Flagstar Bancorp (FBC) reported fourth quarter 2014 net income of $11.1 million, or $0.07 per diluted share, as compared to a net loss of $27.6 million in the third quarter 2014, or $(0.61) per diluted share, and net income of $161.9 million in the fourth quarter 2013, or $2.77 per diluted share.

The full year 2014 net loss was $69.5 million, or $(1.72) per diluted share, as compared to a full year 2013 net income of $267.0 million, or $4.37 per diluted share.

"I am pleased that this quarter's earnings are the result of core operations. We have been working tirelessly for the last two years to de-risk the balance sheet, settle major legal matters, right size operating expenses, upgrade our management talent, build a strong risk management organization and focus our business strategies,” said Alessandro P. DiNello, president and chief executive officer. “These efforts have begun to bear fruit and we will continue to build on this foundation going forward."

Fourth quarter 2014 net interest income fell to $61.3 million, as compared to $64.4 million for the third quarter 2014. The decrease in net interest income was attributable to lower interest income from the company's Ginnie Mae early buy-outs, due to a reduction in the average interest rate earned in accordance with the terms of loans with government guarantees, as well as jumbo residential first mortgage loan sales.

The full year 2014 net interest income was $246.3 million, as compared to $186.7 million for the full year 2013, which primarily resulted from the prepayment of long-term Federal Home Loan Bank advances at the end of 2013.

Net interest margin decreased to 2.80% for the fourth quarter 2014, as compared to 2.91% for the third quarter 2014. The decrease from the prior quarter was driven primarily by a lower yield from the loans that were included in the early buy-outs, as described above, and a 21 basis point reduction in the yield on loans held-for-sale.

Provision for loan losses totaled $5 million for the fourth quarter 2014, as compared to $8.1 million for the third quarter 2014. The decrease from the prior quarter was primarily attributable to lower net charge-offs. Net charge offs in the fourth quarter 2014 were $9.0 million, or 0.91% of applicable loans, compared to $13.1 million, or 1.36% of applicable loans in the prior quarter.

The fourth quarter 2014 amount included $3.0 million of net charge-offs associated with the sale of $24 million of lower performing loans during the quarter. The net charge-offs associated with these loan sales accounted for 31 basis points of the fourth quarter's net charge-off rate.

Fourth quarter 2014 net gain on loan sales increased to $53.5 million, as compared to $52.2 million for the third quarter 2014. The increase from the prior quarter reflects higher refinance volume driven by lower rates in October and early December, offsetting the seasonal decline in purchase origination volume. Fallout-adjusted locks were $6.2 billion for the fourth quarter 2014, as compared to $6.3 billion for the third quarter 2014. The net gain on loan sale margin increased to 0.87% for the fourth quarter 2014, as compared to 0.83% for the third quarter 2014.

Loan administration income remained relatively flat at $5.5 million for the fourth quarter 2014, as compared to the third quarter 2014.

Net return on the mortgage servicing asset increased to $1.6 million for the fourth quarter 2014, as compared to $1.3 million for the third quarter 2014. The gross return on the mortgage servicing rights asset was 7.4% in the 2014 fourth quarter, a slight decrease from the third quarter 2014 as a result of higher prepayments of serviced loans. Additionally, the Company had $3.5 million of lower revenue as a result of the transaction costs and losses associated with $70 million of mortgage servicing rights sold during the quarter.

Net gain on sales of assets fell $3.2 million in the fourth quarter 2014, compared to the prior quarter.

The company sold $24 million of lower performing mortgage loans during the fourth quarter 2014, resulting in a net gain of $1.7 million. In the third quarter 2014, the company sold $48 million of performing jumbo residential first mortgage loans and $33 million of lower performing loans, producing a net gain of $4.9 million.

Representation and warranty provision improved to income of $6.1 million for the fourth quarter 2014, as compared to an expense of $12.5 million reported for the third quarter 2014. The change from the prior quarter was primarily due to a $10.4 million charge in the prior quarter related to certain indemnifications made by the company. Additionally, during the fourth quarter 2014, the company received recoveries of prior expenses and recorded a downward adjustment in the anticipated level of loss rates on claims from Fannie Mae and Freddie Mac, as the overall level of the representation and warranty reserve declined to $53.0 million at December 31, 2014 from $57.0 million at September 30, 2014.

The fourth quarter 2014 other noninterest income was $7.3 million, as compared to $9.5 million for the third quarter 2014. The decrease from the prior quarter primarily resulted from lower gains on the sale of investment securities and lower fair value adjustments on mortgage loans.