NEW YORK - Michigan National Corp., under regulatory pressure to strengthen its management and its balance sheet, took special gains in the third quarter to offset continuing credit problems.
The company, which lost $28.7 million in the first half, sold rights to service about $2.2 billion of mortgages and about $300 million of mortgage loans during the quarter, chairman and CEO Robert J. Mylod said in an interview on Wednesday.
Proceeds from the mortgage servicing sales should help offset writeoffs related to $75 million of intangibles from past purchases of servicing portfolios, said Joseph Duwan, an analyst at Keefe, Bruyette & Woods Inc.
In a telephone interview, Mr. Mylod said Michigan National will announce third-quarter results substantially better than its $16.2 million gain in the second quarter.
He also expanded on details of a memorandum of understanding that his suburban Detroit-based company signed with the Office of the Comptroller of the Currency in August. The regulatory agreement, the least restrictive of administrative enforcement actions, requires the company to complete a study of its management structure by Nov. 2.
Searching for Top-Level Help
The agreement sheds new light on Mr. Mylod's announcement in late July that his board is searching for a president and chief operating officer to help him oversee the bank.
The search committee is down to a "short list" of candidates, the executive said Wednesday. He refused to comment on specific names, including that of James Waterston, a former senior officer of Detroit-based Comerica Inc. Mr. Waterston, who resigned a few months ago as chief banking officer of Keycorp, could not be reached for comment.
The regulatory agreement also requires Michigan National to adopt by yearend systems for identifying and managing risks companywide, and to "complete a review of its mortgage banking business" and adopt appropriate hedging strategies.
The bulk of Michigan National's recent credit problems relate to a steep decline in the value of its mortgage-servicing portfolio stemming from refinancings. Mr. Mylod said the company is revising its strategy of building a big servicing business, and will focus more on nationwide originations.
Michigan National, he added, recently hired Deloitte & Touche, the consultant firm, to work on "reengineering" the mortgage area and to explore cost-saving opportunities throughout the $10.5 billion-asset company.