Even after integrating
Flagstar reported net income of $36 million for the first quarter as it earned a combined $55 million in net gain on loan sales and net return on mortgage servicing rights. That was a jump of $11 million from the fourth quarter of 2018, but down by $9 million from the year prior. An expansion of 12 basis points in net margin on mortgage rate lock commitments to 72 basis points during the first quarter led the increased revenue.
Flagstar earned $54 million in the fourth quarter and $35 million in the first quarter of 2018.
"Our banking and mortgage servicing businesses had another solid quarter. Deposit costs were 3 basis points lower, reflecting a full quarter of lower cost deposits from the Wells Fargo branch acquisition," Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, said in a press release.
"We are also pleased that four months after conversion, we have experienced deposit attrition of only 4.9%, substantially better than our 10% target and the 17% we modeled. Net interest margin expanded 10 basis points to 3.09% compared to an adjusted fourth-quarter net interest margin of 2.99%. Total serviced accounts increased 13% to 962,000, continuing growth in a segment that provides both a stable source of fee income and liquidity."
While Flagstar's fallout-adjusted locks dropped to $6.6 billion from $7.7 billion year-over-year, they increased from $5.3 billion the quarter prior.
"Our mortgage team delivered for the quarter, maintaining pricing and expense discipline in a very competitive mortgage environment, and then when the market turned favorable late in the quarter, our team was well positioned to take advantage of the opportunity. Fallout-adjusted locks increased 25% to $6.6 billion and gain-on-sale margin expanded for the second consecutive quarter. The improvement in net gain on loan sales more than offset lower net return on MSRs," DiNello said.
The company earned $0.63 per diluted share in the first quarter, up from the $0.60 the year before. However, earnings fell from 2018's fourth quarter when net income was $0.93 per diluted share.