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Press release from PR Newswire

Flagstar Reports Second Quarter 2013 Net Income of $65.8 million or $1.10 per Diluted Share

Tuesday, July 23, 2013

Flagstar Reports Second Quarter 2013 Net Income of $65.8 million or $1.10 per Diluted Share

18:43 EDT Tuesday, July 23, 2013

Strengthened regulatory capital ratios and significantly reduced balance sheet risk through bulk loan sales
Non-performing loans declined by 30 percent, troubled debt restructurings declined by 26 percent and allowance coverage increased to 94 percent
Successfully resolved key legacy litigation
New CEO Sandro DiNello committed to transparency and shareholder value

TROY, Mich., July 23, 2013 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported second quarter 2013 net income applicable to common stockholders of $65.8 million, or $1.10 per share (diluted), as compared to $22.2 million, or $0.33 per share (diluted), in the first quarter 2013 and $86.0 million, or $1.47 per share (diluted), in the second quarter 2012. Book value per common share increased to $17.66 at June 30, 2013, as compared to $16.46 at March 31, 2013.

"Our second quarter results represent the successful continuation of Flagstar's efforts to reduce risk, address legacy issues and build strong capital levels," said Sandro DiNello, the Company's President and Chief Executive Officer. "We believe that these efforts, along with new initiatives to reduce expenses and maximize efficiency across the organization, collectively position Flagstar for long-term growth and shareholder value creation.

"During the quarter, we were opportunistic in the resolution of our remaining legacy litigation, entering into settlement agreements with both MBIA and Assured, resulting in a net gain of $44 million. In addition, we took advantage of an improving market for loan demand, selling a substantial amount of non-performing loans and troubled debt restructurings virtually at book, which significantly improved our asset quality ratios. This month, we also made the decision to outsource our non-core default servicing business, which we believe will generate significant cost savings and better position the company to focus on growing the core performing servicing business."

Mr. DiNello continued, "Gain on loan sale income grew from the prior quarter, reflecting an increase in base margin and a flat level of mortgage locks. Despite this improvement, it is important to convey that we believe the recent uptick in mortgage rates will significantly decrease overall refinance volumes in the coming quarters. We believe we can offset some of the expected decrease in refinance production by leveraging our product offerings, overall market position and reputation for speed of closing, and certainty of execution, to continue to grow our share of the purchase market. We also plan to focus on efficiency optimization and disciplined expense management throughout the organization, while developing strategies to improve cross-sells and to utilize excess cash to grow interest-earning assets. As we drive towards Flagstar's next phase of growth and development, we remain committed to improved disclosure and transparency to ensure that our strategy and improved performance is better communicated among the investment community."

Second Quarter 2013 Highlights (as Compared to First Quarter 2013)

  • Net income applicable to common stockholders increased to $65.8 million, as compared to $22.2 million:
    • Income of $49.1 million related to the previously announced settlement with Assured Guaranty Municipal Corp., formerly known as Financial Security Assurance Inc. ("Assured").
    • Loss of $(4.9) million related to the settlement with MBIA Insurance Corporation ("MBIA").
    • Decrease in net interest income to $47.1 million, as compared to $55.7 million.
    • Increase in gain on loan sales to $144.8 million, as compared to $137.5 million.
      • Fallout-adjusted mortgage rate lock commitments of $9.8 billion, relatively flat.
      • Gain on loan sale margin (based on fallout-adjusted locks) of 1.47 percent, as compared to 1.40 percent.
    • Increase in net loan administration income to $36.2 million, as compared to $20.4 million.
  • Strengthened regulatory capital ratios, maintained liquidity and sold mortgage servicing rights:
    • Tier 1 leverage ratio increased by 86 basis points to 11.00 percent
    • Cash and cash equivalents increased by $0.5 billion to $2.7 billion.
    • Completed bulk sales of mortgage servicing rights related to $12.7 billion in underlying mortgage loans.
  • Significantly improved credit quality:
    • Sold $341.1 million in unpaid principal balance of residential first mortgage non-performing loans and total troubled debt restructurings ("TDRs"), with a carrying value of $277.9 million, for 99.5 percent of carrying value, resulting in a net loss (before broker fees) of $1.4 million.
    • Total non-performing loans decreased by 30.2 percent to $257.9 million and total TDRs decreased by 26.4 percent to $547.3 million, of which $451.1 million are performing TDRs.
    • Ratio of allowance for loan losses to non-performing loans increased to 94.2 percent.
    • Total pipeline of active loan repurchase demands (the "repurchase pipeline") decreased by 38.5 percent to $115.0 million, while the representation and warranty reserve remained at $185.0 million.

