is seeing promisingreturns on its investment in new initiatives, and management promised to continuelooking for more opportunities to expand banking relationships, according to commentsmade during the first-quarter earnings conference call April 26.
The thriftcontinued to invest in its new business initiatives such as builder financing, aswell as bolstering existing operations like retail and direct-to-consumer mortgageoriginations. The teams have already approved $200 million in new facilities in2016, the first of which was just funded, said COO Lee Smith. The builder financebusiness offers lines of credit that support land development or home constructionon "relatively large developments" to developers, said CFO James Ciroli.He added that Flagstar believes it can obtain a fair portion of the end loans, butthat the builder finance loans are not long-term credits. The financing carriesa spread of around 300 to 400 basis points, depending on the interest rates andfees.
Flagstaralso was able to derisk its balance sheet through the sale of $96 million in higher-riskassets. Nonperforming loans hit $53 million, the lowest level in more than 15 years.
The thriftexpects noninterest expenses of between $140 million and $145 million in the secondquarter in part because of the 100 distributed retail loan officers and sales assistantsthat have either been hired or are in the recruitment pipeline. The efficiency ratioshould stay in the low- to mid-70s, but Smith remained confident that it could achieveits long-term goal of a ratio in the mid-60s.
The thriftis also making headway on cleaning up legacy problems including its outstandingTARP-issued shares and enforcement action. Management said they are nearing a refinancingof outstanding TARP that could occur within the next 90 days, but President andCEO Alessandro DiNello said management could not be sure on the timing of a transaction.Separately, he said the thrift is making progress toward the release of its OCCconsent order through improvements in its risk and compliance infrastructure.
Flagstarexecutives are also "actively looking" at strategic opportunities forthe company to expand its banking relationships, strengthen its mortgage originationcapabilities across channels and grow its subservicing business, DiNello said.
The thriftreported first-quarter 2016 net income of $39 million, or 54 cents per share, ascompared to $33 million in the fourth quarter of 2015, or 44 cents per share, and$32 million in the first quarter of 2015, or 43 cents per share.