Q1 2025 Flagstar Financial Inc Earnings Call
Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Flagstar Financial First Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. I would know like to turn the conference over to Sal, DiMartino, Director of Investor Relations. Please go ahead. Thank you very much.
Sal Dimartino: Thank you Regina. Good morning everyone. Welcome to Flagstar Financial's first quarter 2025 earnings call.
Speaker Change: This morning, our chairman, president and CEO , Joseph Otting, along with the company's senior executive vice president and chief financial officer, Lee Smith will discuss our first quarter results and outlook.
Speaker Change: During this call, we will be referring to our earnings presentation which provides additional detail on our quarterly results and operating performance.
Speaker Change: Both the earnings presentation and the press release can be found on the investor relations section of our company website.
at IR at Flagstar.com.
Speaker Change: Also, before we begin, I'd like to remind everyone that certain comments made today by the management team of Flagstar Financial may include forward-looking statements within the meeting, so the Private Security's litigation reform act of 1995.
Speaker Change: Such forward-looking statements we may make are subject to the safe harbor rules.
Speaker Change: Please review the forward-looking disclaimer and safe harbor language in today's press release and presentation for more information about risks and uncertainties which may affect us.
Speaker Change: Also, when discussing our results, we will reference certain non-GAAP measures which exclude certain items from reported results.
Speaker Change: Please refer to today's earnings release for reconciliations of these non-GAAP measures . And with that, now I would like to turn the call over to Mr. Otting, Joseph.
Joseph Otting: Thank you, Sal, and good morning everyone, and welcome to our first quarter earnings call.
Speaker Change: We are very pleased with this quarter's operating performance and financial results as we continue to make significant progress on our journey to profitability, executing on our strategic plan and transferring the company to a strong performing regional bank.
Speaker Change: We executed on the critical cost takeouts, credit management, C&I growth and risk governance during the quarter, and really align with our overall pattern that we laid out for all of you in early 2024.
Speaker Change: Our first porter adjusted net loss available to common shareholders was 23 cents per diluted share compared to a consensus of 27 cents per diluted share. This was also 17 cents better than what we reported in the fourth quarter.
Speaker Change: In addition to our improved financial results, I'm also excited with the progress that we are making and building out our commercial lending business where we continue to add talented bankers. These two hires now are generating strong origination volumes, which I will detail for you shortly. Thank you very much.
Speaker Change: Also during the quarter, we announced the hiring of Mark Pitsy to lead our private bank and wealth management business.
Speaker Change: Mark's extensive expertise at various large regional and international banks will help us drive our continued growth.
Speaker Change: In addition, we rounded out some key product offerings in the C&I, including an interest-only jumbo AMR mortgage with a low loan to value aimed at our high network clients in a subscription loan product.
Speaker Change: We feel now that we have the appropriate products that in place to grow a market share in the high net word space.
Thank you very much.
Turning to slide three of our presentation, .
Speaker Change: In 2024, we successfully built capital, improved liquidity, and enhanced the credit quality of our commercial real estate and multi-family portfolios.
In 2025, our focuses on the following four areas.
Speaker Change: Improving our earnings profile to margin expansion as our cost of funds decreases, moderating credit cost and cost reductions.
Speaker Change: Lee will discuss these and outline these later on a couple slides, and we'll continue to execute on our C&I and private bank growth initiatives.
Speaker Change: and then proactively manage the CRE portfolio, including reducing our CRE concentration, which you also see in a couple slides. We've continued to do that virtually since we've arrived and we've continued to see that as we kind of move through the remainder of 25 and 26.
Speaker Change: and then we also see normalizing credit. I will note that both net charge-offs and the loan-loss provision in the first quarter each declined by almost 50% on a quarter or over quarter basis.
Speaker Change: I'd like to spend the next few slides discussing the build-out and increasing momentum in our CNI business, which we've consistently communicated as one of our key targets.
Speaker Change: is to diversify the balance sheet away from being a CRA-driven balance sheet to one where we focus on consumer, C&I, and commercials real estate going forward.
Speaker Change: We've continued to add talent in the CNI business. We hired another 15 bankers during the first quarter and tend to hire another 80 to 90 during the remainder of the year. These additional hires are already factored into our forecast will not impact our cost savings initiatives.
Speaker Change: Early returns from the bankers we hired in 2020 for our impressive, especially in our two main focus areas which are corporate and regional commercial banking and our specialized industry verticals. [inaudible]
Speaker Change: Overall, we had over a billion dollars of CNI loan commitments in the quarter with 769 million in originations up over 40% versus the fourth quarter.
Speaker Change: Art CNI pipeline currently stands at 870 million up over two times compared to the fourth quarter.
Speaker Change: Our expansion strategy, and this is two folds, our corporate and regional commercial banking business.
Speaker Change: is focused on relationship lending in and around our branch foot print to ensure we can maximize our middle market and corporate banking lending opportunities in our backyard, specifically where we have Flagstar brand recognition.
Speaker Change: and then the second is our specialized industry business is a national model and focuses on several industry verticals including things like sports and entertainment, energy and energy renewables, franchise finance, healthcare and lender finance.
Speaker Change: Slide 5 depicts the momentum we have in these two areas over the last several quarters. And as you recall, we really, with Rich Reffetto's hiring in June of 2024, began to organize ourselves and began to recruit talent into that space.
Speaker Change: But as you can see on slide five, importantly in our two areas of forecast, originations increase over 70% to 449 million on a link quarter basis, why commitments rose 40% to $656 million.
Speaker Change: So we're really excited about that and it really shows as you know we've talked to people about growing out our CNI opportunities in the marketplace that those are really starting to come true as we forecast it.
Speaker Change: On slide six, in addition to the sale of the Mortgage Warehouse business, we opted to strategically reduce our exposure to several non-core non-relationship-based C&I Bowers.
Speaker Change: As a result, over the past several quarters, the runoff in these portfolios has massed the progress we are making and growing our new focus areas.
Speaker Change: As you can see in the upper left of this slide on set, on paid sex,
Speaker Change: While overall C&I loans decline again this quarter, corporate regional commercial banking and specialized interest loans increased to 147 million, up 4.4% compared to the fourth quarter.
Speaker Change: runoff is now evaded in the C&I portfolio and combined with continued momentum in our focus area, we feel comfortable that the overall C&I portfolio will begin to deck row in the second quarter.
Speaker Change: With that, I will turn it over to Lee and allow Lee to kind of walk into some of our financial dates.
Lee Smith: Thank you, Joseph, and good morning, everyone. We're very pleased with the continued progress of our turnaround strategy to transform Flagstar into a top performing, well-diversified, relationship-driven, regional bank.
Lee Smith: From a fundamental point of view, our CT1 capsule ratio remains right around 12%, one of the strongest in the industry for regional banks.
Lee Smith: We further improved our liquidity profile as we continue to reduce broken deposits and FHLB advances.
