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Flagstar Bancorp Inc (NYSE:FBC)
Q4 2020 Earnings Call
Jan 21, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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

At this time, I would like to turn the conference over to Ken Schellenberg. Please go ahead, sir.

Kenneth Schellenberg -- Vice President of Investor Relations

Thank you, Ryan, and good morning. Welcome to the Flagstar fourth quarter 2020 earnings call. Before we begin, I would like to mention that our fourth 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 uncertainty.

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.

Alessandro P. DiNello -- President and Chief Executive Officer

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 through these most unusual times. I'm joined this morning by Jim Ciroli, our Chief Financial Officer; Lee Smith, our President of Mortgage; and Reggie Davis, our President of Banking. I'm going to start by providing a high level view of our performance for the quarter and the year, then I'll turn the call over to Jim for details on our financial results. Reggie will file with an update on the Community Bank; then Lee will handle the Mortgage segment, including Servicing, and then we'll open up the line for questions.

2020 brought many challenges and few companies ended the year stronger when they started it. But Flagstar, it's the opposite. We kept getting better throughout the year as we adapted to a new normal and finished the year extremely strong. This is a testament to how we built our business model, to have diverse revenue streams and a flexible balance sheet that provides us optionality and less volatile earnings during change in economic environments.

You recall in 2018, the mortgage business was challenging, where we said, grew earnings as the rest of the company stepped up to contribute. Then in 2019, declining interest rates put pressure on our spread income, but we were able to temper this by capitalizing unfavorable conditions in the mortgage market and was carried into 2020. Today we are looking at an exceptionally strong fourth quarter, shaping up where I consider to be the most successful year in our history.

As reported, we posted net income of $154 million, or $2.83 per share, but a phenomenal 183% from the same quarter last year. For the fourth quarter, we achieved net income of $538 million, or $9.52 per diluted share, topping the result for the full year 2019 by 151%. In fact, our earnings of this quarter alone are roughly three quarters of what we earned in all of 2019.

Mortgage continue to lead the way in the fourth quarter, as it has for most of the year, but the contributions from our banking and servicing businesses should not be overlooked. Make sure we believe the relationships with Fed and [indecipherable] strengthened through adversity. It's going to be true in our banking business, if their team focused all year on supporting our borrowers and helping them navigate the challenging conditions brought on by the pandemic.

We want our borrowers to remember that we stood by them every step of the way. It's times of adversity that built the kind of long lasting relationships we want to be our hallmark. At the same time, banking produced steady results, again led by the warehouse business, which is now the third largest in the nation.

On to mortgage, what an incredible year. The mortgage team delivered amazing results throughout the year, as they took advantage of an extraordinary mortgage market, while maintaining pricing and expense discipline. As always we managed the volume to maintain industry-leading service levels, while producing margin and revenue, we haven't seen in a very long time. And as servicing business kept delivering consistent results, supporting our mortgage business, providing efficient funding, adding fee income and keeping the number of loan service or sub-service steady, even in the face of historically high payoffs related to the robust refinance market.

We couldn't be more pleased with how we ended the year in the many milestones we achieved as well as to which was the investment grade rating for Moody's. This further validates the strength of our balance sheet and the earnings power of the business model. It has been a long and winding road, but I believe we are a very special company with a very bright future.

We move into 2021 with a state of net interest margin, the power generates strong non-interest income and a fortress balance sheet. We are ready to take on, whatever 2021 throws our way.

With that, let me now turn it over to Jim.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Thanks, Sandro. Turning to Slide 6. Net income this quarter was $154 million, or $2.83 per share. This compared to $222 million, or $3.88 per share last quarter. The decrease on a linked quarter basis was largely due to the extraordinary levels of gain on sale revenue last quarter. An increase in net interest income and a lower credit provision this quarter, partially offset the lower mortgage revenue. For the year, we had net income of $538 million, or $9.52 per share compared to $218 million, or $3.80 per share that we are into 2019. Current year earnings represent 2% return on assets, and a 28% return on equity.

Diving deeper into this quarter's performance, our pre-tax pre-provision earnings were $207 million, compared to $327 million last quarter. Net interest income increased $9 million, or 5% as average earning assets grew $1.4 billion, while the net interest margin was flat at 2.78%. Excluding loans with government guarantees that have not been repurchased, the net interest margin actually increased 4 basis points. This performance was primarily driven by the strength of our warehouse business that has rate floors in place to protect from margin compression in our core deposits, which benefited from higher custodial balances and also from the maturity of higher cost CDs and the expiration of promotional rates on savings accounts. We will review these numbers in a couple of slides.

Mortgage revenues were $232 million, a decrease of $126 million compared to the very strong number we reported last quarter. During the quarter, we saw gain-on-sale margins decreased from last quarter's record levels. Asset quality remains strong. Net charge-offs were 4 basis points, early stage delinquencies were only 22 basis points of total loans. Nonperforming loans were $57 million, up $12 million as a result of two commercial borrowers being put on nonaccrual status during the quarter. Our allowances for credit losses remained flat to prior quarter at $280 million, and our coverage ratio, excluding warehouse, increased to 3.2% from 3.1% at the end of the third quarter. We'll provide more details when we get to the asset quality slide and take a deeper dive in to CECL.

Capital also remained solid. Total risk-based capital was 11.9% at December 31. Our CET1 ratio was 9.1%, and our Tier 1 leverage ratio was 7.7%. We repurchased $150 million of stock, which caused our capital ratios decline. This was more than offset by our earnings and total assets grew $1.6 billion causing our CET1 and Tier 1 leverage ratios to decline slightly. Total risk-based capital increased due to the subordinated debt we issued during the quarter to fund the stock buyback. Finally, we continued to demonstrate significant capital generation with growth in our tangible book value per share to $38.80 at year-end, up $3.20 from September 30 and $10.23 from one year ago, a 36% increase.

So let's turn to Slide 7, and dive deeper into the income statement. Net interest income increased $9 million to $189 million this quarter, up 5% from last quarter. Average earning assets grew $1.4 billion led by warehouse lending. Deposit costs came down 15 basis points, while average retail banking and customer deposit balances increased $0.3 billion to $1.2 billion, respectively. We'll dive deeper into net interest income and our interest rate position on the next slide. Non-interest income decreased $115 million, to $337 million due to lower mortgage revenues and non-interest expense was $319 million, up $14 million from the prior quarter.

Finally, our effective tax rate was 24.8% this quarter. This is the result of $2 million in additional state level taxes that resulted from MatlinPatterson's exit and certain non-deductible expenses, including FDIC insurance and incentive compensation. We expect that the effective tax rate in 2021 will be approximately 23%.

