Flagstar Bancorp is the holding company for Flagstar Bank, which operates about 115 branches (including some in retail stores) in Michigan. Home loans are a major focus for Flagstar. The thrift originates, purchases, and services residential mortgages in all 50 states through a network of brokers and correspondents, as well as nearly 30 of its own loan offices in more than a dozen states. More than three-quarters of the company's revenue (after interest expenses) is linked to residential lending, but the reliance on this business hurt Flagstar during the housing bust. Expanding its commercial lending operations, the firm in 2011 opened four full-service branches in Massachusetts, Connecticut, and Rhode Island.
Flagstar is broadening its reach beyond mortgage lending. The company is transforming its branches into full-service community banks, and focusing on cross-selling an expanded suite of retail, commercial, and government banking services. It has also recently introduced a line of consumer loans such as credit cards and home equity lines of credit, and added services for small and midsized businesses like treasury management and specialty lending. Additionally, the bank formally expanded its commercial lending business into New England. While home mortgage lending remains key to Flagstar, the company hopes to diversify its revenue streams so the business eventually accounts for about a third of sales.
The shift likely has something to do with the company's exposure to the miserable mortgage market. Flagstar has reported annual losses every year since 2007, since which it has lost a total of nearly $1.4 billion. Revenues fell 11% to $851 million in 2011, while losses that year totaled $182 million. Both interest and noninterest earnings declined that year as as the credit markets remained challenged. The company has been slowing its losses down, though, and despite reporting another quarter in the red in 2012, expects to return to profitability for the year. Flagstar has also lowered its provision for loan losses, thanks to a decline in charge-offs.
To raise capital, the company sold 27 bank branches in the suburbs north of Atlanta, along with their deposits, to PNC in 2011. The company also sold its 22 Indiana branches to First Financial Bancorp in late 2011. In addition to bringing in some cash, the divestitures help Flagstar focus on its Michigan operations.
MP Thrift, an affiliate of private equity firm MatlinPatterson Global Advisors, assumed a controlling stake of Flagstar in 2009. Today it owns 64% of the company. – less