to to get it feeling for how May and June play out can you were there any is there any sort of aberrant outcomes in April that really change that or you're just seeing up.
Big flow of business and and obviously a return on gain on sale margins to where you would expect they would be.
Which is much higher Chris there if I'm wrong on anything you're correct me, but I don't think there's anything much different in April the March other than we didn't have the hedging challenges.
In April the business continues to be very strong.
The question Henry is tend to tend to margins continue at the levels. There have today I think the volume you know for the next couple of months looks pretty good but whether the margins continue I don't know you know and that was a question that was asked in the earlier that I didn't punted on because I don't know but electricity.
Had anything she would like to that.
Yeah, I Henry I mean, one thing I'll share some of you almost have to look at that strategy that was really the played over the last year, which is really evaluating those opportunities where we called optimize our returns through products through volume and for channel next I'm only really does continue to focus on.
How do we bring value to our customers. So we've come to me that savaging April like the market is going to been difficult kill them over the last two lots from where they take a little ball over that period, there might be mallinckrodts.
Benefit that we would fall, but there's no reason successful that won't can pool has his own tool, but keep in mind set us drive is a world can put a little beautiful optimizing lots going on that.
So we can go back to looking at primary secondary spreads is kind of the guidepost as to what to expect and.
You know given the volatility seen in March that probably doesn't come up for a while it's at a fair conclusion.
Yeah, I wanted to integrate claims that we bring a lot because actually if you look at primary secondary Greg.
Stuart Hi, it's 232 basis points at the end of March and over the last two weeks. It actually came up I know about 60 basis points. So that's a good measure of obviously the competitive dynamic in the market as well like capacity and so you're absolutely right. That's a good thing to watch we certainly.
Watch that important kilowatt hour pricing power as in the market every day.
Great. Thank you and then moving on the surface home side.
Thank you for you. It's not a question you know you don't have to worry about servicer advances you've got plenty of liquidity and as you pointed out in that kind of call owned MSR is there were a small part of your of your servicing book, but maybe you could give some insight into what's going on with your sub servicing clients are they seeing.
In April.
Uh huh.
Rolling up tick in servicer advance requirements are they are you working with them on this provided liquidity line to help them with us given that the Fannie and Freddie or kind of sitting on their hands I was wondering what your.
How does that business look like from the perspective of your clients and what are you going to work with them.
Yes, I'll, let Lee give you the detail, but no one comment I'll make is obviously the four months maximum advance that that the FHLB. That's HFSA amounts was I think a big relief to a lot of our partners.
But yeah, we know we're going to work with them just said, we're going to work with every commercial person Darren and they can give you some detail on that.
Yeah, I think you've hit the nail on the head Sandro I mean, the F.I. chip I announcement last week he gave.
Subsurface or MSR wrong, and those who we subsurface for a lot of certain see because he'd effectively cap. The amount of time. This I would have to might be advances for until I think that was very helpful for all of them in being able to.
From a liquidity need plug it into then multiples and understand what value or what they would want.
Well, what I need and then on the Ginnie nights sold you probably should we got the P type program. The Ginnie Mae has put in place that's helpful. And of course, you know we work with that partners, where we can and we do have some.
Following on seem law instead are out there I.
If we can be helpful in anyway with or without partners. We won't do that you know as the fed women. The fortunate position that were Fang well capitalized we have a love and liquidity and if it makes sense to do so oh, we can help out partners. We will look to do that but I think I think the.
The uncertainty that was them around liquidity, maybe three weeks ago two weeks ago.
HM East given the silhouettes and see that people now half with yes, I just I announcement.
Thank you like I I think you're in a great position I I've, we've heard at least when the press that there's one or two major correspondent lenders that may walk away from that business do you have the capacity from a technology and people are then a lending perspective to pick up.
Either even more market share if that's where we end up.
Yeah, I might look here's what I'd say you never like to benefit from adversity or is this all struggling you know I mentioned in my prepared remarks, with Servicenow Subservicing, a little over a million loans right now and we have the capacity to service the subsidies to.
