Flagstar Bancorp Inc. FBC, the holding company for Flagstar Bank FSB has reported a substantial gain on mortgage banking revenues in the first quarter of 2012, with income increasing by 91.6 percent to $204.9 million, compared to $106.9 million in the prior quarter (margin increased from prior quarter by 85.3 percent to 189 basis points). Residential first mortgage originations, which are comprised of agency-eligible residential first mortgages, increased to $11.2 billion during Q1, compared to $10.2 billion in Q4 2011. Loan sales also increased for the first quarter 2012 to $10.8 billion, compared to $10.5 billion for the fourth quarter 2011.
"We believe our ability to continue to generate significant revenue is a testament to the strength of the Flagstar brand, specifically in the mortgage market where we anticipate gaining market share," said Joseph P. Campanelli, chairman of the board, president and CEO of Flagstar. "Our long-held distribution channels and industry-leading position in the mortgage market, as well as the strategic initiatives we recently implemented, are allowing us to take advantage of current market dislocation. Consistent with our business plan, we continue to use revenues from mortgage banking to fuel growth in our other business lines. This includes our commercial lending business, in which we are balancing diversification with strong but prudent growth that is funded principally by growth in our lower cost retail core deposit balances."
Gain on loan sale margin is calculated based on mortgage rate lock commitments and actual loan sales, and is net of sales expenses, hedging costs and representation and warranty expense (i.e., that portion of the reserve established at the time of sale). Gain on loan sale margin increased to 1.89 percent for the first quarter 2012, compared to 1.02 percent for the fourth quarter 2011. Mortgage rate lock commitments increased 32.4 percent to $14.9 billion during the first quarter 2012, compared to $11.2 billion during the fourth quarter 2011.
"We believe our business lines are moving in the right direction, and with our continued emphasis on risk management and controlling credit costs, and favorable credit trends, we are reaffirming our previous guidance that we expect to return to profitability during 2012," said Campanelli. "That view is based on our expectations on economic and business trends as we see them, and is of course subject to many risks related to Flagstar and its business as well as the economy and business conditions more broadly."