Turning to Slide 8, average earning assets increased $1.4 billion from last quarter. This resulted from a $1.3 billion increase in warehouse loans and a $0.4 billion increase in the loans with government guarantees that have not been repurchased. The increase in warehouse loans resulted from continued success in bringing on new customers. Declines in securities and mortgage loans held for investment were due to faster prepayments and partially offset the balance sheet growth. C&I balances also declined by $200 million, primarily driven by the full quarter impact of the sale of the PPP loan portfolio in the third quarter.

While the balance of the loans with government guarantees peaked at the end of last quarter, the balance declined only slightly throughout the fourth quarter resulting in the average balance increase. We expect to see balances gradually decline throughout 2021. As we've stated previously, we do not believe there is significant downside to holding these loans, either by buying them, or through this accounting gross up. If we were to repurchase these loans, we can pledge the loans to the FHLB and there are 20% risk-weighted asset. Further if we do repurchase the loans, we could resell those at a later date, which is attractive for us, and they remain government guaranteed.

Average deposits increased $1.5 billion from last quarter. Custodial deposits drove $1.2 billion of this increase. We also saw growth of $311 million in DDA, and savings account balances, a 5% increase from last quarter and a $188 million seasonal increase in government deposits. Overall, we managed deposit costs lower by 15 basis points, as deposits continued to reprice into the new curve environment providing support for our net interest margin expansion.

We continue to believe that our interest rate risk position is in a good place, due to the actions we've taken in this lower interest rate environment. We feel that we can protect our net interest income and net interest margin and believe that our net interest margin should be relatively flat to where it's been the past three quarters. There are interest rate floors in place on a large portion of our commercial loan book and these floors help protect us against further margin compression. The actions we took earlier this year to lock in $2 billion of lower rates funding remains in place.

While this has made us more asset sensitive in our structural balance sheet, our mortgage origination business is naturally liability sensitive. So we believe the combination positions us well for future success regardless of where rates are. We continue to have a strong liquidity position driven by the strength of our deposit base and access to multiple sources of liquidity both on balance sheet with our high-quality securities portfolio and off balance sheet with our undrawn FHLB facilities. At December 31, we had ready liquidity of $4.5 billion, not including the ample access we have to borrow with the Fed discount window.

Let's now turn to Slide 9, which details our non-interest income and non-interest expenses. Non-interest income decreased $115 million, due to the extraordinary levels of mortgage revenue in the prior quarter. Our gain on sale revenue of $232 million represented a decrease of $114 million, fallout adjusted locks decreased 20% to $12.0 billion, and the gain on sale margin was 193 basis points. Channel margins continue to come down gradually and Lee will provide more insight in the gain on sale revenues later.

The net return on mortgage servicing rights declined $12 million from the prior quarter, prepayments continue to be elevated resulting in higher run off. The capitalization of our MSRs remain relatively flat at 86 basis points in UPB at the end of the quarter, up only 1 basis point from the prior quarter end. We would observe that the MSR market continues to show signs of improvement as shown with the bulk and flow sales that we executed during the quarter.

Non-interest expense increased to $319 million for the third quarter, compared to $305 million last quarter, primarily reflecting a $7 million loss recognized on the early extinguishment of our senior notes, and $2 million of extra charitable contributions we made to Flagstar Foundation, in support of its efforts to help those in greatest need in the communities we serve. Both of these items will not recur next quarter. We saw a $7 million increase in mortgage expenses, which was driven by efforts to expand capacity along with the higher retail channel mix. Lee will provide more insight into mortgage expenses later. We expect non-interest expense of $295 million to $305 million, and an efficiency ratio in the low 60s for the first quarter of 2021.

So let's now turn to asset quality on Slide 10. Credit quality in the loan portfolio remained strong. Early stage delinquencies continued to be relatively low as early stage consumer loan delinquencies as of December 31 were flat, and early stage commercial loan delinquencies increased driven by one commercial loan that is beyond its maturity date, which we haven't renewed yet, but which remains current with respect to interest payments. Total early stage delinquencies were $36 million at December 31, or only 22 basis points of total loans held for investment. Commercial deferrals were only $22 million at December 31.

We continue to be pleased with how well the portfolio is holding up, despite what the economy has done this past year. Non-performing loans ticked up slightly as we added two small commercial credits to non-accrual status. Our allowances for credit losses of $280 million covered 1.7% of total HFI loans, excluding warehouse loans from the denominator given their relatively clean credit loss history and considering that substantially all of these loans are collateralized with agency or government-backed loans, our coverage ratio stands among the best in the industry at 3.2%.

On Slide 11, we can see that we ended the quarter with $280 million of allowances for credit losses, consisting of $252 million of allowance for loan losses and $28 million in the reserve for unfunded loan commitments. As we did last quarter, we used three different Moody's forecasts of the next two years to guide our allowance level. An S1 growth forecast weighted at 30%, a baseline forecast weighted at 40%, and an S3 adverse forecast weighted at 30%. All forecasts used the December release.

The resulting composite forecast for this quarter was slightly better than the composite forecast used last quarter. Unemployment increases only slightly in 2021, and begins recovering in 2022. GDP recovers slightly by the end of the year from current levels. It does not return to near pre-COVID levels, until 2024. HPI decreases 1% throughout 2021. Those are all positive economic signs. We continue to be cautious and our confidence about the recovery, until we see more evidence that the recovery will sustain. Accordingly, we have qualitative reserves of $77 million, primarily in our commercial real estate and C&I portfolios guided by the seasonal allowance model output using the Moody's adverse scenarios to provide coverage for industries and customers, but we believe could be more exposed to the stressful conditions in our forecast.

We feel very comfortable about the strength of the credit in the portfolio, but feel will be difficult to provide future guidance. We've provided a portfolio by portfolio breakdown of the resulting ACL coverage ratios in our appendix. On Slide 12, we've updated our exposure to those industries that we believe are more likely to be most impacted. In total, we have $1.0 billion of outstanding loans in this category, representing 6% of our total loan portfolio. It's interesting to note, we have almost no loans in deferral in these portfolios today.

In our commercial and industrial loan portfolio, the COVID impacted loans totaled $0.3 billion. You can see that the exposure here is relatively low, especially if there are no deferrals and only one $10 million loans classified as non-performing. We have no oil and gas exposure.

