Record Volume Fuels Flagstar's Growth

Flagstar Bancorp Inc. reported fourth-quarter earnings of $32.1 million ($1.03 earnings per share), up from $29 million ($0.95 EPS) for the same period in 2001, mostly driven by a record mortgage production volume of $15.6 billion, or $4.6 billion higher than the previous year.

Flagstar attributed the increase in mortgage volume primarily to refinancing activity and "technological advantages." In December 2002 alone, it closed a monthly company record of $5.3 billion in residential loans. A record company executives plan to repeat this year, even though mortgage activity is expected "to soften" in the second half of the year. President and CEO Mark Hammond also expects the "gain on sales spreads to contract from the levels recorded in 2002."

At year-end, Flagstar serviced $21.6 billion and subserviced $7.8 billion in loans for other companies, a 52.1% increase compared to the volume serviced at Dec. 31, 2001. The strategy, Mr. Hammond explained, is a higher servicing portfolio retention to enhance earnings when interest rates go up, while balancing out the retail banking, mortgage origination and mortgage servicing lines so they are "complementary as well as countercyclical."

The company projected 2003 EPS at between $3.80 and $4.20.

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