Flagstar Bancorp Inc., the holding company for Flagstar Bank FSB, has announced its return to profitability, reporting a 2012 second quarter net income of $86 million, as compared to a first quarter 2012 net loss of $8.7 million, and a second quarter 2011 net loss of $74.9 million.
"Our second quarter performance reflects the earnings power of our industry-leading mortgage banking franchise and a continued focus on risk management and controlling credit costs, while at the same time, adding reserves to the balance sheet," said Joseph P. Campanelli, chairman of the board, president and chief executive officer. "We also continued to see improvements in our consumer loan credit quality, with total delinquent consumer loans decreasing for the third consecutive quarter."
Second quarter non-interest income increased to $240.3 million, as compared to $221.4 million for the first quarter 2012. The increase was primarily due to higher net gain on loan sales, which was reflective of strong consumer demand for the refinancing of residential mortgage loans in a declining interest rate environment. Additionally, the Flagstar believes it has been able to strategically take advantage of opportunities given the current displacement in the mortgage market.
"I am very pleased to report strong net income for the second quarter and for the first six months of 2012," said Campanelli. "Returning to profitability following an extended period of losses marks a major milestone for our bank, and is the culmination of countless hours of hard work and dedication by our employees. While we are excited about reaching this significant milestone, we recognize that we still have a great deal of work ahead of us. We have made great progress in transforming Flagstar into a diversified super-community bank, and we remain committed to delivering diversified products and exceptional service to our customers and generating value for our shareholders."
Second quarter 2012 net gain on loan sales increased to $212.7 million, as compared to $204.9 million for the first quarter 2012. This increase from the prior quarter was a result of increases in both residential first mortgage rate lock commitments and sales of residential first mortgage loans.
Gain on loan sale margin is calculated based on residential first mortgage rate lock commitments and actual sales of residential first mortgage loans, and is net of sales expenses, hedging costs and provisions related to the representation and warranty reserve (i.e., the portion of the reserve established at the time of sale). Gain on loan sale margin declined to 1.66 percent for the second quarter 2012, as compared to 1.89 percent for the first quarter 2012, due to increased hedging costs resulting from a more rapid declining rate market during second quarter 2012, as compared to the first quarter 2012. Residential first mortgage rate lock commitments increased 17.9 percent to $17.5 billion for the second quarter 2012, as compared to $14.9 billion for the first quarter 2012. Loan sales of residential first mortgage loans also increased for the second quarter 2012 to $12.8 billion, as compared to $10.8 billion for the first quarter 2012.
Residential first mortgage loan originations, which are principally comprised of agency-eligible residential first mortgage loans, increased to $12.5 billion for the second quarter 2012, as compared to $11.2 billion for the first quarter 2012. Loan fees and charges increased to $34.8 million for the second quarter 2012, as compared to $30.0 million for the first quarter 2012, reflecting the increase in residential first mortgage loan originations during the quarter. Net servicing revenue, which is the combination of net loan administration income and the gain/loss on trading securities, decreased to $28.7 million for the second quarter 2012, as compared to $32.9 million for the first quarter 2012. This decrease from the prior quarter reflects a lower value of mortgage servicing rights in the second quarter 2012, principally as a result of an increase in prepayment speeds due to the refinancing of consumer mortgages from the decline in interest rates during the quarter.