In our commercial real estate portfolio, we have $0.7 billion outstanding in the areas most impacted by COVID, including commercial real estate loans secured with hotels, retail properties and senior housing. Of the loans in this category, our average pre-COVID LTV was 55%, and our average debt service coverage was 1.6 times. We still don't have any loans in these portfolios that we believe will default. While we believe that we will have losses, we continue to see strong borrower support across the portfolio. We feel good about our credit risk in this portfolio as we are starting from a position of strength from our carefulness about who we lend to, to the disciplined underwriting of those credits, and the pre-COVID LTVs and debt service coverage ratios in that CRE portfolio.

Turning to Slide 13, our capital ratios remained solid and nicely above our stress buffers. At December 31, our total risk-based capital was 11.9%, our CET1 ratio was 9.1%, and our Tier 1 leverage ratio was 7.7%. As I mentioned before, we repurchased $150 million of stock, which caused our capital ratios to decline. This was more than offset by our earnings and total assets grew $1.6 billion causing our CET1 and Tier 1 leverage ratios to decline slightly. The total risk-based capital increased as a result of the subordinated debt we issued during the quarter to fund the stock buyback. As we pointed out with our warehouse loan portfolio loans held for sale and loans with government guarantees, yet more than half our balance sheet and over 1,100 basis points of risk-based capital dedicated to these three asset categories that have very little risk content.

Warehouse loans are secured with recently originated first mortgage loans and turnover every 10 days to 15 days. Loans held for sale turnover every one to two months, and this portfolio is carried at fair value. The portfolio of loans with government guarantees has a little downside and perhaps a modest upside. When you take all of this into consideration, we believe that we are operating at strong capital levels, given our low risk balance sheet composition.

If we just weighted our warehouse loans at 50%, they're weighted at 100% of the current risk-based capital rules. You'd see that our capital ratios compare favorably to most other mid-sized banks. This makes sense for loans that are fully collateralized by 50% risk-weighted assets and those assets remain under our custody while the loans are on our lines. Further, there is even an outstanding proposal from the Mortgage Bankers Association to make this distinction in the risk-based capital rules, a proposal we wholeheartedly support.

So, adjusting the risk weighting on the warehouse loans, our total risk-based capital would be 14%, over 200 basis points higher, which would put that ratio above the average for all mid-sized banks. Our CET1 ratio would be 10.7%. So that provides the rationale behind our belief that we have solid amid a strong capital ratios.

I will now turn it over to Reggie to cover community banking.

Reginald E. Davis -- Executive Vice President, President of Banking

Thank you, Jim, and good morning. The last 12 months have been like nothing we've experienced before. At the start of the year and in response to the COVID-19 pandemic, the Fed took unprecedent action by significant recurring interest rates and putting immense pressure on the net interest margin for many banks. Additionally, in response to the uncertainty around the duration and the impact of the pandemic, we took a conservative approach in the bank by tightening the credit loss and being thoughtful around new lending opportunities. This has served us well so far and will be our approach into the foreseeable future. We'll continue to lean into lower risk, commercial lending opportunities and be diligent in adding new relationships as we continue to navigate these uncertain waters.

Please turn to Slide 15. Quarterly operating highlights for the Community Banking segment include average warehouse lending balances increased $1.3 billion, or 22% to $6.9 billion in the quarter as the low interest rate environment has persisted driving strong mortgage refinance volume. Our relationship-based approach and speed of execution also enabled us to add new customers as well as increase lines to existing customers during the quarter. We continue to maintain our disciplined underwriting in this business.

Average commercial, industrial and commercial real estate loans decreased to $146 million, partially impacted by the timing of the sale of the PPP loans in the third quarter, as well as a thoughtful approach we continue to take in terms of new facilities. We believe our conservative credit policies and diversified portfolio will be a strength as we get more clarity around the fallout from this pandemic.

Average consumer loans held for investment decreased $241 million. Our result of increased payoffs in our first lien mortgage portfolio, partially offset by growth in the other consumer loans, which is predominantly our indirect Marine RV loan portfolio, which has performed rather nicely in this environment.

I'm also proud of the success that the retail team has achieved. Average community banking deposits, which exclude custodial accounts and brokered deposits increased $269 million, or 2.4% over the last quarter to $11.5 billion. We continue to see solid growth in governmental deposits due to seasonal tax collections and higher non-interest bearing DDAs and low cost savings accounts. We also saw CD balances contract $257 million. The overall cost of these deposits declined by 16 basis points to 26 basis points from 42 basis points the last quarter. The last three -- the retail team did a great job retaining CDs that were maturing and redeploying these deposits in the DDA and savings accounts.

Turning to commercial lending on the next slide, we continue to manage our well-diversified commercial loan book. In the warehouse lending book, we've been using our quarter-end balance sheet to accommodate the needs of our customers, despite this having a direct impact on our period end capital ratios. The momentum built in prior quarters carried over this quarter as warehouse loan balances remained elevated, which is a testament to the strength of the relationships we built with our warehouse customers.

In commercial real estate, we're in constant contact with our customer base. The homebuilder book continues to perform well. The result of doing business with strong and experienced clients and the close relationship with those clients have with our lenders here at Flagstar. The C&I book remains well-diversified and we're starting to see our customers get their business back on track. We're taking steps now to build our relationships in our markets, so that we can be in a position to fully serve these customers when the opportunity presents itself.

I'll now turn things over to Lee.

Lee M. Smith -- Executive Vice President, President of Mortgage

Thanks, Reggie, and good morning, everyone. We're thrilled with how our mortgage originations and mortgage servicing businesses have performed in what was an unprecedented year. Both business lines have demonstrated their resiliency and delivered important and significant non-interest fee income for the bank in this low rate environment.

During the year, we generated an incredible $971 million of gain on sale revenues, including $232 million in the fourth quarter, as we continue to leverage our diversified mortgage platform in this strong mortgage market. We ended the year servicing or sub-servicing approximately $1.1 million loans, consistent with the end of the third quarter on where we ended 2019. What is noteworthy, however, is we processed over 350,000 payoffs during the year, given the low interest rate environment and boarded over 290,000 of non-Flagstar originated loans, a remarkable achievement in this highly volatile work-from-home environment.

The earnings generated from our mortgage origination and servicing businesses have contributed significantly to our overall earnings per share of $9.52 for the year and given mortgage and other economic forecast for 2021, we believe the foundations are in place for us to continue to be successful and generate strong returns for our shareholders. I will now outline additional key operating metrics from our mortgage and servicing segments during the fourth quarter and full year.

Please turn to Slide 19. Quarterly and full year operating highlights for the mortgage origination business include, we're very pleased with our gain on sale revenues of $232 million during the quarter, which held up remarkably well in a remarkable year for mortgage. Both volume and margins remain seasonally strong as we continue to see robust refinance and purchase activity in all channels. One channel that did standout was that consumer direct to direct lending business, where we saw a 20% increase in lock volume and 21 basis point margin expansion quarter-over-quarter. This is a channel we've been actively growing in 2020, and it also plays a key role in our recapture capabilities. We expect to see continued growth in this channel throughout 2021.

