Flagstar posts big loss in shrinking mortgage market
CEO hopes 'to achieve profitability in any mortgage environment'
Sandro DiNello, CEO of Michigan's largest community bank Flagstar Bancorp (FBC) brushed off the first quarter 2014 net loss of $78.9 million, or $1.51 loss per share, as compared to net income of $160.5 million in the fourth quarter 2013, or $2.77 earnings per share.
"During the quarter, we made the determination to significantly bolster our loan loss reserve estimates which results in an increase to the loss coverage period from approximately 12 months to 18 months," DiNello said.
As a result of this action, which was not driven by charge-offs, the allowance for loan losses increased to $307 million from $207 million.
Additionally, the bank recorded a $21.1 million reduction to the originally recorded fair value of loans that they repurchased from the GSEs and "which were performing at that time," DiNello added.
Recent layoffs are helping the bottom line at the bank, he added, and profit per loan is up.
"In a very challenging mortgage environment, we were able to maintain our market share and at the same time increase our gain on sale income from $44.8 million in the fourth quarter 2013 to $45.3 million in the first quarter 2014, despite the industry-wide decline in mortgage production levels," he said.
"We will continue to strengthen our mortgage platform and hope to achieve profitability in any mortgage environment and remain optimistic about the Company's future prospects," he added.
In the last year, the lender outsourced its default servicing and announced layoffs, while entering into massive mortgage settlements with insurers and government-sponsored enterprises.
The clincher came in January when Flagstar said it planned to slash 600 jobs as part of said massive restructuring initiative.