Flagstar Bank had a loss of $27.6 million in the third quarter, driven by a Consumer Financial Protection Bureau penalty of $37.5 million, the Troy, Mich., lender said Wednesday.
The loss compares to a profit of $12 million in last year's third quarter. The bank has lost a total of $81 million for the first nine months of 2014. The adjusted loss per share under generally accepted accounting principles was 61 cents, far greater than the 12.5 cent average estimate of analysts surveyed by Bloomberg.
Total noninterest income fell about 37% while net interest income rose by about 33%. The bank provisioned $8 million for credit losses, twice the amount it did during the third quarter last year. The net interest margin tightened seven basis points to 2.91%.
Excluding the CFPB penalties, Flagstar generated about $141.5 million combined net interest and noninterest income, barely covering some $140.8 million in "core operating expenses" (what it would have spent for the quarter before the CFPB action).
Even on that basis Flagstar only eked out a profit through crediting itself with $10.4 million for a reassessment of how much it will have to indemnify government loans. Bose George, an analyst for the firm KBW, described this reassessment as a one-time measure.
Flagstar also saw a close to 20% decline in total assets, to $9.6 billion, as a result of continuing divestment of loans. "They've been shrinking their balance sheet for some time now," George said. Net charge-offs were $13.1 million, down about two-thirds from a year earlier. Michigan's housing market was one of the hardest hit in the post-2008 financial crisis.
Notably, total cash and cash equivalents declined from about $2.5 billion to $106.8 million, partially due to the bank repaying Federal Home Loan Bank advances, according to George.
The CFPB's regulatory action was related to improper delays of foreclosure relief and other mortgage-related violations. This was the CFPB's first action enforcing new mortgage servicing rules it issued in January.