Refinance activity accounted for 64% of our lock volume during the quarter and retail accounted for 36% of lock volume, up from 33% in the third quarter. Mortgage closings were $13.1 billion in the fourth quarter, a 9% decrease from the previous quarter given the seasonal holidays and employees using PTO toward the end of the year.

Our mortgage operations team continues to operate effectively in this work-from-home environment. We've increased capacity 47% in 2020 versus 2019, and we continue to hire and train new fulfillment staff in the fourth quarter setting us so well for 2021, given the strong mortgage market outlook. The increasing capacity in the fourth quarter on both the sales and operations sides of the business, together with a higher percentage of retail business and lower closings given the holidays drove the increase in mortgage non-interest expense to closings from 1.02% to 1.18% quarter-over-quarter.

During the quarter, we started to roll back some of the overlays and product holds we put in place, as a result of the pandemic, as we became more confident around market liquidity and the economic outlook. At period end, we have approximately $2.5 billion in Ginnie Mae early buyouts on our balance sheet. Of this, approximately $1.9 billion were results of borrowers opting into forbearance, as a result of the pandemic.

The accounting consequence of owning the MSR is to show them as early buyouts, whether you buy them out or not. As we've analyzed these loans in more detail, we believe $800 million will fuel through the partial claim process and our intention is to buy out these loans and resecuritize them. The gain on sale benefit from doing this is approximately $32 million, $23 million of which will be realized in the second half of 2021, a $9 million in 2022.

We think a further $250 million will queue up through a modification, and again we will buy these loans out and resecuritize, realizing approximately $10 million of gain on sale revenue, $7 million in 2021, and $3 million in 2022. If anything from the remaining population of $850 million we'll secure through a partial claim or modification, we would buy them out, resecuritize and realize the gain on sale benefit.

Given the increase in home prices over the last few years and equity most owners have in their homes, we don't anticipate many borrowers going into foreclosure following the end of the forbearance period. Finally, given the slightly smaller extreme of the mortgage market in Q1 versus Q4, from the agencies and MBA and continued tightening of margins, we forecast gain on sale revenues to be between $200 million and $220 million in Q1. We couldn't be more pleased with the performance of our mortgage business in the fourth quarter and during 2020. We believe we will continue to be a meaningful contributor to the bank's earnings in 2021 and beyond particularly given the low interest rate outlook.

Moving to servicing, quarterly operating highlights for the Mortgage Servicing segment on Slide 20, include, we ended the quarter servicing or sub-servicing approximately $1.1 million loans, of which almost $870,000, or 80% a sub-service further MSR owners. The number of loans serviced or sub-serviced stayed relatively flat quarter-over-quarter, as we have it in excess of 100,000 non-Flagstar originated loans. And despite the high levels of refinance activity, we're able to replace runoff with new loans from our mortgage origination business, another advantage of our business model. Today, we have the capacity to service or sub-service $2 million loans, as well as provide ancillary offerings such as recapture services and financing solutions to MSR owners.

If you look at Slide 37, you will see that we are generating $5 million to $7 million of operating profit before tax for every 100,000 loans, we had for the platform, as we continue to achieve economies of scale benefits in this business. As it relates to forbearance through December 31, 83,759 borrowers, representing 8% of the first-lien mortgage portfolio that we, the service or sub-service have requested forbearance for late because of COVID-19.

We've seen a significant decrease in new forbearance requests, since the peak weeks at the outset of the COVID pandemic. Of the 83,759 borrowers in forbearance at year-end, 12% are current. So 7% of the loan book, we service or sub-service are actually using forbearance. The peak number of loans in forbearance was 129,332. And as of December 31, that number has declined by approximately 45,000, or 35% as borrowers who initially opted in, have opted out, paid off their loan, reached out to say their hardship has been resolved and their loan is current or had their loan modified.

During the quarter, we sold $2.6 billion in bulk and $2.6 billion in flow for a total of $5.2 billion in MSR deals. The market for MSRs is certainly bouncing back after it dried up at the outset of the pandemic and our MSR to CET1 ratio is currently 16%, significantly below the 25% threshold before it becomes capital punitive. Finally, custodial deposits averaged $8.5 billion in the fourth quarter, a 16% increase compared to the prior quarter. Our sub-servicing business had another successful year, despite the volatility and uncertainty brought about because of COVID-19. It complements our mortgage origination capabilities and provide several of the benefits to Flagstar, including low cost deposits to help on the balance sheet.

This concludes our prepared remarks. And we will now open the call to questions from our listeners.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from Bose George with KBW.

Alessandro P. DiNello -- President and Chief Executive Officer

Good morning, Bose.

Bose George -- KBW -- Analyst

Yes, good morning. Great quarter. Specifically, I wanted to ask first about the net interest margin guidance, you noted that it's going to be, I guess roughly flat the next few quarters. Just what are your thoughts there in terms of expectation for the warehouse? And so it's obviously been very supportive to the margin, how do you think that sort of placed into that guidance?

James K. Ciroli -- Executive Vice President and Chief Financial Officer

I think we can see -- expect to see more of the same in warehouse. We've been maximizing our balances there based on the capital of the company. And we're going to continue to be disciplined around that. But given the fact that the mortgage business appears to be still strong and in the first quarter. I think it's a business that's going to continue to be very helpful to us in maintaining our margin going forward. Reggie, anything you'd like to add on that.

Reginald E. Davis -- Executive Vice President, President of Banking

No, I think that's right. We're very selective with the borrowers that we do business with. And we've tried to build that business as a long-term business. And so it's less about price and more about our ability to fulfill and we consistently hear for them. And so we feel really good about the dynamics of the portfolio we built in that business, obviously, still have a lot of strength.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Yeah. That's a good point, Reggie. The pipeline in terms of incoming new business is still strong. And so as we gain more capacity just because of growth in capital. And obviously we're generating a lot of capital right now that will allow us to continue to bring that new business online.

Reginald E. Davis -- Executive Vice President, President of Banking

And we're still investing in that business. We're improving the technology platform to drive greater efficiency there. So we really like that business.

Bose George -- KBW -- Analyst

Okay. Great, thanks. That's helpful. And then actually I wanted to go back to Lee -- to Lee's comments just on the forbearances. On the FHFA, on the GSC forbearance side, can you remind us what the deadline is for that? Is there a clear deadline for when that ends? I mean are you guys still doing forbearances there? How does that sort of that program going to play out?

