Fresh off NYCB acquisition news, Flagstar earnings show slight decline

It’s already been an eventful year for Flagstar Bancorp.

The holding company for Flagstar Bank faced a data breach in March, resolved a nine-year penalty with the Department of Justice in the same month and got acquired by New York Community Bancorp in a $2.6 billion deal announced this morning. Flagstar also reported its first quarter earnings, which were strong in spite of regulatory and interest rate uncertainties, company president and CEO Alessandro DiNello said.

The company opened 2021 by generating a net income of $149 million or $2.80 per diluted share, down from $154 million and $2.83 in the fourth quarter, but more than tripled the $46 million and $0.80 per diluted share year-over-year.

Flagstar’s mortgage revenue decreased quarterly to $227 million from $232 million but spiked annually from $96 million in the first quarter of 2020. The average margins followed the same pattern, declining to 1.84% from 1.93% in the fourth quarter of 2020 while jumping from 0.8% year-over-year. Origination volume climbed to $13.8 billion in the first quarter from $13.1 billion in the fourth quarter of 2020 and $8.6 billion the year prior.

"Our mortgage team delivered another strong quarter and leveraged our multi-channel mortgage platform to grow fallout adjusted locks by 3%,” DiNello said in a press release. “With our ability to originate mortgages in multiple channels, our asset-sensitive balance sheet, our strong ACL coverage, and our demonstrated power to generate capital, we are well positioned to flex our business to take advantage of whatever may come our way… and to find success whatever the environment may be."

Flagstar’s servicing and subservicing portfolios both grew. The overall unpaid principal balance rose to $247.4 billion across 1.15 million loans from $226.7 billion and 1.09 million in the fourth quarter and $225 billion and 1.08 million the year before.

Subservicing accounted for $197.1 billion and 921,126 accounts, up from $178.6 billion and 867,799 quarter-over-quarter and $193 billion and 916,989 year-over-year. The company’s servicing portfolio totaled $40.4 billion, growing from $38 billion quarterly and $23.4 billion annually. Flagstar is servicing just under $10 billion in its own loans, down from $10.1 billion in the fourth quarter and up from $8.5 billion in 1Q 2020.

Going forward, the deal with NYCB will allow Flagstar to “increase long-term shareholder value through continued expansion to achieve the scale necessary to aggressively invest in our key businesses,” DiNello said.