Lee Smith: and the results of our cost optimization efforts are on full display.
as our non-interest expenses.
excluding one-time charges, merger expenses.
Lee Smith: An intangible amortization declined 71 million quarter-over-quarter, put in us on track to achieve that full 2025 forecasted run rate.
Lee Smith: We continue to see significant par pay ups in that commercial real estate portfolio.
Lee Smith: and we closed on the two non accrual loan sales that had been moved to available for sale during the fourth quarter.
Lee Smith: with a combined book value of $290 million, resulting in a small gain of $9 million on these loan sales.
Lee Smith: We will continue to explore all options as it relates to reducing our multifamily and commercial real estate portfolios and non-performing loans and will execute on what is in the best economic interests of the bank.
Speaker Change: Joseph already touched on the momentum in the C&I business, but let me add that our goal is to originate one plus billion of C&I loans per quarter and believe the first quarter to trains prove we're on track to do this.
Speaker Change: Moreover, this growth is at market spreads, which together with the expected multi-family resets and maturities will drive margin expansion over the next three years.
Speaker Change: We paid off approximately 1.9 billion of brokerage during the quarter with a weighted average cost of 5%, and 250 million of flood advances with a weighted average cost of approximately 4.5%.
Speaker Change: The last $1.4 billion of our high cost savings promos with a weighted average cost of 5.2% matured during the first quarter, and we had $5 billion of retail CD maturities at a weighted average cost of almost 5%.
Speaker Change: Overall, our weighted average cost of deposits declined 34 basis points in Q1 versus Q4.
Speaker Change: We continue to actively manage our deposit costs and will further de-leverage the balance sheet in 2025 by paying down more broker deposits and FHLV advances.
Speaker Change: Over the next three quarters, we expect to reduce our broken deposits by an additional 3 billion, and our FHLB advances by another 1 billion.
Speaker Change: On the asset quality front, our criticised assets declined quarter over quarter, while our allowance for credit losses and reserve coverage remained stable due to lower health for investment loan balances and better appraisal values.
Speaker Change: The increase in 30 to 89 day delinquencies were driven by one borrower who pays subsequent to month end and has done so again.
Speaker Change: Meaning that 414 million of delinquent loans as of March 31st are current as of April 23rd.
Speaker Change: We also moved one significant borrower to non-acrual status during the quarter. Their portfolio is approximately 563 million and 90 properties. We are pursuing all legal and contractual remedies against this borrower.
Speaker Change: Turning to Slide 7. As you read in our earnings release, our first quarter lost narrowed significantly compared to the previous quarter. And as Joseph mentioned, it was ahead of consensus estimates.
Speaker Change: On a gap basis, we reported a net loss available to common stockholders of 26 cents per deluded share, and on an adjusted basis, we reported a net loss available to common stock holders of 23 cents per deluded share.
Speaker Change: versus 40 cents in the fourth quarter after adjusting for the following items in Q1.
Speaker Change: 6 million in accelerated lease costs related to branch closures, an 8 million of merger-related expenses.
Speaker Change: Moreover, our adjusted pre-provision, pre-tax net revenue for the quarter was a negative 23 million, also much improved compared to the previous quarter, as we aim to return the bank to profitability by the fourth quarter 2025.
Speaker Change: On slide A, you can see the tremendous strides we've made in strengthening our balance sheet over the past five quarters.
Speaker Change: We have increased capital by nearly 300 basis points, improved our reserve coverage by almost 60 basis points.
Speaker Change: Significantly enhanced liquidity position, and we enhanced our funding profile by reduce in our reliance on higher cost wholesale borrowings. This last item also helps us reduce our direct-the-I-C expenses.
Speaker Change: We now have a more fortified balance sheet that will better support our diversification strategy as we move forward.
Speaker Change: We slightly lowered our 2025 net interest income forecast and increased our forecast for fee income. These largely offset, resulting in no change to our 2025 earnings per share.
Fiscal Year's 2026 and 2027 remain unchanged.
Speaker Change: Slide 10 shows our nim trends and as you can see the margin is stabilised over the past two quarters.
Speaker Change: The name is expected to increase as we move forward based on
Speaker Change: A lower cost of funds as we continue to de-leverage the balance sheet and manage our cost of deposits lower.
Using excess cash to purchase investment securities.
Growth in Hyatt Yielding, C&I Lones
and a reduction in not-a-craw-loan balances.
Speaker Change: I touched on our cost optimisation effort a moment ago and on slide 11 you can see the significant progress we've made in reducing our expense base.
Speaker Change: At cost reduction efforts are focused on the following five areas, compensation and benefits, real estate optimization, vendor costs, outsourcing offshoring non-strategic back-office functions and processes, and at the IC expenses.
Speaker Change: We've reduced non-interest expenses 71 million quarter over quarter on an adjusted basis.
Speaker Change: and are on track to reduce expenses by over 600 million year over year and achieve our non-interest expense full cast for 2025.
Speaker Change: It is important to note that our cost savings goal is net of growth in other areas, including our C&I businesses and investment in our risk compliance and technology infrastructure.
Speaker Change: Turning now to slide 12, which shows the growth and strength of our capital position. At just under 12% our CET1 capital ratio is top quartile among our peer group. Our priority is to redeploy this capital into growing our C&I business as we diversify our balance sheet.
Speaker Change: The next slide is Add Deposit Overview. Add Deposit's decreased approximately 2 billion driven by the payoff of 1.9 billion in broken deposits, consistent with management strategy to reduce our alliance and hold south funding.
Speaker Change: Moving to slide 14, the first quarter was another strong quarter for par payoffs in the CRE portfolio, which totaled 840 million.
Speaker Change: 673 million or 80% of these were in the multi-family portfolio and importantly 59% of the pay-offs were loans rated substandard.
Speaker Change: These payoffs are driving a significant reduction in our CRE balances and in the CRE Concentration
Speaker Change: Since year end, 2023, CRE balances a down 5.7 billion or 12% to 42 billion, while the CRE concentration ratio is down 62 percentage points to 439%, compared to 501% at year end 2023.
Speaker Change: Slide 15 provides an overview of the multi-family portfolio. This portfolio is declined 3.3 billion or 9% year over year. In addition to the payoffs this portfolio has been reduced through loan sales and charge-offs.
Speaker Change: We maintain a strong reserve coverage on this portfolio of 1.82% the highest relative to other multi-family focus banks in the northeast.
Speaker Change: Furthermore, the reserve coverage on multi-family loans where more than 50% of the units are re-regulated is 2.82%
Speaker Change: Earlier I stated that one driver to our margin expansion is the resetting of our multi-family loans.
Speaker Change: We have about 18 billion of multifamily loans either resetting or maturing through the remainder of 2025 and end of 2027, with a weighted average coupon of less than 3.8%.
Speaker Change: If these loans pay off, we will reinvest the proceeds and capital into sea and eye growth or pay down wholesale borrowings. If they reset, the contractual reset is at least 7.5% which gives us an immediate benefit.