Lee M. Smith -- Executive Vice President, President of Mortgage

Yeah. So if you remember Bose, end of the CARES Act, we were allowed to offer two six-month forbearance periods. And so if you think that that came into play, sort of around April, when we looked at when most of the loans are going to be ending the second six-month forbearance period, it is April of this year. So unless there is a new announcement further extending that, the way it's currently constructed most of the loans, because most opted in, when it was made available will be coming out around April time.

Bose George -- KBW -- Analyst

Okay. But our new forbearances being offered now, so can a borrower be a new forbearance currently?

Lee M. Smith -- Executive Vice President, President of Mortgage

Yes, they could call the forbearance correct.

Bose George -- KBW -- Analyst

Okay, perfect. Thank you.

Operator

Our next question comes from Scott Siefers with Piper Sandler.

Scott Siefers -- Piper Sandler -- Analyst

Good morning, guys. Nice quarter, so congrats. I was just hoping, I know you actually don't like to provide too specific guidance, but gain on sale margin is obviously a huge topic. Just wondering, even qualitatively, any thoughts you can give on sort of ability to support, because I guess, as I look at banks, in addition to just the normal market ebbs and flows, what's a little more idiosyncratic to Flagstar is just your kind of ability to create and as you've been doing kind of richer origination mix, which I would think would hold up your margins a little better than perhaps the industry at large. So would be curious to hear any thoughts on sort of where you see things and how Flagstar in particular supports?

Lee M. Smith -- Executive Vice President, President of Mortgage

Yeah. Yes, Scott, it's Lee, good morning. So if you -- I mean look, we rely on the primary, secondary spreads. And if you look at the primary, secondary spreads, that was 1.71 in Q3, and in Q4, that was 1.59. So we did see a little bit of tightening in the fourth quarter. And we've seen a little bit of tightening in the first quarter or month-to-date, January. The advantage that we have as you mentioned and we've spoken about is, we have a diversified mortgage business. And what I mean by that is, we will originate in all six channels, whether that's both delegate, correspondent, non-del correspondent, broker, distributive retail or direct lending.

And so yeah, we're able to maximize earnings based on where we get the biggest advantage and borrowing capacity to the channel where we think best serves us. And so that's how we sort of take advantage of it, but at the end of the day that primary, secondary spread and as we're seeing that sort of come in that does affects us -- definitely affects every originator.

Reginald E. Davis -- Executive Vice President, President of Banking

Yeah. And I would add, Scott, we really do focus on the revenue targets and what's the best way to get there is. And so the margins were obviously, they're very, very important. The market will give you what the market will give you. And then you got to figure out, where the best opportunity there is, to get to your revenue targets. So I think we've done that pretty well. And in Lee's speech, he may referenced to the fact that we're seeing great success in growing our direct-to-consumer business. And obviously that's a business with a pretty strong margin.

So we're very bullish on the mortgage business and its strength going forward here. So we will continue to focus on the revenue target and you heard Lee, say $200 million to $220 million. So again when you think about that against fourth quarter given what the market thinks is going to happen in Q1. That's a pretty good number, if we get there.

Scott Siefers -- Piper Sandler -- Analyst

Yeah. Okay. That's perfect. I appreciate those thoughts. And then separately, I guess this is more of an emerging issue. But -- so the GSEs are now limiting the number of lenders that can access the cash window. Just curious, although I know it's sort of a newer issue, to what degree have you guys thought about that? Are there any opportunities that presents to you guys or how are you thinking about it at a top level?

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Yeah. So, it is an emerging issue, Scott. So -- because it's the cash window, it doesn't affects us. We obviously operate in a scale. And so all I think that it's going to affect more the smaller originators. It's not going to affect as much, or at all the big originators, who are operating at scale large cap sales and some of the other big names. In terms of opportunities, I need to think about that more. But I think that the effect is going to be on the smaller originators as a set, which should be a positive for our TPO business.

I think we haven't seen our business with small correspondent. And as you know, we -- historically Flagstar that was its bread and butter was the small correspondent. And frankly as many of you know we're able to get into the cash window and even coming to the book space that had an impact on that. So it remains to be seen where that goes, but it could be a benefit to those mortgage originators that have a strong third-party business.

Scott Siefers -- Piper Sandler -- Analyst

Yeah. Okay, perfect. All right. Thank you guys, very much.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Thank you, Scott.

Operator

Our next question comes from Daniel Tamayo with Raymond James.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Hi, Danny.

Daniel Tamayo -- Raymond James -- Analyst

Good morning. Hey, good morning everybody. Nice quarter. Just a question on the expenses first, probably for Lee. Specifically on the mortgage side, you mentioned in the release and talked about it being driven by the efforts to expand capacity as well as a higher retail mix. Sounds like that higher retail mix will continue to be the case. So I'm expecting that you would say the mortgage expense ratio to closings will be a little bit higher than what you were thinking prior. How are you thinking about that number going forward?

Lee M. Smith -- Executive Vice President, President of Mortgage

Yeah. I would actually say slightly differently. I think that it will be in the same zip code. I think the retail mix will sort of the similar to what you've seen in the last couple of quarters. And I think that 1.18% result. That's I would expect is to be in a similar zip code next quarter. So that's how we think about it.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

No, Danny, going back to my earlier comment about managing to the revenue, we really managed to the net revenue when it's all set and done. So if you're generating business from higher expense category or delivery channel, then you kind of need more revenue to support that. I mean we've shown our ability to tie the revenue changes to the expense changes and that will continue to be the case.

So while saying, all of a sudden, the mix of retail went way up, which cause our expenses to go way up. When that probably would mean, if we're doing it right, that we guided to should be more than what we guided you to. So I want to just be real clear about this. We're very careful in terms of how we're managing the net revenue in the business.

Daniel Tamayo -- Raymond James -- Analyst

That's great. And you certainly have proven that. And then I guess on the non-mortgage side, maybe for Reggie here. But how do you think about the expenses in that side of the businesses where -- as where perhaps anticipating a shift on the balance sheet. Is there an efficiency ratio or profitability target that you use to govern there, or is it just too tough to pin down given all the moving parts?

Reginald E. Davis -- Executive Vice President, President of Banking

Yeah. I don't know about our overhead efficiency target, but we're trying to basically keep expenses flat. We are looking for opportunities where we think that the spend can be optimized in certain channels and businesses. And we're also looking for opportunities to move expenses from non-growth areas where we think we have less growth, things like technology and other things will ultimately drive the overhead efficiency ratio. So that kind of the mode that we're in. It's hard to peg a number right now.

