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Politics & Money

Credit Costs Weigh Down Flagstar’s Origination Gains

Flagstar Bancorp, Inc. (FBC), the holding company for Flagstar Bank FSB, on Tuesday reported a $67.4m — or 76 cents per share — Q109 net loss, narrowed from Q408’s $218.5m net loss. Flagstar said it earned $144.6m before taxes and credit costs and touted its residential loan originations increased to $9.5bn from $5.4 bn last quarter. “Credit costs continued to negatively impact earnings; however, there were a number of encouraging results and trends that developed during the quarter,” CEO Mark Hammond said in the earnings statement. “Gain on loan sales was at an historic high and mortgage originations increased 76%, as compared to the fourth quarter 2008. Net interest margin improved and regulatory capital remained high relative to previous periods, although, delinquencies continued to rise, but at a decelerating rate.” Flagstar Bank, which on Jan. 30 received $266.66m from the Treasury Department through the Capital Purchase Program, said it remained well-capitalized for regulatory purposes, with capital ratios of 7.22% for Tier 1 capital and 13.58% for total risk-based capital. The bank’s provision for loan losses decreased to $158.2m in the quarter, from $176.3m in Q408. In its mortgage operations, gain on loan sales margins increased to 2.54% for Q109, compared with 0.29% in the previous quarter. Flagstar said the adoption of fair value method of accounting for the available-for-sale portfolio of residential mortgage loans originated after 2008 positively impacted the margin. Flagstar retained $58.9bn in unpaid principal balances of loans held in its mortgage servicing rights portfolio as of March 31. Flagstar’s non-performing assets, which include non-performing loans either 90 days or more past due, matured loans, real estate-owned and repurchased assets (excluding any FHA-insured assets) increased to $915.1m as of March 31. Write to Diana Golobay at [email protected]. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.

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