Speaker Change: Going back to January 1, 2024, approximately 3.4 billion of multifamily loans have reset. Over 90% of these loans have either paid off a par or reset an occurrence, excluding the one borrower we move to not a cruel.
Speaker Change: Slide 16 provides an overview of the office portfolio. We have reduced our office exposure by approximately 800 million or 25% over the past five quarters and we will continue to actively manage this portfolio lower throughout the course of the year.
Speaker Change: Our office allowance coverage at March 31st stood at 6.68% and remains among the highs compared
Speaker Change: The next slide, details are allowance for credit losses by loan category.
Speaker Change: Of no, a total ACL coverage, including unfunded commitments of 1.82% was relatively unchanged compared to the previous quarter due to low alone balance charge-offs and the receipt of additional praises.
Speaker Change: On Slide 18, we provide additional details around our credit quality trends.
Speaker Change: Criticized loans declined almost 900 million or 6% on a quarter over quarter basis to 14 billion.
Speaker Change: Additionally, net charge-offs decline 48% to 115 million compared to the previous quarter, reflecting further normalization of credit costs.
Speaker Change: As I mentioned earlier, one borrower relationship, totally five hundred and sixty-three million, became non accrual during the quarter, which accounted for almost all of the increase in non accruals.
Speaker Change: Excluding this non-a-cruel, loans including health for sale would have declined modestly compared to last quarter.
Speaker Change: Finally, Slide 19 depicts a liquidity position as of quarter end. Overall, a liquidity remains strong totaling 30 billion, representing 231% of uninsured deposits.
Speaker Change: During the quarter, we used that cash position to pay down broken deposits.
wholesale borrowings, and to purchase investment securities.
Speaker Change: In conclusion, we're executing on our turnaround and strategic plan to return Flagstar to profitability and make us one of the best performing regional banks in the country. I will now turn the call back to Joseph.
Joseph Otting: Thank you very much, Lee. Before we go to questions on just reference for everybody's benefits, slide 20.
Joseph Otting: Um, there were some critical, you know, components that need to be, you know, that we needed to accomplish. We obviously needed to lower the cost. We needed to get our arms around the credit risk within the company. We needed to build a CNI franchise that could originate loans. [inaudible]
Joseph Otting: and we could move the company forward on that journey. And I think where we sit today we feel very confident.
on the turnaround of the company.
Joseph Otting: and as Lee referenced, we do forecast and believe that our fourth quarter will be a profitable quarter for us, you know, turning point in the organization's history.
Joseph Otting: On slide 20, we give you a reference that compared to where the current stock price is trading and where we think it would be on a one-time multiple that we do feel for our investors. There's a tremendous opportunity in owning the Flagstar bank stock going forward.
Joseph Otting: So with that operator, I will turn it back to you and we can open it up for questions.
Speaker Change: At this time, I would like to remind everyone that in order to ask a question, press star, followed by the number one on your telephone keypad. We ask that you please limit your initial question to one and return to the queue for any additional questions that you might have.
Thank you and happy Friday.
Mark Fitzgibbon: I see your guidance, Joseph, on page 10 of the slide deck, and as it relates to the NIMM, but I guess I'm curious to get to a 195-205 NIMM for the year. Looks like a pretty big lift from the 174 we had this quarter. So I guess I'm curious.
Mark Fitzgibbon: Does that incorporate any rate cuts, if so, how many? And secondly, the four main drivers that you reference, one of the biggest pieces of that, which really contributes the most to the name.
Speaker Change: Yeah, thanks for the question. So when we put this latest forecast together, we were using the forward rate curve as of March, so there are two rate cuts in 2025 assumed in this.
and as you think of the near-improvement, [inaudible]
Speaker Change: going forward. It is driven by the items that are noted. So you'll see a cash balance is come down throughout the remainder of this year, and that's the result of us.
Speaker Change: We're going to buy another two billion of securities between now and the end of the year. We're planning on reducing broken CDs, another three billion, and we will pay off another billion of FHLB advances.
Speaker Change: As we've mentioned previously, we've got another $4 billion of multifamily loans resetting in 2025 they have.
Speaker Change: A coupon that is less than 3.8%. So as they reset, they're going to move into coup, if they stay, they're going to move into coupons that are at least 7.5%.
Speaker Change: So we get an immediate and in benefit there, and if they pay off a par, we will reinvest those proceeds in growing AC and I portfolio which is based off of sofa spread.
So that is improving the the name position as well.
Speaker Change: We're also going to manage the cost of our and continue to manage the cost of our deposits lower like we have in the first quarter. We've managed interest bearing deposits.
Speaker Change: Down 34 basis points versus Q4, and we're going to continue to do that as we move throughout, not just 25 but beyond as well.
Speaker Change: We've got 4.9 billion of retail CDs maturing in the second quarter. They've got a weight average cost of 4.8% and then, as I mentioned, we're planning on reducing our non-cruel loans and
Speaker Change: Okay, and then secondly, just was curious on that one large relationship that went on non-accrual this quarter and give us a sense what the LTVs on those loans look like and also how much you haven't specific reserves on that relationship.
Speaker Change: Yeah, so here's what I would say, we're not going to get into the specifics around the relationship, but what I would tell you is
When we looked at this, [inaudible]
Speaker Change: This loan had the ability to pay. The LTVs and all the other metrics were adequate. This was a borrower who decided that he wasn't going to pay. And that was a human behavioral choice, but he certainly had the ability to pay. [inaudible]
It cost us about $28 million. [inaudible]
Speaker Change: and then in terms of NIM reversal, it was about 5 million. So...
Speaker Change: This particular borrower, it costs us about 33 million or seven cents.
Speaker Change: just in the quarter. And the other thing that I would add is
we've obviously scrubbed. [inaudible]
Speaker Change: The Remaining Portfolio, we have done a lot of screens, and we believe that this was a very unique situation, this borrower, he, he...
Speaker Change: looked to gain additional leverage by pledging his equity interests. And as we've done various other screens, we don't see anything like this in the rest of the portfolio. So we do see as being very idiosyncratic and unique.
Speaker Change: In the thing I would add, Mark is, I think we communicated the journey through 2024, through the whole portfolio.
Speaker Change: We continue to, in an instance like this, as we do an assessment of our current reserves.
Lee Smith: and then when we move it to not a cruel, you do specific reserves against the loan. So what Lee was kind of referencing was that we placed additional reserves against that loan. So we feel subject to getting appraisals back in is that we're adequately reserved on that loan for any action that we would take.
Lee Smith: I think just one other thing that I would add, outside of that loan, if you look at the credit trends, charge-offs are down, the provision was down, and if you look at classified assets as I mentioned in the prepared remarks, they were down 900 million quarter over quarter as well.
Thank you.
Speaker Change: Our next question will come from the line of Jared Shaw with Barclays. Please go ahead.