Litigation Settlements

On May 2, 2013 the Bank entered into an agreement (the "MBIA Settlement Agreement") to settle the previously announced lawsuit which was filed by MBIA on January 11, 2013. The lawsuit involved approximately $1.1 billion of non-agency securitization transactions in 2006 and 2007 involving fixed and adjustable rate second mortgage loans that MBIA insured. Under the terms of the Settlement Agreement, MBIA terminated its pending lawsuit and in exchange, among other consideration and transaction provisions, the Company paid MBIA $110.0 million. As a result of the MBIA Settlement Agreement, the Company recognized a loss of $(4.9) million. This includes a $7.2 million loss (recorded in other non-interest income) arising from the fair value of the assets in the mortgage securitizations and an $8.8 million other-than-temporary impairment, partially offset by $5.0 million in income recognition resulting from the reversal of related reserves for pending and threatened litigation and a $6.1 million tax benefit resulting from the deferred tax asset associated with the mortgage securitization.

On June 21, 2013 the Bank entered into an agreement (the "Assured Settlement Agreement") to settle the previously announced lawsuit filed by Assured. The litigation pertained to $902.2 million of non-agency securitization transactions in 2005 and 2006 involving home equity line of credit ("HELOC") loans which were insured by Assured. Under the terms of the Assured Settlement Agreement, Assured terminated its pending lawsuit and will not pursue any related claims at any time in the future. In exchange, the Company paid Assured $105.0 million and will assume responsibility for future claims associated with the two HELOC securitization trusts, including the right to receive from Assured all future reimbursements for claims paid to which Assured would have been entitled. As a result of the Assured Settlement Agreement, the Company recognized $49.1 million of income, which includes $44.1 million in income arising from the excess of the fair value of the net assets and liabilities in the two HELOC securitizations and $5.0 million in income recognition from the reversal of related reserves for pending and threatened litigation.

Net Interest Income

Second quarter 2013 net interest income decreased to $47.1 million, as compared to $55.7 million for the first quarter 2013 and $75.5 million for the second quarter 2012. The decrease from the prior quarter was driven primarily by lower average balances of interest-earning assets and a decrease in the yield paid on those assets, plus a slight increase in the cost of funds. Net interest margin for the Bank decreased to 1.72 percent, as compared to 1.89 percent for the first quarter 2013 and 2.37 percent for the second quarter 2012. The decrease from the prior quarter reflects the decline in net interest income, which more than offset the decline in the average balances of higher-yielding assets, primarily mortgage loans held-for-sale and warehouse loans.

The average cost of funds for the second quarter 2013 was 1.58 percent, an increase from 1.54 percent for the first quarter 2013 and a decrease from 1.72 percent for the second quarter 2012. The increase from the prior quarter was driven by the use of lower costing short-term FHLB advances during the first quarter which were paid-off during the second quarter 2013 as a result of the availability of increased liquidity. Average cost of total deposits decreased to 0.75 percent for the second quarter 2013, as compared to 0.78 percent for the first quarter 2013 and 1.07 percent for the second quarter 2012. The decrease from the prior quarter was consistent with the Company's improvement in funding mix, as higher-cost retail certificates of deposit were replaced with lower-cost demand and savings deposits.

Non-interest Income

Second quarter 2013 non-interest income increased to $220.0 million, as compared to $184.9 million for the first quarter 2013 and decreased from $240.3 million for the second quarter 2012. The increase from the prior quarter was driven by increased gain on loan sales, net servicing revenue and other non-interest income.

Second quarter 2013 net gain on loan sales increased to $144.8 million, as compared to $137.5 million for the first quarter 2013 and decreased from $212.7 million for the second quarter 2012. The increase from the prior quarter was primarily due to an increase in the gain on sale margin, combined with a flat level of mortgage rate lock commitments. Gain on loan sale margin (based on the amount of rate lock commitments net of estimated cancellations, or "fallout-adjusted locks") increased to 1.47 percent for the second quarter 2013, as compared to 1.40 percent for the first quarter 2013 and decreased from 1.59 percent for the second quarter 2012. Fallout-adjusted locks were $9.8 billion in the second quarter 2013, flat from the level in the prior quarter.

