FBR Cuts Flagstar Earnings Estimate

Analysts at FBR Capital Markets have cut their earnings per share estimates at Flagstar Bancorp, Troy, Mich., citing higher credit costs for the company that will pressure capital levels. Flagstar had a net loss to common stockholders for the first quarter of $67.4 million ($0.76 per share). But the company was able to successful raise new capital, including $566 million from private investors and the TARP program. Plus Flagstar expects to add $50 million of private capital during the quarter. FBR said the new capital is a positive for the company but would result in significant dilution to existing common shareholders. On the bad news side, the analysts said, is Flagstar's exposure to weak markets, namely California, Florida, Michigan and Atlanta, which have yet to show signs of stabilization. As a result, FBR expects credit losses to remain elevated. Like a number of banks, Flagstar benefited from a strong performance in the residential mortgage area. But the FBR report said, "Although Flagstar's mortgage banking revenues were strong this quarter, we expect the revenues to taper to more normalized levels in the coming quarters as spreads narrow."