Flagstar Bancorp Inc., the holding company for Flagstar Bank FSB, has reported earnings of over over $337 million in 2011, while reducing its yearly net loss by 58 percent from 2010. Leading the charge is Flagstar's mortgage banking operations, reporting strong revenues in the fourth quarter. Flagstar's gain on loan sale income increased from Q3 totals to $106.9 million, with a margin of 102 basis points. The firm reported residential first mortgage loan originations of $10.2 billion in Q4, an increase of $3.3 billion, or 47.1 percent, from third quarter totals.
"Our results for the fourth quarter and full year 2011 reflect near-record revenues from our mortgage banking business, significant growth in net interest margin, de-risking of our balance sheet through building of reserves, and the benefits of our continuing transition to a full-service commercial bank. While our 2011 results were negatively impacted by a challenging operating environment, we remain well-capitalized with significant liquidity and look forward to delivering improved results in 2012," said Joseph P. Campanelli, chairman of the board, president and chief executive officer. "I am proud of all that we have been able to accomplish this year. During the fourth quarter, we transitioned to a new regulatory agency, made significant enhancements and investments in our mortgage loan servicing area, and successfully completed the divestitures of our retail branches in the Indiana and Georgia markets."
Flagstar continued its emphasis on credit risk management in 2011, primarily associated with loans originated prior to 2009. The company converted its residential first mortgage servicing system to a nationally-recognized loan servicing platform in the fourth quarter of 2011. Flagstar also made significant investments and enhancements in residential first mortgage loan default servicing and loss mitigation in Q4 as well.
"Our default servicing and loss mitigation areas, including leasing a new dedicated facility in close proximity to our headquarters in Troy, Mich., converting to a state-of-the-art servicing platform, and increasing loss mitigation staff by over 20 percent to the addition of approximately 80 full-time employees," said Campanelli of Flagstar's initiatives over the past year. "And restructuring and enhancing our servicing practices included the establishment of single points of contact for customers who are seeking loss mitigation solutions from the bank. These investments will be an important factor in reducing the overall level of delinquencies and credit cost."
During the fourth quarter, Flagstar consummated the previously announced sales of two retail bank branch franchises in Indiana and Georgia to separate purchasers. On Dec. 2, Flagstar completed the sale of its 22-branch Indiana retail bank franchise to First Financial Bank, N.A., a wholly owned subsidiary of First Financial Bancorp. On Dec. 9, Flagstar announced the completion of the sale of the 27-branch Georgia retail bank franchise to PNC Bank NA, part of The PNC Financial Services Group Inc. The two transactions resulted in a net gain of $21.4 million.
"Competitors continue to exit the wholesale mortgage business for many reasons, which we view as an opportunity to selectively gain market share," said Campanelli. "During the fourth quarter, we took advantage of strong refinancing activity and believe we are well-positioned to gain market share in the wholesale market. We fully intend on participating in enhanced HARP II for a refinance program and plan to capture our proportional share of the anticipated volume. Currently, we are awaiting necessary technology changes to the GSE automated underwriting platforms, which are expected to be available over the next 60 days."