Mortgage originations decreased to $10.9 billion for the second quarter 2013, as compared to $12.4 billion for the prior quarter and $12.5 billion for the second quarter 2012. Purchase originations comprised 28.9 percent of overall mortgage originations in the second quarter, as compared to 18.8 percent in the prior quarter, reflecting the shift to a more purchase-driven market as a result of the recent and sustained increase in mortgage interest rate levels.

Loan fees and charges decreased to $29.9 million for the second quarter 2013, as compared to $33.4 million for the first quarter 2013 and $34.8 million for the second quarter 2012. Loan fees and charges are driven by mortgage loan originations, which decreased to $10.9 billion for the second quarter 2013, as compared to $12.4 billion for the first quarter 2013 to $12.5 billion for the second quarter 2012.

Net servicing revenue, which is the combination of loan administration income (including the off-balance sheet hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), increased to $36.2 million for the second quarter 2013, as compared to $20.4 million for the first quarter 2013 and $28.7 million for the second quarter 2012. The increase from the prior quarter was primarily attributable to a gain associated with bulk sales of mortgage servicing rights related to $12.7 billion in underlying mortgage loans, partially offset by a decrease in hedge performance from the prior quarter.

The Company's second quarter 2013 results included $44.1 million related to the Assured Settlement Agreement and a loss of $7.2 million related to the MBIA Settlement Agreement, which in total, increased other non-interest income by $36.8 million from the prior quarter.

The Company also recorded a second quarter 2013 net impairment loss on its investment securities available-for-sale of $8.8 million (recognized in earnings), as compared to no impairment in the prior quarter, as a result of the MBIA Settlement Agreement.

Non-interest Expense

Non-interest expense was $174.4 million for the second quarter 2013, as compared to $196.6 million for the first quarter 2013 and $169.5 million for the second quarter 2012. Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality, below), non-interest expense would have totaled $158.5 million for the second quarter 2013, as compared to $180.1 million for the first quarter 2013 and $148.6 million for the second quarter 2012. The decrease from the prior quarter primarily reflects decreases in legal and professional expense and compensation and benefits.

Second quarter 2013 legal and professional expense decreased to $16.4 million, as compared to $28.8 million for the first quarter 2013. The decrease from the prior quarter was primarily driven by a $10.0 million release of reserves for pending and threatened litigation associated the Assured Settlement Agreement and the MBIA Settlement Agreement. As a result of the settlement agreements, the Company's reserves for pending and threatened litigation decreased by $221.2 million from the prior quarter to a balance of $26.8 million at June 30, 2013, which primarily includes the U.S. Department of Justice ("DOJ") litigation.

Compensation and benefits decreased to $70.9 million for the second quarter 2013, as compared to $77.2 million for the first quarter 2013 but increased from $65.4 million for the second quarter 2012. The decrease from the prior quarter was primarily related to the timing of payroll taxes. Commission expense decreased to $15.4 million for the second quarter 2013, as compared to $17.5 million for the first quarter 2013 and $17.8 million for the second quarter 2012. The decrease from the prior quarter was consistent with the 12.4 percent decrease in mortgage loan originations during the quarter.

Credit-Related Costs and Asset Quality

For the second quarter 2013, total credit-related costs (see non-GAAP reconciliation) increased to $85.2 million, as compared to $54.4 million for the first quarter 2013 and $127.6 million for the second quarter 2012. The increase from the prior quarter was primarily due to increases in the provision for loan losses, representation and warranty reserve - change in estimate and other than temporary impairment on available-for-sale investment securities (discussed in Non-interest Income, above).

During the quarter, the Company sold $341.1 million in unpaid principal balance of residential first mortgage non-performing and TDRs, with a carrying value of $277.9 million. The Company recorded a total loss on the sales of $3.0 million, which included $1.6 million in fees paid to the broker.

At June 30, 2013, the allowance for loan losses decreased to $243.0 million, as compared to $290.0 million at March 31, 2013, primarily driven by the charge-off of $38.3 million in reserves associated with the non-performing loan and TDR sales, partially offset by an increase in the allowance for loan losses related to emerging risks associated with loans expected to convert from interest-only to full-pay. At June 30, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment increased to 94.2 percent, as compared to 78.5 percent at March 31, 2013.

