CEO Michael Nierenberg hinted at an upcoming partnership, as the rebranded New Residential reported a quarterly loss from residential mortgages plus management internalization costs.

Net interest income was the driver, as increases from investments more than offset a decline related to its guaranty book of business.

The decline was driven by a $307M provision to cover potential credit losses, primarily from its single-family business.

The company says it’s making progress on other parts of its business-model revamp — including a shift to lower-cost deposit sources — while regulators weigh its application to buy Flagstar Bancorp in Troy, Michigan.

Pretax operating results were down by $79 million from the previous quarter, but the company estimates that by the end of the year, servicing income should be more than four times higher than the second quarter’s results.

The Seattle-based bank underestimated single-family loan declines in the larger market but was able to improve margins slightly with cost-cutting and by diversifying with a shift toward apartment lending.

The mortgage investor reported core earnings per share slightly below estimates and a loss in comprehensive income but may ultimately outperform competitors, analysts said.

Earnings posted by the two bank holding companies show increased production on a quarter-to-quarter basis, although gain on sale sank at both.

Like other mortgage lenders, the San Francisco megabank has been cutting staff since refinancing volumes started to fall. Additional layoffs are expected over the next couple of quarters, according to the bank’s chief financial officer.

These results are likely to be mirrored by the nonbank lenders when they report earnings, said Keefe, Bruyette & Woods.