Hey, good morning.
Thank you. Thank you.
Speaker Change: I guess when we look at the projected growth in commercial lending and then tie that with the...
Speaker Change: The Guidance for Provision. How should we be thinking about the ratio of allowance as we go forward? I mean, is this going to be, you know, at this point we're going to continue to see reserve releasing and most of the provision is going to be for
Speaker Change: for that growth in the commercial portfolios or, you know, with their still, you know, potential for reserves as some of those multifamily loans that hit that 18 month brief eye window.
Speaker Change: Yeah, so a couple of questions there, Jared. First of all, you know, this quarter, as you use the moody data and you put it into your quantitative model, it did not reflect the reduction in interest rates.
Speaker Change: And so if interest rates, especially on the five year curve, you know, we're down any given day, 40 to 60 basis points.
Speaker Change: I do think that that will have some positive impact when we do the quantitative analysis in the second quarter.
Speaker Change: and the reserve build would be, the offset to that would be that is we add new C&I incrementally that we're reserving against those loans as they get boarded.
Yeah, I know just that if you look at it.
page 17 of the deck, you will see the...
Speaker Change: The Reserve or the Coverage against the C&I loans did increase quarter-over-quarter [inaudible]
Speaker Change: as a result of some of those new originations, but also the economic forecast that Josie.
Speaker Change: reference that was coming out of Moody's. But as we think about the overall provision, I think it's looking at the entire book, so it's factoring in what we're doing on the sea and eyesight from a growth point of view, but it's also taken into account what we expect to happen from a sea area multi-family point of view as well.
Speaker Change: and just remind you, Jared, we actually went through the entire portfolio in 2024.
Speaker Change: and virtually re-underwrote all the commercial real estate including the multi-family that it was marked to market, you know, so to speak from the standpoint of where we thought the underlying cash flows supported and the loan to value on the underlying assets.
Speaker Change: Okay, all right, thanks. And if I could just ask a follow-up on Capitol, you know, with the Capitol CT1 being so above that.
Speaker Change: Target Range, and then all the positive steps that you've outlined with tailwinds on margin and tailwinds on credit.
Speaker Change: What are your updated thoughts on maybe deploying some of that capital into a buyback, you know, maybe around here with the valuation being so far below tangible book?
Speaker Change: Yeah, you know, we think that as we start to stabilize and pay down the real estate, the offset to that will be deploying that capital into the C and I in private bank. And so I think our, you know,
Speaker Change: and we actually think we can turn it around and go back the other way now with the balance sheet and use that excess capital for growing the franchise.
Thanks.
Speaker Change: Our next question comes from the line of Ben Gerlinger with City. Please go ahead.
Hey, good morning. How are you guys?
Speaker Change: So you guys reference around a billion or so kind of aspirational run rate on CNI. It's kind of curious if you can dig into that a little bit. And I made a
Speaker Change: 75-plus, let me do a doubling amount in terms of hiring, so it's kind of a little in size of your segments or another pricing that says the market rate, but a billion is quite a bit more than I was expecting.
Speaker Change: from a C&I point of view, and we outline that on...
Speaker Change: H5. And this is coming from the 60 bankers that we recruited in the second half of 24. We've recruited another 15 to 20, just in the first quarter of this year. And we still intend to recruit another 60 to 70 throughout the remainder of this year.
Speaker Change: These bankers are very experienced. They come with a track record. They're coming from other.
Speaker Change: Big financial institutions, and they're typically originating that first loan within the first 90 days of arriving at Flagstar.
Speaker Change: and that's how we're seeing these numbers from a strategic point of view. We're sort of focused in two areas.
Specialty, Lending Vertical, so you heard Joseph mention. Thank you, Jon.
Speaker Change: Sports and Entertainment, but also oil and gas, renewables, energy, health care, are just some of the other national lending verticals that we've set up.
Speaker Change: C&I, Areas, within our footprint. So it's a two-fold approach. There's the national approach from a specialty lending point of view. And then there's a geographical approach, leveraging our brand name in the geographies that we operate. So, let's take a look at that.
Speaker Change: I mean, we're thrilled, obviously, with what we've accomplished in the first quarter, and we believe that we can maintain that and even grow it going forward. What I would tell you is, we also believe Q2 will be the...
Speaker Change: The turning point, and what I mean by that is, right now, even though we've been originating these new C&I loans, the C&I balances have been decreasing quarter-over-quarter as we've got the right size other legacy portfolios.
Speaker Change: Starting in the second quarter you'll start to see overall C&I balance is increasing so we're sort of making that pivot and you'll see an increasing C&I loan balance Q2 and going forward.
Deach, the top 12, and then...
Speaker Change: I have to take away from the successes you've guys have seen on the expense front because it seems like you've moved mountains quite a bit here but when you think about the back after this year, the remaining three quarters
Speaker Change: I may still have initiatives and plans. Is there anything to think about in terms of timing on additional cuts and or a cruise for CNI success that would work against that or should we think about it many year to get to the range that you guys provided? Thank you.
Speaker Change: Yeah, now here's what I would say on the cost reduction efforts and it's just been a tremendous effort by the entire organisation.
Speaker Change: there, and then some, and what I mean by that is I actually think right now.
Speaker Change: There's probably 25 to 30 million good guy from the bottom end of our range. We did not want to move our range this quarter. We obviously wanted to get another quarter under our belt, but the way things are trending on the expense side, I think we'll be what we're going into.
in terms of things that are still in process.
Speaker Change: as we mentioned last quarter there are some additional branch closures that will happen at the end of June .
about 23.
Speaker Change: the some private client locations that we are emerging and exiting in early July and then there will be some additional branch consolidation at the end of September . So obviously that's all factored into our numbers.
Speaker Change: The vast majority of what we were looking to accomplish has been accomplished, or is on the agenda to be accomplished. Okay, Ben, the other thing that I would add, which I think is really important,
Speaker Change: is, you know, these costs are net of investing $40 million in our risk governance infrastructure.
Speaker Change: what we're doing in the CNI group of effectively adding 120 people over a 12-month period.
Speaker Change: and then we have some pretty significant IT and operational initiatives.
Speaker Change: to drive costs down, but at the same time we're investing in our systems to finalize the combination.
of the entire bank now on to one platform. [inaudible]
Speaker Change: So those are things that are all kind of being laying the work and the foundation for that to get complete in 2025 so...
Speaker Change: You know, you can't, you know, are probably total expenses as Lee indicated, probably are somewhere around 7 to 750 million takeout, but we are making investments in the company in addition to taking those costs out.
Speaker Change: I would say we did get a lot of questions whether we were going to be able to meet those numbers and as Lee referenced, we feel really confident that not only are we going to meet those numbers but we can exceed those in 2025.
Gotcha, that's helpful, thank you.
Speaker Change: Our next question comes from the line of Manan Gosalia with Morgan Stanley . Please go ahead.
