Flagstar Benefits from Mortgage Servicing Gains
Flagstar earned $0.22 per share in the second quarter, benefiting from gains on its mortgage servicing portfolio.
Flagstar's $15.7 million in second-quarter earnings was a turnaround from the company's first-quarter loss of just over $10 million, and it was also an improvement over the $15.1 million in net earnings reported in the second quarter of last year.
Flagstar said that loan administration income grew to $37.4 million in the second quarter. During the first quarter, the company reported a $17 million loan servicing loss.
But the company said this benefit was offset by an increase in the provision for loan losses.
Analysts at Friedman Billings Ramsey lowered their price target on Flagstar, calling the results "noisy" and noting that credit conditions continue to deteriorate for the bank.
Flagstar's loan production for the second quarter increased 2.5%, totaling $8.2 billion. Most of the total consisted of residential mortgages.
Flagstar serviced $46 billion of loans with a weighted average servicing fee of 34.2 basis points at the end of the second quarter. The servicing portfolio has more than doubled from its year-earlier level.
In other earnings news, WAYNE, NJ-Valley National Bancorp, Wayne, N.J., earned $41.5 million in the second quarter, up from $39.7 million in the same period last year.
The bank said its net interest income increased for the third consecutive quarter, primarily because of a decline in interest rates paid to depositors. The bank reported a net interest margin of 3.48%, an improvement of 13 basis points from the first quarter.
The bank's loan portfolio grew 17% from a year earlier to just over $9 billion as of June 30. Growth in commercial mortgage, residential mortgage, commercial and automobile loans contributed to the gains, Valley National said.
Net charge-offs were $4.9 million, up from $3.1 million in the second quarter of last year. But with an overall delinquency rate of just 0.82%, Valley National's portfolio continues to perform much better than those of most banks.
"We believe much of our commercial and commercial mortgage loan growth during the second quarter was the result of new quality customer relationships which came from other financial institutions which were unable to compete due to their own capital limitations caused by today's market," said president and CEO Gerald Lipkin in the company's earnings release.
Community Trust Bancorp, Pikeville, Ky., said its second-quarter earnings were flat with the year earlier period, as pressure on net interest margin offset gains in fee income.
Part of that improvement in fee income reflected a $700,000 increase in the fair market value of the bank's mortgage servicing rights. The bank said 37% of its loans reprice within 30 days, and a 100 basis point decline in rates between March 18 and June 30 hurt the company's margin. (c) 2008 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com/ http://www.sourcemedia.com/