Considering the steps they had to take in the latest quarter, Flagstar Bancorp (NYSE:FBC) didn't perform too badly, according to FBR, but they still have a long way to go and a lot to prove before confidence in them can be fully restored.
FBR says, "Overall, we thought this was a good quarter for Flagstar, considering the drastic strategic actions the company had to take. The company was able to increase its mortgage originations, while NIM increased over 53 bps to 2.08% from 1.55% as deposit costs dropped more than expected. On the credit side, NPAs declined from $1,141M to $498M due to the sale of the nonperforming residential mortgages. We believe that after shedding problem assets and recapitalizing its balance sheet, Flagstar is better positioned to return to profitability in 2Q11 or 3Q11 and to eventually pay back TARP. However, the company still needs to execute its goals of increasing NIM closer to 2.30% and replacing its brokered deposits with more traditional and stable funding sources, while keeping operating costs at reasonable levels. If Flagstar can demonstrate that it is progressing toward these goals, we would become more constructive on shares."
FBR Capital reiterates a 'Market Perform' on Flagstar Bancorp (FBC), which closed Thursday at $1.65, gaining $0.02, or 1.23 percent. FBR has a price target of $1.75 on Flagstar.
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