Flagstar sees 26 percent increase in originations in Q2
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Flagstar sees 26 percent increase in originations in Q2

July 28, 2010

Flagstar Bancorp Inc., the holding company for Flagstar Bank FSB, has reported a second quarter 2010 net loss applicable to common stockholders of $(97.0) million, or $(0.63) per share (diluted) based on average shares outstanding of 153,298,000, as compared to a net loss of $(81.9) million, or $(1.05) per share (diluted) based on average shares outstanding of 77,699,000 for the first quarter 2010.
"Despite the loss for the quarter, we are encouraged by a number of positive results in our core business," said Joseph P. Campanelli, chairman and chief executive officer. "We experienced a 26 percent increase in mortgage originations, a 16 percent increase in gain on sale margin, a two percent increase in core deposits, an eight percent increase in Bank net interest margin, and a 14 percent reduction in total delinquent loans from the prior quarter. We are also pleased with the 56 percent increase in pre-tax, pre-credit-cost income, to $55.7 million in the second quarter 2010, from $35.7 million in the first quarter of 2010. Further, we maintained historically high regulatory capital ratios, while continuing to make progress in transforming to a more diversified super community bank."
Non-performing assets decreased to $1.2 billion at June 30, 2010, from $1.3 billion at March 31, 2010. These assets include non-performing loans (i.e., loans 90 days or more past due, and matured loans), real estate owned and net repurchased assets, excluding any Federal Housing Agency (FHA)-insured assets. The decline reflects a reduction in the amount of non-performing loans, offset in part by an increase in real-estate owned (REO).
 
Non-performing residential first mortgage loans decreased 6.5%, to $663.5 million at June 30, 2010, as compared to $709.4 million at March 31, 2010. The decrease reflects improvements of $7.3 million in the 90-120 day category, $26.3 million in the over 120 - day category, and $12.3 million in matured delinquent loans. Non-performing commercial real estate mortgages that are seriously delinquent decreased to $324.9 million at June 30, 2010 as compared to $395.8 million at March 31, 2010.
REO, net of any FHA-insured assets, increased to $198.2 million at June 30, 2010 from $167.3 million at March 31, 2010. The increase was attributable primarily to increases in commercial REO as legacy loans cycle through the loss mitigation process.
Gain on loan sales for Flagstar's mortgage banking operations increased to $64.3 million in the second quarter of 2010 as compared to $52.6 million for the first quarter 2010. Loan production, substantially comprised of agency eligible residential first mortgage loans, increased to $5.5 billion for the second quarter 2010, as compared to $4.3 billion in the first quarter 2010. Interest rate lock commitments also increased, to $8.3 billion for the second quarter 2010 as compared to $6.1 billion during the first quarter 2010.
Gain on loan sales margins increased to 1.22 percent for the second quarter 2010, as compared to 1.05 percent for the first quarter 2010.
At June 30, 2010, our loans serviced for others increased to $50.4 billion and had a weighted average servicing fee of 32.4 basis points. This was an increase from $48.3 billion at March 31, 2010 with a weighted average servicing fee of 33 basis points.
Delinquencies on first mortgage loans held for investment declined between March 31, 2010 and June 30, 2010. Delinquent first mortgage loans (90 days and over) held for investment were $663.5 million at June 30, 2010 and $709.4 million at March 31, 2010. Despite the decline in delinquencies, provision for loan losses increased to $86.0 million as compared to $63.5 million for the first quarter of 2010. The increase in the provision reflects increases in rolling average historical loss rates on the residential portfolio, which resulted from higher charge-offs experienced in more recent periods. Application of these higher loss rates resulted in a $4.1 million increase in residential loan provisions. There was also a $16.9 million increase in commercial real estate loan provisions based primarily upon the accelerated disposition of non-performing assets, as well as updated collateral valuations on several loans.
"Our continued losses, largely as a result of legacy credit costs, indicate that we are operating in a challenging economic environment, but we are encouraged by the improvement in asset quality, as evidenced by declining delinquencies and a lower level of non-performing loans," said Campanelli. "Despite these improvements, we believe it is prudent to continue to maintain a cautious outlook with regard to economic conditions, as reflected in our allowance for loan losses coverage level."
For more information, visit www.flagstar.com.
 

Originations, Residential, Marketing, Trends