Daniel Tamayo -- Raymond James -- Analyst

Yes, no I understand that. And then finally, I guess given the stronger warehouse business and really taking share there, your ability to grow that business and the demand everything that you've mentioned, how does the more traditional commercial lending fit in, in the CRE and the C&I, especially the C&I has been kind of declining over the last year or so, understandably. But how do you think about the growth of that business given that kind of what we've seen and what you're expecting in the warehouse business going forward?

Reginald E. Davis -- Executive Vice President, President of Banking

Yeah. That's a great question. It's funny, not having benefited from having the warehouse business in past experiences. It's a wonderful thing, because what it does, it takes the pressure off of us on the commercial side. And so it would be really selective about things that we're looking at. We therefore our existing clients and many of those clients extremely well. But we're looking at external opportunities where we have very strong sponsorship over the project, very strong project. And we're kind of cherry-picking for lack of better terms. And we're not feeling any undue pressure because of the benefit of the warehouse business to do anything other than that.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Yeah. I think this is a time where you need to be very patient with the commercial business, whether it's CRE or C&I. Any time you're in a recession, I think you got to be really patient and particularly given this unique recession ever. And now that's more about our health crisis than it is anything else. And as Reggie said it's a terrific advantage to be able to grow the warehouse business by billions of dollars without adding any risk to the balance sheet. So we're going to continue to operate this way and when the right rate opportunities present themselves, we'll jump on them. And when the market gets a little more certain then we would be even more aggressive.

Daniel Tamayo -- Raymond James -- Analyst

All right, great. That's all I had. Thanks for all your color.

Alessandro P. DiNello -- President and Chief Executive Officer

Thanks Danny.

Operator

Our next question comes from Steve Moss with B. Riley Securities.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Good morning, Steve.

Steve Moss -- B. Riley Securities -- Analyst

Hi, good morning, guys. On the reserve ratio here continue to maintain a very strong allowance. Just kind of curious what you want to see forward -- reserve releases going forward here?

Alessandro P. DiNello -- President and Chief Executive Officer

Yeah. I wouldn't project any reserve releases at this point. I don't know, how you could. I don't know how to project even a reserve increases or reserve decreases. And if you kind of crystal ball, I'd be happy to borrow that for a couple of those manually. It's just right to know what's going on here with our references, unusual type of recession. So I think for the foreseeable future, it's prudent for us to stay right where we're at until we get more information that would change our mind. And we think you know it seems pretty specific about how we arrive at our ACL, using Moody's and so on and so forth.

We're going to continue to file those analytics and add qualitatively wherever we think it's appropriate. So as I always said since I've been CEO here we're going to operate on a conservative side with conservative range, when it comes to our loss reserves. And I know this is not the time to change that kind of thinking.

Steve Moss -- B. Riley Securities -- Analyst

Okay. That's fair. And then on capital here, obviously very strong and looking at another good quarter here, just kind of wondering what is the appetite for additional repurchases or acquisitions?

Alessandro P. DiNello -- President and Chief Executive Officer

Sorry, would you repeat that?

Reginald E. Davis -- Executive Vice President, President of Banking

Stock purchases or acquisitions?

Alessandro P. DiNello -- President and Chief Executive Officer

Yeah, well any at all, certainly possible. We are open to business combination, business acquisitions, bolt-ons, where it makes sense, where we did use our ability to repurchase shares in the last quarter. So that's certainly an option. We increased the dividend last night. We announced that. So these are all, always to use capital and they're all on the table, but it's got to be the right situation.

We are a patient organization and we wait for the right situation. And if we don't find the right situation in terms of a business opportunity, then we'll figure out another way to reward our shareholders. They've been very patient with us. And they're seeing the benefits of that now.

Steve Moss -- B. Riley Securities -- Analyst

Okay. That's helpful. And then in terms of just the loan fees here I know there is elevated for a loss of mitigation forbearance. Just kind of wondering how sustainable do you think about that? Is it more like as things come off in April, perhaps that will pull back a bit, any dynamics on that would be -- any color on that would be helpful.

Lee M. Smith -- Executive Vice President, President of Mortgage

Yeah. So there is a few things going on when you think, please you -- you've got some of the forbearance fees. But we've been waiving late fees and charges as a result of loans being in forbearance. So when that burns, when the forbearance period burns off that comes back. And then we've been boarding loans as I mentioned on those boarding fees that are included in there. So, yeah as we continue to board loans, we would expect to continue to generate those fees. So there's a lot going on there. I think the $5 million to $7 million of operating profit for every 100,000 loans, we have at the platform. I am confident in that guidance whether we're in the forbearance period or not.

Steve Moss -- B. Riley Securities -- Analyst

Okay. Thank you very much. Good quarter.

Alessandro P. DiNello -- President and Chief Executive Officer

Thanks.

Operator

Our next question comes from Giuliano Bologna with Compass Point.

Alessandro P. DiNello -- President and Chief Executive Officer

Hi, Giuliano.

Giuliano Bologna -- Compass Point -- Analyst

Good morning and congrats on a great quarter.

Alessandro P. DiNello -- President and Chief Executive Officer

Thank you.

Giuliano Bologna -- Compass Point -- Analyst

I guess turning back to your topic that's a few times on the warehouse line side. You obviously have done an incredible job growing that the warehouse line business. And you -- as you kind of alluded to there is a lot of demand out there for other opportunities within that business. I'm kind of curious what the pipeline looks like because you're obviously managing it to capital and there, which implies that there are other opportunities out there that you could take advantage of the capital wasn't the constraint here.

But I'm -- what I'm trying to figure out is kind of like what the magnitude of the opportunities that you're potentially turning away might be because that could be relevant when the mortgage cycle does call down eventually in terms of your ability to kind of take more share going forward as well?

Alessandro P. DiNello -- President and Chief Executive Officer

Well, we have not provided specific guidance on the pipeline. And you know, it's a difficult question to answer, because you don't know how much business your reps out in the field were actually not encouraging, because they know that we've got some limitations. With that said, I can tell you, as we go into committee every week, there are new requests every week that come into our committee. And they're not smart requests, in order to come to the committee meeting that I go, go through it, have not been pretty significant request.

So it's been that way all year, in 2020. It's been that way, so far in 2021. So it's difficult for me to say how strong or how long that that will continue, but I don't know how it could be much stronger right now. Reggie, anything you want to add on that?

Reginald E. Davis -- Executive Vice President, President of Banking

No. I think that's right. We don't -- it's impossible to forecast. We thought we might see some degradation of decline for the end of the year. But honestly, the business has continued to be really strong. And so we're open for business.