Manon Gosalia: Hi, good morning. Lee, I just wanted to follow up on your comments on CNI. How are you thinking about utilization of those 1 billion in new commitments each quarter? How quickly do you expect to see a balance sheet growth in CNI coming from those commitments?
Manon Gosalia: 760 has been funded, which indicates a pretty high utilisation rate.
Manon Gosalia: Legged into it a little more and it will ramp over time but again just sort of using Q1 as an example we've sort of seen about 75-76% of what was originated utilised.
Manon Gosalia: And our pricing model is pretty punitive to put commitments out that aren't being utilized, so that also spears the team.
Manon Gosalia: You know, to look at transactions that meet high credit quality standards, but at the same time have high utilization rates and you know one of the things you know that I would mention you know. [inaudible]
We feel really good about these growth numbers. [inaudible]
Manon Gosalia: But we also have less than 1% market share in kind of C&I. And so our ability to put these numbers forward, we may go from 1% to 3% by the end of 26. So it's not like we're gathering huge market share but there's a lot of market available for us to participate in.
Got it.
And then Joseph ...
Speaker Change: There are concerns by the economy slowing over the next 12 months.
Speaker Change: You've recently done a review and re-underwritten the entire lawnbuck and the credit
Speaker Change: Can you talk about how insulated Flagstar is from the concerns around tariffs and economic growth and
You think credit metrics can still improve from here? [inaudible]
Speaker Change: We did an analysis of the portfolio of the sectors that we thought would be impacted by terrorists.
Speaker Change: The autospace actually is having a pretty good quarter because people are kind of pre-bying automobiles, so...
Speaker Change: So as we now get into the individual credits that are makeup back you know that $2.8 billion we are not seeing you know obviously it's going to take time to see the impact of this.
Speaker Change: But the aggregate dollars are very minor for us, number one and number two. They seem to be in areas that won't have significance. The other thing that I would reference in that regard,
Speaker Change: You know, as we are looking at new opportunities, obviously one of the things that are being looked at hard in any new credit originations today is what is the tariff impact and what could it be to a particular company and we have passed on a number of opportunities. [inaudible]
Speaker Change: Where we thought, you know, like where somebody was manufacturing in China or Vietnam or other countries that, you know, this could be problematic in the future. It may not be today, but we've passed on a number of opportunities where we thought this needs to kind of stabilize before we would enter the opportunity. [inaudible]
Speaker Change: So I think we're also in a unique position that we're not starting with a big portfolio of stuff that could be impacted, and we can use that as part of our criteria in the credit not to write it.
Great, thank you.
Christopher Marinak: Our next question comes from the line at Christopher Marinac with Janie, please go ahead.
Christopher Marinak: Thanks, good morning, Lee. Can you tell us about the Warren conversion and how that stands and should we be thinking of a tangible book on a fully converted basis soon?
Christopher Marinak: We assume that it converts in Q4 of 2025. And so what that does is it does factor in to the earnings per share that you're seeing in the forecast. So that assumes...
the AFTER Q4 2025, the warrants have been exercised.
Christopher Marinak: but we have not included it in the TVV for share.
Number, because they haven't been exercised.
Christopher Marinak: if you see what I mean, but for the purposes of the earnings per share number because we hit profitability in Q4, we assume that they are exercised and they are included, the dilutive impact is included in the EPS number.
Speaker Change: Got you, and is there any material change in the number of shares but there's any about the warrants with the figure we have on the case still be somewhat accurate?
Speaker Change: Yeah, I think so, the way they work, obviously there is a, it depends where the stock is trading when they're exercised.
Speaker Change: As you know, there's a strike price and their net settled and so you know the delusive impact
Speaker Change: Increases as the stock price increases, but overall, you know, they're not incredibly dilutive, and what we've laid out in the K, I think, you know, it gets you what you need from an information point of view.
Speaker Change: Perfect. Thank you for that. And just a quick, critical question from a high level. When you look at overall frequency and severity in the book, whether it's multifamily or other parts of CRE, are those numbers kind of the same as you thought a quarter or two ago, or do you see those perhaps trending in a different direction? And somewhat better.
Speaker Change: A couple of comments that I would add is we're right in the season where we will be getting the updated financials from the borrowers.
Speaker Change: You know, last year we were in the mid 90% of borrowers who provided this updated financial, which was up substantially from the legacy bank.
Speaker Change: So we'll have a really good look into how 24 was here in the next 60 days.
Speaker Change: and clearly be able to talk about that in the second quarter.
Speaker Change: But for the most part, what we're seeing in the market and we see through our praisels is we've seen stabilization.
Speaker Change: Both in the multi-family and in the office while office is really, you know, a relatively immaterial number to us. If you think back to 24 that's really where a bunch of the big hits came as we moved out of, you know, some problem office.
Credits That We Had.
Lee Smith: So, you know, I think what I would say is right now is for the most part of you think about what Lee commented on.
Lee Smith: and then our charge-offs being down. I think it would lead you to indicate that we just don't have a lot of flow now into those categories from the portfolio. And I think that's a result of, you know, what we were doing forward-looking [inaudible]
Lee Smith: in the portfolio through 2024 that we were catching everything that was going to mature or price reset 18 months out.
Lee Smith: gave us a pretty long runway to be able to look at our credit exposure and each quarter we pick up another quarter in that kind of analysis.
Lee Smith: So, we just haven't seen really the deterioration at this point from new appraisals and new credits falling into that bucket.
Ciao
Lee Smith: And we do, you know, overall we do forecast, you know, continue to forecast that our NPAs will be down by year end. And we continue to see, you know, reductions in our special mention and substandard.
Lee Smith: Up to 115 million from 222 last quarter, I think is a very positive sign. The appraisals are coming in better than we were expecting, certainly better than the shock analysis that we have when we don't have appraisals. But the...
of the 800-plus million of payoffs.
Lee Smith: in the first quarter, 59 percent, we had them rated substandard, I think that is another good sign.
Lee Smith: and then when you look at that reduction in classified assets from 14.9 billion to 14 billion, as well as those payoffs, we did have 600 million of upgrades, and I think that's important to know as well, so as we get new information as...
Lee Smith: credits continue to pay, we get appraisals, we're seeing upgrades as well, so those are obviously all good indicators.
Lee Smith: We not only looked at the credit debt service coverage, but we also factored in that analysis market rate interest rates. So, if they were at 3.8, we reset them at 7 or 7.5 and under wrote those credits.
Great, thank you both very much, it was very helpful.
Okay, you're welcome.
Speaker Change: Our next question comes from the line of Chris McGratty with KBW, please go ahead.
Oh, great, good morning. [inaudible]
Speaker Change: Or Lee, the non-accural comment, I think on the January call, you said by the end of the year, down 30%. Obviously that I'm sure I didn't contemplate this quarter's move, but any degree of resolution, magnitude from these levels, and secondarily, the collateral on the non-accruals, was that the building? I assume that's the building itself, but just a little clearly there. Thanks.
