Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Flagstar's Flagging Performance

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Flagstar Bancorp (NYSE: FBC  ) has disappointed its investors once again by reporting its 13th straight quarter of net losses. Does the bank have any positives to offer? Let's take a look.

The quarter in detail
In my previous discussion of the bank's first-quarter results, I sounded cautiously optimistic as it recorded significant improvements in its key metrics, in spite of posting a net loss. But this time, the tune has changed.

The bank's net losses have gone up to $74.9 million from $31.7 million in the first quarter of 2011. While its regional peers such as KeyCorp (NYSE: KEY  ) and SunTrust Banks (NYSE: STI  ) have been reporting quarterly profits on the back of declining provisions for loan losses (PLL), Flagstar continues to struggle with its losses.

The negatives
The preceding quarter witnessed a considerable drop in PLL, but this quarter saw that figure rise to $48.4 million from $28.3 million. I also noticed a slight decline in net interest margin (NIM) because of a 1.5% dip in average interest-earning assets. Consequently, net interest income (NII) decreased by $1.3 million from the prior quarter. Non-interest income also declined to $58.1 million from $96.3 million.

This continued rise in delinquencies, combined with unfavorable conditions in the housing industry, resulted in an increase in residential loan portfolio provisions. Furthermore, the bank continues to grapple with credit costs, which have been plaguing it for a while now.

The positives
The bank, however, did reveal a few positives. Average core deposits grew by 8.4% from the last quarter. Flagstar also maintains a decent Tier 1 capital ratio of 10.07%, which is well above the minimum level of 8%. Flagstar is selling 27 of its branches to PNC Financial (NYSE: PNC  ) as it plans to focus its expansion in the Midwest and Northeast markets. But these positives weren't enough to break its trend of more significant bad news.

The Foolish bottom line
With consecutive losses and not many noticeable improvements, the second quarter doesn't paint a very healthy picture of Flagstar. At the moment, I would prefer to keep an eye on this stock, but from a distance.

Fool contributor Zeeshan Siddique owns none of the stocks mentioned in the article. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1531542, ~/Articles/ArticleHandler.aspx, 10/28/2016 12:18:27 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,229.12 59.44 0.33%
S&P 500 2,138.87 5.83 0.27%
NASD 5,218.18 2.21 0.04%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 11:52 AM
FBC $27.37 Down -0.03 -0.11%
Flagstar Bancorp CAPS Rating: ***
KEY $14.16 Down -0.11 -0.77%
KeyCorp CAPS Rating: ****
PNC $95.31 Down -0.12 -0.13%
PNC Financial Serv… CAPS Rating: ****
STI $45.45 Down -0.22 -0.47%
SunTrust Banks CAPS Rating: ****