Flagstar Vols Jump But Net Income Falls

Flagstar Bancorp Inc., Troy, Mich., saw its residential mortgage volumes increase to $9.5 billion in the first quarter from $5.4 billion the previous three months, but said that under its accounting methodology it had to take a net loss for the period. Flagstar said it has adopted the fair value method of accounting for mortgages it originates for sale and thus cannot capitalize and defer recognition of loan fees as it had done previously; it also can no longer defer recognition of a portion of its expenses. It had $32.9 million in loan fees during the quarter and saw a gain on loan sales of $195.7 million. Flagstar also took a $158.2 million provision for loan losses in the first quarter. Nonperforming residential first mortgage loans increased from $432.6 million at the end of last year to $561.5 million at the end of the first quarter, while nonperforming commercial real estate mortgages increased from $164.4 million to $198.3 million during the same time frame. Overall, the company's net loss to common stockholders for the first quarter was $67.4 million ($0.76 per share), as compared with a loss of $10.6 million ($0.18 per share) for the same period one year prior.