Flagstar Bancorp Inc. (NYSE:FBC) Q2 2020 Earnings Conference Call - Final Transcript

Jul 28, 2020 • 11:00 am ET

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Flagstar Bancorp Inc. (NYSE:FBC) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the Flagstar Bank Second Quarter 2020 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the call over to Ken Schellenberg. Please go ahead, sir.

Executive
Kenneth Schellenberg

Thank you and good morning. Welcome to the Flagstar second quarter 2020 earnings call. Before we begin, I would like to mention that our second quarter earnings release and presentation are available on our website at flagstar.com.

I would also like to remind you that any forward-looking statements made during today's call are subject to risks and uncertainties. Factors that could materially change our current forward-looking assumptions are described on Slide 2 of today's presentation, in our press release and in our 2019 Form 10-K and subsequent reports on file with the SEC.

We are also discussing GAAP and non-GAAP financial measures, which are described in our earnings release and in the presentation, we made available for this earnings call. You should refer to these documents as part of this call.

With that, I'd like to now turn the call over to Sandro DiNello, our President and Chief Executive Officer.

Executive
Alessandro P. DiNello

Thanks, Ken, and good morning to everyone listening in. I hope all of you and your loved ones have been able to stay safe and healthy.

I'm joined this morning by Jim Ciroli, our Chief Financial Officer; Lee Smith, our Chief Operating Officer and Steve Figliuolo, our Chief Risk Officer.

I'm going to start the call by providing a high level view of our performance for the quarter, then I'll turn the call over to Jim for details on our financial results. Lee will then follow with a review of our business segments and strategic initiatives, and then we'll open the line for your questions.

Well, it was an absolutely fantastic quarter for Flagstar. In my opinion, the best in the company's history. Not only did we report outstanding earnings far exceeding anyone's estimates, but we continue to build a fortress balance sheet. We've talked a number of times about how our results are validating the earnings power of the business model we've built starting in 2013. There have been quarters when mortgage results fell off when banking returns a lag, when interest rates soared and when they slumped, and still we produced strong returns quarter-after-quarter. The knock-on Flagstar by many has been a mortgage business. It's too much of our revenue. It has regulatory risk. It's too volatile. I think we've laid those concerns to rest. Not that long ago the mortgage business was challenging, as challenging as it has ever been, and the rest of the company carried us. Now we're in a recession and the mortgage business is off the charts.

But that's not the most important story of the quarter. The most important story is the expansion of our net interest margin. Yes. Expansion. How did we do it? First and foremost, the yield on our warehouse portfolio held up well relative to the decrease in benchmark rates quarter-over-quarter. Thanks to those