The chief executive of Flagstar Bancorp, Troy, Mich., told a conference call that he was encouraged by the steady results the company is seeing as it moves from a mortgage banking model to a commercial banking one and works to reverse a loss it took in the second quarter due to legacy concerns.
The company posted a second-quarter loss of $75 million, citing continued credit costs related to its legacy balance sheet. One-year prior, Flagstar lost $97 million. Included in the loss is an OTTI impairment on its nonagency mortgage-backed securities portfolio of $50 million.
But during the quarter, the company saw strong mortgage banking revenue even as production decreased, said Joseph Campanelli, chairman, president and chief executive.
He pointed to a 17% increase in mortgage rate locks between the first and second quarters, indicating potentially stronger origination trends in the third quarter. This is due primarily to seasonality. Campanelli specifically mentioned $136 million in rate-lock commitments as of June 30 for a prime jumbo program the company is rolling out.
While originations fell from $4.9 billion in the first quarter to $4.5 billion in the second, the gain-on-sale margin increased 5 basis points to 91 bps.
During the quarter, Flagstar sold $68 million of nonperforming commercial real estate assets for a gain of $600,000.
On Tuesday, the company entered into an agreement with PNC Financial Services Group to sell 27 branches located in Georgia. A PNC spokesman said among the opportunities for the company from the transaction is to expand its mortgage originations presence. While PNC is acquiring $240 million of deposits in the deal, no mortgage loans are changing hands in the transaction, its spokesman told this publication.
