- With the a challenging housing market still serving as a headwind to its core mortgage origination business, Flagstar (FBC +7.7%) has focused efforts on de-risking its balance sheet and reducing costs and risks associated with NPLs, writes BTIG's Mark Palmer.
- The bank's sale of $386M of interest-only loans during Q2 as well as $70M of NPLs helped drive a $10.3M after-tax reserve release, making a big earnings beat even bigger.
- Still, says Palmer, mortgage originations will be the primary driver of the stock price, and after a big uptick in Q1, things pulled back last quarter as gain on loan sales fell to $82.2M from $91.3M, and gain on sales margin fell six basis points to 1.21%.
- Palmer reiterates his Neutral rating and sees the stock - trading at 0.95x book value - as close to fair value.
- Previously: Cut in loan-loss provisions boosts Flagstar's quarter (July 28)
- Previously: Flagstar beats by $0.31, beats on revenue (July 28)
Flagstar Bancorp soars after Q2 results; BTIG stays lukewarm
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