Giuliano Bologna -- Compass Point -- Analyst

That makes sense. And then on the mortgage origination side, you obviously done a lot on the channel mix side, in terms of shifting around channels and managing very effectively on the net margin side. I'd be curious when we think about you have the direct channel. What kind of upside there, is there kind of -- and to an extent what kind of recapture rates you're achieving or where that could go just in terms of thinking about kind of the upside opportunity with -- on the direct channel side?

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Yeah. I mean, we don't provide guidance or recapture, right,. But as I mentioned, we on-boarded 290,000 of non-Flagstar originated loans in 2020. And so we're doing something right, because if we weren't -- we wouldn't be onboarding that many loans. And so we are competitive as it relates to recapture. In terms of the consumer direct channel, yeah, we have been growing that. We bought in a significant number of LOs, strong LOs who were selling Flagstar not just selling rights. These are high-quality LOs. And I think that these potential for continued upside in this channel.

And the other thing I think in this COVID environment where people are doing more things remotely. Yeah, I think that's another opportunity, the direct lending to continue to grow up and people are more comfortable doing things digitally or over the telephone [indecipherable] and so we feel very good about the potential for that direct lending channel.

Alessandro P. DiNello -- President and Chief Executive Officer

Yeah. I would just say that, I think that's absolutely, right. I think the opportunity in that channel is significant, And I think we've got the right leadership there. And so I'm optimistic about our opportunities there.

Giuliano Bologna -- Compass Point -- Analyst

That makes a lot of sense. The one thing that I'd be curious about as a -- quicker question is, obviously the implied outlook or the outlook implies some pretty strong performance, which will obviously continue to add to capital. I'm kind of curious what -- what kind of asset growth potential there might be out there, or how you think about the roll forward in terms of kind of assets versus capital in the next couple of quarters or obviously you might have some good warehouse, it's hard to tell outside of that?

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Well, Giuliano, I mean if you -- you follow -- you have been following the company. And our history is that we're comfortable in this capital area. And so we're going to maximize the reinvestment of our capital, the way we always have. So we're going to find ways to grow the balance sheet to match the growth in capital, and if we can, then to the previous question, then we look for different ways to invest our capital. So it's hard to give you. I'm reluctant to give you a target growth for the balance sheet. But we're going to grow it as much as we can, while still maintaining proper capital levels.

Giuliano Bologna -- Compass Point -- Analyst

That's great. I really appreciate the time. And I'll jump back in the queue.

Alessandro P. DiNello -- President and Chief Executive Officer

Thank you, Giuliano.

Operator

And our next question comes from Henry Coffey with Wedbush.

Henry Coffey -- Wedbush -- Analyst

Yes, good morning, everyone. And let me add my congratulations. Fantastic quarter and a great run in the stock. But turning all the way back to the discussion about mortgage, you -- I think the comments on gain on sale margin were very helpful. The overall tone of the market, what are your thoughts in terms of where the various parties that create mortgage estimates are going to take their numbers? And there is some real heating up going on. Without getting into all the details, you've got -- you could call it four or five parties that are trying to expand their muscle in the broker direct channel. You've got -- I assume a fairly robust set of competitors already in correspondent. What are your thoughts there?

One of the things that the broker direct parties talk about is channel conflict, the new battle cry is, don't give your loans to rocket, they're just going to steal your customers, I mean we've heard this from people. So as you look at these different channels you've got a lot of different places to deploy capital, but are there some channels that are just going to get too hard to handle? Is the market going to come in bigger or smaller than the about $3 trillion estimate, that it seems to be out there now. I'm just wondering what are your thoughts about the overall tone of the market and where competition goes by channel?

Alessandro P. DiNello -- President and Chief Executive Officer

I'm going to let Lee answer, the important part of your question, but I do want to make one comment relative to the reference you made to rocket. We're not going to go down there, OK. We're not going to worry about what others say about other companies. We never talk about other companies. And I don't buy the argument of various channel conflict. We have operated in this organization across channels for decades without any conflict.

We provide great service to everybody and every challenge. And we will continue to do that. So I don't -- I just don't think any of that makes any sense. So we're going to keep doing what we're doing. And I don't think any customer of ours whatever tell you that the way we've handled the business is in anyway impacted by the fact that we operate in six different channels. I just don't buy it. And with that I'll let Lee answer like I said this important part of the question.

Lee M. Smith -- Executive Vice President, President of Mortgage

All right. Thanks Sandro. Good morning, Henry. Yes, so let me talk about the market first or a few questions and your comments. I mean look I'm very bullish on the mortgage market in 2021. If you look at the agencies and NBA forecast and the NBA of day-to-day to yesterday. So this is off the press and you average them out. We're looking at a $3.3 trillion market. That's the second biggest mortgage market in 13 years after 2020. And I think it's going to be strong that's the refi and the purchase side. On the refi side, there's been a couple of studies in the last six weeks or so that have identified still 19 million good borrowers out there that could say 75 bps if they were to refinance at current rates.

Good borrowers meaning minimum volatility of 7.20 at least 20% equity in their homes. I mean that was confirmed by one of the major investment banks over the holiday same as 80% of mortgages are in the money to the tune of 50 bps if they were to refi current rate. So I think the refi way has got some room to run there, which I think is positive. In terms of purchase mortgages, the low rates are making homeownership much more affordable particularly first time homebuyers and the low rates are offsetting some of the home price increases that we're seeing. Homebuilders are same that starts, homestarts are going to increase 16% year-over-year. So that's going to put inventory into the market.

And then I mentioned COVID a couple of moments ago. People are much more flexible in their work life balance, and so we've seen a lot of movement because of that. And then the final thing on sale purchases, the NBA themselves have said they expect this year to be the strongest purchase market ever. So I feel very bullish on the mortgage market in 2021. The only thing I would say based on what Sandro commented on is, look, we have proven our ability to optimize and maximize revenue. So we will look because we have the benefit of a diversified mortgage business. We will look to see where the opportunities are and we will focus resources there and we've done that and you've seen us do that in our results.

And I would just emphasize we never running to conflict now. We just haven't running to conflict and if you think of Michigan, which is where we're based. We have a lot of retail business TPO business. That's not something that we've had a problem with and I think it is because we offer great service to all of our customers.

James K. Ciroli -- Executive Vice President and Chief Financial Officer

The NBA was a little late to the party here relative to their projections for '21. We felt when Fannie Mae came out early with their increased projections, so that was the right number. That's one of the reasons why you saw us continue to build our capacity and so we have some additional expensive there in Q4. We are prepared for this. So we're ready for the market and I think if with the estimates that are out there are wrong, I think you probably agree with me they're probably wrong on the low side.