Speaker Change: Chris Weiner was not factored into those numbers but we still are currently forecasting to go from like the 3.3 billion to around 2.7 billion by year in. So we do see that those numbers will continue to decline.
Speaker Change: and then your question on the collateral was that regarding the borrower that went on accrual during the quarter.
That's right, yes
and those who were fully collateralized probably by multi-family properties.
and then my follow-up, if I'm looking at slide.
Nine.
Speaker Change: The appreciate your comments on basically going to overachieve the cost days near term, but if I look at the kind of a medium term cadence of the expenses, there's still a pretty good list down by 2027 and a pretty big ramp up and call it fees, can you just give me a little bit more color on what's that next level of growth and next level of step down costs. Thanks. Yeah, so let me start with the on the cost side.
Um.
Speaker Change: There were actions that we've executed on that are behind us now in the first quarter that you're not seeing the full benefit of in the first quarter. You'll start to see the full benefit of those actions.
Speaker Change: in Q2-3-4. So you've kind of got that phenomenon, particularly around compensation and benefits.
Speaker Change: I think you're going to continue to see the FDIC expense come down as we further de-leverage the balance sheet and so you saw another reduction in Q1 versus Q4 as the impact of what we [inaudible]
Speaker Change: Q4, you got the full quarterly impact in Q1, and you're going to continue to see that as we move forward here as well. I mentioned that there are various real estate locations, so bank branches and PCG locations.
Speaker Change: that we will be combining and exiting in the second quarter and early in Q3 and then some additional branches that we're combining at the end of Q3.
Speaker Change: and then we've also been working on outsourcing, offsuring sort of certain back-office processes and functions. And again, some of those actions we execute it on.
Speaker Change: Recently and so you're not seeing the full benefit of those cost reductions in the Q1 actual run rate and so that will start to come through as we move through the year so. Thank you very much.
That's why we feel pretty good about-
Speaker Change: What we've accomplished today from a cost reduction point of view and why we feel good about where 2025 is going to come out from an overall NRE point of view. And then on the fees, Joseph mentioned we've just launched the subscription lending products.
Speaker Change: and we feel that there's a lot of pencil demand for that. That's going to help us from a viewpoint of you.
to a top serious sponsor.
Speaker Change: and it was a combined revolving credit facility term loan, delayed draw term loan and we got an upfront fee, structuring free, an admin agent fee and I think there's going to be more of those opportunities.
Speaker Change: We've continued to build out our Treasury management team and that's pretty much complete now and we feel pretty good.
Speaker Change: and so all of those are driving the increase in the fee income that we adjusted for in 2025.
Thank you very much.
Speaker Change: Our next question comes from the line of Ebrahim Poonawala with Bank of America. Please go ahead.
Speaker Change: Good morning. I did a phone call on the margin because I looked at the average of this curve and they expected the margin to go next year. That's an open 5. That kind of gets you to the NRI that you're getting to next year. So...
Speaker Change: Correct me if I'm wrong, it feels like a balance, it still has some shrinkage to go, so be in there.
Anjury, as it's too declining.
Speaker Change: Hey, Abraham, we're having a tough time hearing you. You're kind of cutting in and out, I apologize. So, I think you're asking about the margin going forward. Is that the question you asked? And the balance, I think you mentioned the balance she saw as well, Abraham.
Speaker Change: So, sorry about that, I'm not sure if it's any better now.
pixelate, Obeder,
Speaker Change: Yeah, so I'm going to send this to Joseph Otting, and he's going to answer some of these questions for us.
I'll be staying at the forum.
Do you want to believe it? No, we've lost you again. Yeah [inaudible]
Speaker Change: Abraham, do you want to try to come back in and see if that improves it because we can't understand the question?
Speaker Change: Our next question will come from the line of Casey Haire with Autonomous. Please go ahead.
Casey Hare: Thanks, good morning guys, can you hear me? Yeah, here you find.
Speaker Change: All right, great, so I'll ask you for him to spell a sheet question, so I think that's what he was getting at, but I think you outlined about between multi-family runoff and then paid out of borrowings and brokerage about eight billion of asset headwind obviously CNI is doing well and you have the ability to. [inaudible]
Speaker Change: Bill DeBond book, just wondering where does the balance sheet end this year, when does it start neck rowing?
Speaker Change: Yeah, yeah, got it. Good question. And I'm glad you asked it. So we end the year at around 96 billion.
So the balance sheet, this is total assets.
Speaker Change: with the balance sheet will be about 96 billion at the end of the year, and then just to, I'll give you the numbers, at the end of 2026.
Speaker Change: We expected to be around 102 billion and then at the end of 27 we expected to be around 111 billion so that's how I would model it but we end 25 at 96 billion. [inaudible]
I understood, great, thank you, and then...
Speaker Change: Slide five. I wanted to ask about the CNI originations. I hear you, I think you said, you know, you want to get to over a billion and you're certainly on your way there. Um,
Speaker Change: I'm wondering when you guys are fully staffed and you hire these eight-year-so bankers by the end of this year. What do you sit like fast for a year? Where, what is the C&I growth when you got the full team on the court? [inaudible]
Speaker Change: Yeah, so one clarification is we expect to get the the loan out standings up to a billion dollars a quarter going forward and then that continues to accelerate but Lee has the exact numbers kind of.
Speaker Change: Do you want to share with us? Yeah, sure. So that's exactly right. With the growth, as we think about that billion dollars, it's really that's that's outstanding.
rather than commitments.
Speaker Change: and I think we feel that by the time we are fully staffed,
Speaker Change: We're doing about a billion and a half a quarter in outstanding and just so everybody's aware when we talk about hiring these bankers they're not all account managers we're bringing in credit specialists. [inaudible]
Speaker Change: We're bringing in underwriters so that, you know, you're bringing in the entire team and so that's also embedded in that number of 70 to 80.
Thank you.
Speaker Change: Our next question comes from the line of Bernard BonGazighi with Deutsche Bank. Please go ahead.
Hey, guys, good morning.
Bernard Bongazzichi: Just on succession planning, Joseph, you know, in a recent filing, I know that you'd be staying on till March 2027.
Bernard Bongazzichi: and I think at a recent media article, I noted that after the three years, you'll be looking to move to share the role, so five years club, the week. Can you just confirm a factor in how does that sit within the time of transforming the business?
Bernard Bongazzichi: You know, really this comes down to being a board decision, you know what I mean, ultimately, you know, I clearly, you know, committed to the company for a five-year term, you know, in capacity, but I think...
Bernard Bongazzichi: from a succession planning as the board starts to look at that, you know, I think the guidance is that, you know, in 2027.
Bernard Bongazzichi: We'd be looking to transition the CEO role to another person and then I would stick around for a period of time if the board wants me to after that to help lead and manage the company as well.
Speaker Change: Okay, got it. And then maybe just in the follow up, Lee, with the balance she grossed numbers you gave.
