Flagstar Bancorp had a good fourth quarter, according to the analysts at FBR Capital Markets, “considering the drastic strategic actions the company had to take.”
What drove the company’s loss for the period, the analysts said, was the $176 million increase in its provision as a result of the sale of $474 million of nonperforming residential mortgages and the transfer of $104 million worth of similar loans to the available-for-sale portfolio.
What made the quarter good for Flagstar was the increase in mortgage loan production and the 53 basis point increase in its net interest margin.
“We believe that after shedding problem assets and recapitalizing its balance sheet, Flagstar is better positioned to return to profitability in the second or third quarters of 2011 and to eventually pay back TARP. However, the company still needs to execute its goals of increasing NIM closer to 2.3% and replacing its brokered deposits with more traditional and stable funding sources, while keeping operating costs at reasonable levels.
“If Flagstar can demonstrate that it is progressing toward these goals, we would become more constructive on shares,” FBR Capital Markets said.
FBR believes for the full year 2011, Flagstar will have net earnings of 0.03 per share. For 2012, the analysts have introduced a $0.15 per share profit projection.