Henry Coffey -- Wedbush -- Analyst

No. It's amazing. I've never seen anything like this in 34 years of being an analyst, so it should be fun. You do have a bank. You have a incredible bank and generally when we analyze it there is a tad of asset sensitivity in there. How do you think that plays out that long-term the 10-year is up over 100 basis points. It's obviously doesn't sound like it's going to slow down the mortgage market. Is there room for margin expansion? Is the yield curve steepener a little bit from all this? Or what should our thoughts be? I know you've given guidance around the world stability, but there is some asset sensitivity in your equation and we're wondering how it plays out?

Alessandro P. DiNello -- President and Chief Executive Officer

I think at this time I'll let Jim talk. We cannot go further without what Jim is saying. [Speech Overlap]

James K. Ciroli -- Executive Vice President and Chief Financial Officer

So, Henry, just go back to my prepared comments. And you know what I am saying there is I think we're extremely asset sensitive. We are as high as we've ever been as a company in terms of our asset sensitivity that we took actions to lengthen liability duration in this low interest rate environment. So even if we had a steepener come along I really I think that's only going to accrue to our benefit. Certainly if we see something move on the short into the curve that will immediately accrue to our benefit. But even on the longer end if we had a steepener I think that there -- I think we're rather new on the liability side. And there are things that we can take advantage of in that environment that will help our net interest income.

The other thing I'll say and I did put this in my prepared remarks, but with the payoff of a senior notes that we have, keep in mind that those notes cost us over 6%, and we're going to effectively replace that funding. It's something that's around or maybe a little bit less than 25 basis points. So that alone in 2021 will give us about $3.5 million of lower interest expense per quarter. And if you look at Q4's interest expense that's about 15% of our interest -- our total interest expense in just that one move. So I again feel pretty confident about where net interest margin is and our ability to maintain that.

Alessandro P. DiNello -- President and Chief Executive Officer

And -- that's a little accessibility in our company with the mortgage business makes all the sense in the world. So we're -- that's a strategic position that we've taken.

Henry Coffey -- Wedbush -- Analyst

My last question and probably torquing this to Lee ultimately. But you had a very successful branch based branch acquisition, which you've integrated, done a great job with, you've got the capital, you've increased the dividend and the stock is performing exceptionally well. As you look longer-term particularly in the mortgage sector, would you do another acquisition there and if you would, would it be a branch based company, a DTC company -- if you have thoughts in that direction. What are you thinking about?

Lee M. Smith -- Executive Vice President, President of Mortgage

Yeah, I don't think that's the best place to us go in terms of a business expansion. I don't think the market would rework that and I think we are at a level in our mortgage business in terms of scale and such that is very comfortable. And I think what we do now with mortgage is simply take advantage of the opportunities that the market gives us as opposed to look at that as the future growth of the organization's revenue. I think we look to the banking side for that and we can share to you servicing as a way to support the mortgage business as well as support our funding with the mortgage business, generate a lot of capital at times and enough capital other times. And then move up to build up the revenue that comes in from our banking business. I think we've got a great platform to grow from in the banking side.

I think Reggie has had a vision, that's going to take us in a -- we expect differentiated place that could provide some real opportunities on the banking side. I think we're strong enough right now in terms of the currency that we have to use in potential bank acquisitions. We are in a position because of how much capital we deliver that generate as we go through the next 12 months to 24 months, the opportunities to extend our company into markets that were not currently in and give us access to customers that we don't currently have access to is really the right way to look at growing the company.

And then mortgage is exciting and right now you know I think a lot of my colleagues in the banking business who have found on the mortgage business may wish they were in it today and I'm thankful to where we are, but I would also say long-term in terms of creating shareholder value that's the smart place to lay our ships.

Henry Coffey -- Wedbush -- Analyst

Great. Thank you very much.

Operator

We have no further questions at this time. I'd like to turn the conference back to Sandro DiNello for any additional or closing remarks.

Alessandro P. DiNello -- President and Chief Executive Officer

Thank you, Ryan. We talked this morning about financial success that was off the charts for the quarter and the year. And I'm incredibly proud of what we've achieved, but I'm equally proud of the success of the financial field of what we've accomplished for our employees and customers and our communities. Certainly it was the year of diversity, equity and inclusion and without question Flagstar was all in. The killing of George Floyd became a catalyst for us to accelerate our diversity and inclusion journey and to make equity part of it.

We've realized more than ever before that the faster our work environment where employees feel comfortable and do the best work, we had to acknowledge what was happening in the outside world and this amplify the dialogue with our employees that meaningfully strengthened our culture. Our customers were in the spotlight in 2020 as we work to help them overcome the challenges brought on by the pandemic. We made PPP loans to everyone who asks, including many who were not our customers at the time. And we work closely with our commercial customers to help keep them afford and with our consumer customers to help more than 100,000 of them with forbearance.

On the community side, we gave more grants than ever before. Many to minority owned small businesses as well as to nonprofits committed to helping those impacted by the pandemic. We support our programs for restaurants to provide meals to hospital workers and supported with our food bank with donations. With our help with small business converted from manufacturing supplies to COVID use to making personal protective equipment. With the cellular apartments benefited from donations of masks and all of our communities benefited from our elevated level of giving and our focus on helping those harder step by the pandemic.

And just a few of the many actions our company and our employees took on to give back to those in need. In summary, the quarter and year we're successful across the board from the performance of all our business lines to our progress in the ENI to our outreach to our customers and to our contributions to our communities. This level of success and progress couldn't had been accomplished without the tireless effort and sacrifice from all of our team members. Thanks to all of you. I know I've said all the time, but I really mean it. The success of this year belongs to you. Thanks to all for spending a few minutes with us this morning. I look forward to reporting on Q1 in April.

Operator

[Operator Closing Remarks]

Duration: 71 minutes

Call participants:

Kenneth Schellenberg -- Vice President of Investor Relations

Alessandro P. DiNello -- President and Chief Executive Officer

James K. Ciroli -- Executive Vice President and Chief Financial Officer

Reginald E. Davis -- Executive Vice President, President of Banking

Lee M. Smith -- Executive Vice President, President of Mortgage

Bose George -- KBW -- Analyst

Scott Siefers -- Piper Sandler -- Analyst

Daniel Tamayo -- Raymond James -- Analyst

Steve Moss -- B. Riley Securities -- Analyst

Giuliano Bologna -- Compass Point -- Analyst

Henry Coffey -- Wedbush -- Analyst

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