Speaker Change: Just any thoughts on how you're thinking about growing the securities book?
Speaker Change: from here and any thoughts on the growth that you're trying to give out. How much of that is like, I guess, loans. I'm assuming in the outward years it's more, maybe in the recent short term it's a little bit more in security. So could you maybe just help give a little bit of a color on that?
Speaker Change: but in 25 and the remainder of this year, yeah, we're certainly looking to buy at least another $2 billion of securities with the excess cash.
Okay, great. Thanks for taking my questions.
Speaker Change: Our next question comes to the line of Matthew Breese with Stephen's. Please go ahead.
Hey, good morning.
Matthew Brees: Good morning. Hey, I was hoping we could first touch on, you know, C&I, but a different way. You'd mention in the release and you prepared remarks that there are some portions of the C&I book that are considered non-core. Could you just outline for us how much in the C&I book is non-core, what those areas are?
Matthew Brees: and then remind us over the next couple of years where you want the theory of multi-family books to be as a proportion of total ones.
Yeah, so if you go to a painstacks [inaudible]
Matthew Brees: Clearly, the first categories to specialize in industry and corporate banking is where we see really this significant growth.
Matthew Brees: and then the specialty finance, what we've really done in that space.
Matthew Brees: is our comfort level for single relationships. It's very similar to what we discovered a little bit into the CRE and multi-family. The whole levels, you know, at the legacy NYCB, were significantly larger than what our comfort level is, usually on a risk-graded five credit, which is kind of down the middle.
Matthew Brees: You know, from a credit quality, 75 million hold and for a credit that's just slightly at or below investment grade, we're at a hundred million. What was a lot in those portfolios and it was a strategy in the company was...
Matthew Brees: In a lot of instances, they were in the 150 to 250 range of commitments.
Matthew Brees: Comfort Zone for us. So, actually, in the specialty finance that was down roughly $180 million, we actually see that growing from that point forward. So, I wouldn't say that was non-core.
Matthew Brees: and then the similar story if you go from the second line from the bottom, the MSR and EBO lending is a very similar story. We had very large hold levels.
Matthew Brees: and we're reducing our exposures at the individual relationship level but we we did have one payoff in that space of a large relationship but the rest.
Matthew Brees: We do think we'll have stabilization kind of going forward in that regard. And then the two other in the middle Flagstar Financial Leasing and Flagstar Public Funding, those were really five or six businesses in that space.
Matthew Brees: We've kind of stopped non-relationship activities there. We were just buying paper but had no relationships with the barbers.
Matthew Brees: and so we do also see those going positive in the second and the third quarter. So I wouldn't call them none core as I would say we were reducing what we thought was the risk appetite by whole levels.
Speaker Change: Great. Okay, very helpful. And then my last one is just a little bit of a different question, but there's been a recent discussion across the banking industry around.
Speaker Change: New York community once had its toe dipped in these waters and I'm curious if you have any appetite to pursue that again and pursue the public road via those those verticals. [inaudible]
Speaker Change: Yeah, I don't see us, you know, forming a specialty group or, you know, going after that aggressively that particular space. I mean, clearly there are some companies that I would put under the general corporate banking that, you know, we would consider if given the opportunity but I don't see that being one of the specialty businesses within the company.
Speaker Change: I'll leave it there. Thank you. Okay, thank you very much
Speaker Change: Our next question comes from the line of Anthony Elian with JP Morgan. Please go ahead.
Hi everyone, can you hear me okay?
Speaker Change: Yeah, we're here to find out. Good morning, Anthony. Joseph, morning. Joseph, I know you said you're starting to receive updated financials from borrowers for 2024, but can you share with us any early reads you've seen so far. And I guess what I'm really trying to get is specifically for the 19 billion or so loans you have in rent regulated in New York, are you seeing improvements or deterioration of NOI?
Speaker Change: Well, you know, it's a little early to tell on that question because we haven't received the 24 financial shot, but you know, 23 was really a rough period in the rent regulated because, you know, the increases were restricted.
Speaker Change: Occupancy is very high in those buildings, generally in the 98, 99 percent, so it's like it's not like you're going to fill up a bunch of extra space in Generate Cashflow.
Speaker Change: and really where they got, you know, impacted was on the expense. You know, in most instances insurance went up 30 to 40 percent. You know, age back and maintenance and things like that were up 40 percent and labor was up 30 percent. So I think I'm hopeful that stabilization on the expense side over the last 12 months.
Speaker Change: Will be positive in the analyze in that particular space. So we do see investors re-entering in demand for
Speaker Change: Buying loans for us in that space. So I think that's an indication that investors are starting to feel more positive about the rate regulated now.
Speaker Change: and there's been some, you know, large projects that have gotten tax abatement, you know, that the legislation doesn't, without, you know, more change in the direction, I don't think we're going to see legislative changes, but you have seen tools that are being used to be able to make those projects more economic by, you know, providing tax abatement, but within an agreement that owners and investors will dedicate a certain amount back into the projects from a cap expert. [inaudible]
Thank you. Thank you.
Thank you, Ethan.
Speaker Change: Credit, or increases around specific credit. So those were the two drivers of that increase in the C&R Non-Special Epolyn and Sloan Arton.
Thank you.
Speaker Change: Thank you very much. Our next question comes from the line of Steve Moss with Raymond James. Please go ahead.
Good morning. Thanks, Pete.
and the rest of us. Thank you, everybody.
Speaker Change: on the scene outside, Joseph, just kind of curious here, what kind of spreads you're getting on the New CNI loans? You're originating here and if there's any deposit coming over with those
Joseph Otting: The spreads are ranging from like 225 to 275 over sulfur, so the spreads have held up pretty well in the sea and ice, even in light of a lot of competition.
Joseph Otting: and then what you generally see in those relationships, we are getting deposits, but most of that transitions in over a period of time.
Speaker Change: But where we have seen significant opportunities or results is really on the fee site where Lee mentioned we're now starting to get you know senior leadership roles in some of these credits because the people who join us have those roles at their prior institutions.
Speaker Change: But, you know, very few opportunities are we willing to do where it's a credit-only relationship?
Speaker Change: and most of those we either are offering 401K or Treasury Management or Interstrate Derivative Products.
Speaker Change: We have a broker dealer so we can get bond economic. So our pricing model does not work very effective for where we're not getting non-interest income or deposits from a yield perspective. Thank you.
Speaker Change: And so now we're using a new pricing model and the company that will really drive people to have to get those sales in addition to the credit sales on the front end.
Okay.
Speaker Change: Great, that's, that's really helpful. And then in terms of just the funding side equation, just curious how you guys are thinking about the step down here over the course of the year and funding costs. You know, I see your CD rates are generally marketed around the Fed funds rate. And you have some other promotional products at a similar pace, kind of like wondering, you know, at what point you think maybe you could feel a bit of separation between the rates you're offering and Fed funds as the year goes on. [inaudible]
coming in.
