CEO Says Flagstar Will Be Back in the Black in 2012

Flagstar Bancorp (FBC) reported another loss in the first quarter but its chief executive assured investors Tuesday that the Troy, Mich., company will return to profitability this year.

Fueled by a surge in mortgage lending, the $14 billion-asset company said its first-quarter loss narrowed to $8.7 million, from $78.2 million in the prior quarter and $31.7 million in last year's first quarter. Its total revenues, before credit costs, climbed 229% year over year, to $206.3 million.

Its losses narrowed despite a 310% increase in its loan-loss provision, to $114 million, which Flagstar attributed in part to "a more conservative posture taken by the bank's primary new regulator," the Office of the Comptroller of the Currency. Flagstar had been regulated by the Office of Thrift Supervision until that agency was abolished in July and folded into the OCC.

Revenue growth was driven by record mortgage banking activity. Loan fees increased nearly 90%, year over year, to $29.9 million, while gains on sales of loans more than quadrupled, to $204.9 million.

In a news release, Flagstar Chairman, President and Chief Executive Joseph P. Campanelli said that the company intends to parlay revenues from mortgage lending, as well as its low funding costs, to fuel growth in its other business lines, including commercial lending. Flagstar has lost roughly $1.2 billion since 2007, mostly on soured real estate loans, but Campanelli said that the company's ability to grow revenues in a challenging climate highlights the strength of its brand.

"We believe our business lines are moving in the right direction, and with our continued emphasis on risk management and controlling credit costs, and favorable credit trends, we are reaffirming our previous guidance that we expect to return to profitability during 2012," Campanelli said.

Flagstar's shares were up nearly 9% in heavy trading midday Tuesday, to 95 cents.