Flagstar Bancorp Inc. of Troy, Mich., reported Wednesday that its first-quarter loss widened to $82 million from $67.4 million a year earlier.
Yet the $14.4 billion-asset company still managed to raise $576.7 million of fresh capital, which analysts said will enable it to ride out persistent credit-quality issues.
"The capital we feel has allowed them to strengthen the balance sheet enough that they're in a position where they can weather the storm, in terms of the credit losses that they're going to get on their legacy portfolio," said Bose George, an analyst at KBW Inc.'s Keefe, Bruyette & Woods Inc. "So in that sense, it was a hugely successful quarter. It looks like they've ensured that they'll be a survivor."
At March 31, Flagstar's thrift unit had a Tier 1 capital ratio of 9.37%, compared with 5.8% at Dec. 31, and a total risk-based capital ratio of 17.9%, compared with 11.23%.
Flagstar also is seeing signs of credit-quality improvement. Despite a 40% year-over-year increase in nonperforming assets, nonperformers rose just 8% from the fourth quarter. The loan-loss provision declined 33% from the fourth quarter, to $63.5 million.
Net chargeoffs were cut in half, to $49.6 million from $98.9 million in the fourth quarter, a trend that is expected to continue.
"Flagstar is on the move, positioned for growth and moving in the right direction," Joseph Campanelli, the company's chief executive, said in an earnings call Wednesday.
Flagstar blamed its higher loss on problems with its mortgage banking operations, which make up the bulk of its revenue stream.
Loan production declined 37.6%, to $4.3 billion from the fourth quarter, and the gain on loan sales margin dropped 30 basis points quarter to quarter, to 1.05%.
Terry McEvoy, an analyst at Oppenheimer & Co., said those declines are the result of market conditions. Campanelli said Flagstar will next focus on diversifying its revenue stream to rely less on its mortgage banking operations.