Speaker Change: and then we've been actively managing our other interest-bearing accounts, whether those be savings, interest-bearing DDAs, money market, again I mentioned in the prepared remarks, quarter over quarter.
Speaker Change: Interest Bear in Deposit Costs with Down 34 Basis Points. So it's something that we have meetings
Speaker Change: and we are looking at it and strategizing all the time, but we feel good about hitting the targets that we have in our forecast.
Speaker Change: Okay, great. And one last one for me, just in terms of the multi-family and commercial estate books
Speaker Change: Just curious, you know, it kind of seems like there's going to be some stabilization maybe here late this year based on the asset size of the bank. You guys are projecting, just kind of curious if that's a fair assumption or should we expect further runoff in those books throughout 2021-26.
Yeah, I think the
Speaker Change: You should expect further to run off, because as we've said before, we're trying to create a diversified balance sheet, a third, a third, a third, and we probably won't quite get to with third in consumer, but a third C&I, third CRE.
Speaker Change: and a third consumer. And so, you know, what that means is we really want to try and get that CRE book, which includes multi-family to...
Lee Smith: You know, 35 billion, 35 billion, and so you will continue to see runoff throughout the three-year period as it relates to multi-family. And just as a reminder, you know, we've been running $800 to a billion that Lee referenced.
Lee Smith: that our desire on a maturing credit is that they would take that credit to another financial institution. And, you know, fortunately for us, you know, roughly half of those are substandard credits. And so, we've continued to see that trendline.
Speaker Change: Okay, great. Thank you very much. I appreciate all the power. Thank you. Welcome.
John Armstrong: Our next question comes from the line of Jon Arfstrom with RBC. Please go ahead. Thanks, good morning.
Lee Smith: Hi, Jon. Hey, Lee on slide 13, just kind of a follow-up. What do you think that mix looks like in a year, and maybe when you get to your 20-27 goals?
This is the Depondent Next.
Lee Smith: Yeah, right, so I think you were obviously going to continue to pay down broken deposits, so you will see a reduction, more reduction in broken deposits, and I think you'll see this increase.
Lee Smith: Our Retail and Private Bank deposits and that's kind of how we're thinking about it. We're looking to build core deposits.
and further reduce the wholesale borrowing and reliance on.
Lee Smith: Broker Deposits and Flub Advances, so I think that's what you can expect and on the deposit side, you know, Joseph just made this point as we leg into these new C&I relationships, that's another opportunity for us to bring in core deposits. [inaudible]
Lee Smith: as well and build that deep relationship with those seeing eye customers. [inaudible]
Lee Smith: Yeah, the river deposits now are down two point, you know, we even further in the month of April , we're down, I think $2.2 billion here to date. So that's really a big opportunity for us, you know, to
Yeah, okay.
Joseph Otting: Joseph, one for you, kind of a call it a due diligence or check the box question, but what do you guys work in on now in terms of the non-client face and activities? Do you feel like things are fully buttoned up from a risk and regulatory point of view or are there other hurdles or objectives you need to make?
Joseph Otting: We've come a long way in the company. From the time we got here, the company is a category for bank.
Joseph Otting: and neither of the legacy banks had the risk governance and infrastructure along those lines to be a bank of that size.
Joseph Otting: I couldn't be more pleased in the direction and the rails that we now have built.
Joseph Otting: and I think from now you know to the end of really 25 and into 26 is we're going to feel very comfortable that that ourselves and our regulators are going to feel good about you know the risk governance structure that we have kind of put in place.
Joseph Otting: and I think, you know, the technology side is going to be very helpful. We're investing in really...
Joseph Otting: Creating a platform. Today, we're sitting here with six, you know, data centers.
Joseph Otting: that were never consolidated in all those actions that are kind of pin up. We're going to get done here in 2025.
Joseph Otting: In addition to, you know, we're investing in an organization wide-actimize, we're promoting a new global, you know, platform and, you know, so all of that gets done this year and it's that really stuff that should have been done in 23.
Okay, thank you very much. Appreciate it. Welcome.
Joseph Otting: Our next question comes from the line of Nick Holoco with UBS. Please go ahead.
Hi, good morning.
Thank you. Thank you.
Casey Hare: Morning. Maybe just a first question for Lee, you know, I know you and a follow-up on deposits. I know you gave a lot of color on the broker deposit mix and the CD maturities, but maybe you could just touch on the NIB trend that you had in the quarter and how you're thinking about that over the near term. And if by chance you have it potentially the the spot rate on the interest bearing deposits or the net interest margin at the end of the quarter. Thank you very much.
but that was offset by increases in AB.
Um...
Casey Hare: Commercial deposits, they were up about $152,000,000, so by and large they sort of...
netted each other off. [inaudible]
Casey Hare: The other part that netted itself out was we had the last loans transfer as a result of the mortgage sale that we executed on in Q4 of 24, so there were about a billion dollars of mortgage escrowse that left
But...
We subsequently got an increase.
Casey Hare: and that was just a buildup of T&I and other escrosse. That pretty much offset itself as well. And so the biggest driver of the change quarter over quarter was the paydown of those broken deposits of 1.9
Speaker Change: Got it. Thank you. And then maybe just one follow up on the single borrower, non accrual in the quarter. You know, I know you give color on like the average loan size in your multifamily book around eight and a half million on average. Thank you very much.
Speaker Change: If I was to look at the loan book on a per-barware basis rather than a per-lone, how materially different would that be? Do you have a substantial number of borrowers with similarly large exposures above the $500 million range? Thank you.
Speaker Change: Yeah, again, we see this as a very sort of unique idiosyncratic situation. Yeah, and we're not referencing 12 to 20 hours over 500 million in size. Correct, yeah. So, yeah.
Oh.
Speaker Change: But I would also say, you know, these aren't like huge loans to one piece of property. These are 90 loans that represent the $500 million, so you can run the math on those. But so there are a lot of different properties with individual loans.
Understood. Thank you for that.
Speaker Change: and I will now turn the call back over to Joseph Otting for any closing remarks.
Joseph Otting: Okay, thank you very much, very much appreciate your interest in the company [inaudible]
Speaker Change: We couldn't be more pleased the journey we're on. We think we've made incredible progress over the last 12 months.
Joseph Otting: We think there'll be a significant amount of progress in 2025. We're going to look like a completely different company when we end the year.
Joseph Otting: as we indicated, all indications in our forecast and analysis is that we will return to profitability in the fourth quarter. We feel our risk elements of the company are under control, and we're really excited about what we can grow and develop the company into a top performing regional bank. And, uh...
Joseph Otting: So we look forward to continue to have dialogue with each of you, you know, on the journey of the company and open day any dialogue and discussions that you have and appreciate everybody getting up on a Friday morning and be part of the call.
Joseph Otting: This does conclude today's call. Thank you all for joining. You may now disconnect.