Flagstar Bancorp, Inc. (FBC)

Q2 2010 Earnings Call

July 28, 2010 11:00 am ET


Joseph Campanelli - Chairman and CEO

Paul Borja - CFO

Matt Kerin - EVP and Managing Director - Corporate Specialities of the Company and the Bank

Matt Roslin - EVP of Company and Bank, CLO and CAO


Brad Milsaps - Sandler O'Neill

Paul Miller - FBR Capital Markets

Bose George - KBW

Bryce McLoughlin - Private Investor

Zachary Prenske - Coyote Capital



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Previous Statements by FBC
» Flagstar Bancorp, Inc. Q1 2010 Earnings Call Transcript
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» Flagstar Bancorp, Inc. Q3 2009 Earnings Call Transcript

Good morning. My name is Tiffany and I will be your conference operator today. At this time, I would like to welcome everyone to the Flagstar Bank second quarter investor relations conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions) Thank you. I would now like to turn the conference over to Paul Borja.

Paul Borja

Thank you. Good morning. I would like to welcome you to our second quarter 2010 earnings call. My name is Paul Borja and I am the Chief Financial Officer of Flagstar Bank. Before we begin our comments, let me remind you about a few things that this presentation does contain some forward-looking statements regarding both our financial condition and our financial results and that these statements involves certain risks that may cause actual results in the future to be different from our current expectations. These factors include among other things changes in economic conditions, changes in interest rates, competitor pressures within the financial services industry and legislative or regulatory requirements that may affect our businesses. For additional factors, we urge you to please review our press release and SEC documents, as well as the legal disclaimer on page 2 of our slides that we have posted on our Investor Relations website for this speech.

I would like to now turn the call over to Joseph Campanelli, our Chairman and Chief Executive officer.

Joseph Campanelli

Thank you Paul and good morning everyone, and thanks for joining us for this call. I would like to also welcome you to our second quarter 2010’s earning call. We will be getting into the quarterly financial results in just a few minutes, but first, I would like to take a moment and talk about where we stand overall and what we have accomplished relative to the goals we laid out in prior quarters.

Today, Flagstar Bank continues to progress on our transformation initiatives. Our transformation leverages are established position as a leader in the residential mortgage business with the super community bank model that is at the foundation of our diversification plan. Since joining Flagstar around nine months ago, we established this as one of primary goals to maximize the value of the Bank’s entire franchise. And I am happy to say we are well on our way to achieving that goal. We sharpened the focus on our banking relationships, growing core deposits and placed the heavy emphasis on growing transaction accounts.

Our new enhanced retail strategy has already shown early signs of increased productivity to account acquisitions and cross-sell activity. Our new open architecture banking platform has proven to be everything we thought it would be. Account opening time has been reduced from approximately 30 minutes to under 10 minutes. It gives this ability to view the entire customer profile at the point of sale, improving cross-selling efforts in service quality.

Our customer satisfaction level was ranked the best in the five states, North Central Region in the United States, as ranked by J.D. Power and Associates for 2010. Overall, we rank number seven nationwide. We also rank number one in the country relative to branch appearance and branch customer experience, one of the key drivers to growing branch revenues and building a strong brand. Delivering a premium retail banking experience is important to Flagstar as it distinguishes our self in the marketplace. It also represents a very attractive opportunity as we position ourselves for growth for the branch network and compassing more than 3 million households.

In addition, there were over $145 billion in deposits within a 2 mile radius of the Flagstar branch, which provides a significant opportunity for us. We are also making significant progress in rolling out a new commercial banking platform that will allow us to be particularly responsive for the needs of small businesses and little market customers.

There are over 500,000 small businesses within a 5 mile radius of our existing branch network. Most of these do not currently have a significant relationship with Flagstar, so there is a tremendous potential for growth in this market segment. As our core deposits and revenues are growing, we continue to be disciplined in managing our expenses. Through the first six months of 2010, we have identified and implemented $16 million in cost savings to improve the efficiency in operations. We saw an 8% improvement in our efficiency ratio from the prior quarter, as we continue to work towards moving that ratio more in line with that of our peers.

As we have said in the past that folks across all operations is that we will constantly pursue ways to do things better, faster and cheaper without compromising the customer experience.

Let me take a moment to talk about capital and asset quality. We spent considerable amount of time and energy focusing on our legacy balance sheet. Our capital position continues to be strong with our Tier 1 capital ratio at the end of the second quarter at 9.24% and our total risk base capital ratio at 17.2%. During the second quarter, we experienced some positive developments in improving are asset quality. Total delinquent loans decreased by 14% on a shrinking balance sheet. Our ratio of non-performing assets or total assets fell from 9.3% to 9.1%.

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