Million loans I look we will just continue to do what we've always done in terms of a growing that portfolio.
You know when we've been very successfully in doing that up to now and so as opportunities arise we will evaluate them and see my sense, you know I'm certainly not going to talk about benefiting from from other sort of a falling down but be smiling, but.
Great. Thank you very I would end up.
Hi, Thank you signed or what do you want to say I'm, sorry that Charlie I. Just I was just got I emphasize what we've said this isn't the time to look at significant growth in our servicing business I think we take it slow and easy and take advantage of the.
Really strong opportunities that may present themselves, but the way the way we've been building this business over time than what kinds of worked really well and we're just going to can seem to follow that same very thoughtful path.
Great well, thank you very much Oh.
This call was extremely helpful. In the stock has responded well.
Thanks.
Next we'll move to Steve My B. Riley.
Hi, good morning.
Two questions for me, there's quite a lot of until here, but just one on a they're not starting to talk to get sort of quarter I apologize I missed it I'm just wondering if you'd give some color there.
I'm sorry, you I you cut out I mean, I couldn't hear your question hit me again, sorry.
Yes, sorry on the noninterest bearing deposit growth for the quarter, just wondering or what the you know what was before the drivers there any color there would be helpful.
Yeah, I think it's primarily custodial deposits.
Okay.
And then in terms of the discourse around the leverage lending and the shared national credit portfolios. Here. Just wondering if you guys have any specific reserves.
For those portfolios.
And any color would be helpful.
Well, that's page 37, where would you could have breakdown and it is with him to see some model.
Yeah.
Yeah, what was it directly already in euros specific reserves on either of those portfolios.
Let me okay, Okay, I'm sorry [laughter].
Okay, and there are specific reserves, but all that but let me just clarify say there aren't specific reserves in the gap.
Terminology.
But when you look at we see some model each industry has reserves, obviously, which would all be part of both the leverage and the syndicated portfolio.
Okay. That's that's helpful and then in terms of just.
Just wondering about the a 35 million in loans that were special mention or sub standard at quarter end.
As that increase quarter over quarter or is that relatively you know just any dynamics there.
Yeah, it's relatively flat.
Okay. That's the only killer had nothing to do with.
Yeah, those had nothing to do have told it.
Okay. Thank you very much I appreciate that.
You're welcome Steve.
And that will conclude today's question and answer session. At this time I would like to kinda topic, because I guess I'm proud to netlist for any additional for closing remarks.
Yeah. Thank you Michel I'd like to close by talking about the Flagstar spirits. This company has come together in a way that I'll never forget not just in the down to deadlines. They have mentioned that crushing workload their shoulders.
In the way they have brought farm into the things.
Like Flagstar Colvin, Facebook group and they virtual happy hour in companywide photo contest showing there at home workstations and while we've moved over 4000 people to work at home. Some folks do have to support bank branches and some do have to be in an office building and as you heard and leaves comments, we're doing all.
The weekend to put them in a safe environment can have rewarded them, but over a million dollars and bonuses plus though we changed the workweek for our branch employees to four days, we're paying them for five and they continue to pay employees, who are not working due to the virus. We also set up an employee assistance program through our foundation to help employees experiencing pools.
19 related financial hardships and in addition to the community support I noted earlier, we also opened their paychecks protection program to nonprofits that were not previous flagstar customers.
Additionally, we've set up especially small dollar loan program for people are impacted by close to 19 that live and low to moderate income areas.
We know that were in the side of our lives and we've given expression to that sense in them with a flagstar versus covert 19 T shirt for every employee yard tough and we will prevail.
Finally, thank you to the entire Flagstar family I. Appreciate all you do more than my words can express.
And all the best everyone else this marriage and stay home as much as you can and I pray that you stay safe and healthy.
And that will conclude today's call. We thank you for your participation.
[noise].