Flagstar Bancorp swung to a fourth-quarter loss as the Troy, Mich., company took an $80 million noncash charge to earnings because of the tax reform bill.
Flagstar had to revalue its deferred tax asset under the Tax Cuts and Jobs Act. Without the charge, the company would have earned $35 million in the quarter.
"All three of our business lines strengthened during the quarter. Our community bank drove a 9% increase in commercial loans, which helped fuel earning asset growth of $642 million — a 4% gain," Flagstar President and CEO Alessandro DiNello said in a press release.
"Our mortgage acquisitions earlier in 2017 continued to pay dividends, producing a 14% increase in closings and a 42% increase in locks over the same quarter last year in the face of a smaller market. And our third key business line, servicing, continued to gain scale and now has a book of business that exceeds 440,000 accounts."
For the full year, Flagstar earned $63 million, down from $171 million a year earlier. Without the fourth-quarter charge, Flagstar would have earned $143 million this year.
The company had a net gain on sale for mortgages sold into the secondary market during the fourth quarter of $79 million, compared with $57 million one year prior.
It took a net loss on its servicing rights of $4 million, compared with a gain of $6 million in the third quarter and a net loss of $5 million in the fourth quarter of 2016.
The quarter-to-quarter drop is due to a $4 million decrease in fair value and a $3 million charge associated with pending mortgage servicing rights sales with a fair value of $98 million expected to close in the first quarter.
Flagstar originated $9.7 billion of mortgages in the fourth quarter, compared with $9.6 billion in the third quarter and $8.6 billion in the fourth quarter of 2016.
For the full year, it had total volume of $34.4 billion, up from $32.4 billion one year prior.
It originated $111 million of home equity loans originated in the fourth quarter, along with $283 million of commercial real estate and commercial and industrial loans.
As of Dec. 31, Flagstar serviced $97.95 billion of residential mortgages. Its subservicing business had 302,814 accounts with an unpaid principal balance of $65.86 billion. On the same day one year prior, it subserviced 220,975 accounts with an unpaid principal balance of $43.12 billion.
Flagstar also serviced $25.07 billion for investors and $7 billion of loans in its portfolio.
Finally, the Office of the Comptroller of the Currency approved Flagstar's purchase of the eight branches of Desert Community Bank from East West Bancorp.