Provision for loan losses increased to $31.6 million for the second quarter 2013, as compared to $20.4 million for the prior quarter, driven primarily by the increased allowance for loan losses related to emerging risks associated with loans expected to convert from interest-only to full-pay. Second quarter 2013 net charge-offs increased to $78.6 million, as compared to $35.4 million for the prior quarter, driven primarily by the $38.3 million in charge-offs associated with the non-performing loan and TDR sales.

The Company maintains a representation and warranty reserve on the balance sheet, which reflects an estimate of losses that may occur on both loans that have been sold or securitized into the secondary market and those currently in the repurchase pipeline, primarily to the GSEs. At June 30, 2013, the representation and warranty reserve was $185.0 million, which remained flat as compared to March 31, 2013. During the second quarter 2013, the model was enhanced to reflect a change in estimate of loss period as a result of increased requests by the GSEs for loan files for loans originated in earlier vintages. As a result, provisions related to the representation and warranty reserve - change in estimate increased to $28.9 million for the second quarter 2013, as compared to $17.4 million for the first quarter 2013.

At June 30, 2013, the total repurchase pipeline decreased to $115.0 million, as compared to $187.0 million at March 31, 2013, as the Company continued to aggressively work through its existing population of repurchase requests. New audit file review requests increased by 33.5 percent in the second quarter 2013 from the first quarter 2013, while new repurchase demands decreased by 35.4 percent from the prior quarter.

Total non-performing loans held-for-investment were $257.9 million at June 30, 2013, a decrease as compared to $369.3 million at March 31, 2013 and $431.6 million at June 30, 2012. The ratio of non-performing loans held-for-investment to loans held-for-investment also decreased to 5.74 percent at June 30, 2013, from 7.79 percent at March 31, 2013, as a result of the decrease in non-performing loans. These decreases from the prior quarter were primarily due to a decrease in consumer non-performing loans as a result of the sale of residential first mortgage non-performing loans completed during the second quarter 2013.

Commercial non-performing loans decreased to $63.8 million at June 30, 2013, as compared to $66.1 million at March 31, 2013 and $138.1 million at June 30, 2012, primarily driven by normal dispositions of commercial real estate loans.

Real estate-owned and other non-performing assets also decreased to $86.4 million at June 30, 2013, as compared to $114.4 million at March 31, 2013. The decrease was driven primarily by the sale of residential first mortgage non-performing loans, a portion of which were considered in-substance foreclosures for accounting purposes and therefore classified as real-estate owned.

Asset resolution expense, which includes expenses associated with foreclosed properties (including the foreclosure claims in process with respect to government insured loans for which the Bank files claims with HUD) was $15.9 million for the second quarter 2013, relatively flat as compared to $16.4 million for the first quarter 2013, but decreased from $20.9 million for the second quarter 2012.

Balance Sheet and Funding

Total assets at June 30, 2013 were $12.7 billion, as compared to $13.1 billion at March 31, 2013, driven primarily by a decrease in loans held-for-sale reflecting the decrease in mortgage loan originations during the second quarter 2013. This decrease was partially offset by an increase in cash on hand and interest-earning deposits from the proceeds of the non-performing loan and TDR sales completed during the second quarter 2013.

Long-term debt increased to $367.4 million at June 30, 2013, as compared to $247.4 million at March 30, 2013, driven by the on balance-sheet recognition of debt, which is recorded at fair value, associated with the Company's re-consolidation of the two HELOC securitization trusts as a result of the Assured Settlement Agreement.

Total deposits were $7.5 billion at June 30, 2013, a decrease of $0.3 billion as compared to $7.8 billion at March 31, 2013. The decrease from the prior quarter was primarily attributable to a decrease in retail certificates of deposits, which were replaced, in part, by retail demand and savings deposits. The Company's average balances of retail demand and savings deposits increased by 2.1 percent and 7.0 percent, respectively, from the prior quarter.

At June 30, 2013, the Company had approximately $2.7 billion of cash on hand and interest-earning deposits, as compared to $2.2 billion at March 31, 2013. The Bank maintains a line of credit with the FHLB under which borrowings are collateralized by residential first mortgage loans and other assets of the Bank. At June 30, 2013, the Bank had medium-term outstanding borrowings from the FHLB of $2.9 billion and an additional $0.5 billion of collateralized borrowing capacity available at the FHLB.

Capital

The Bank's regulatory capital ratios remain above current regulatory quantitative guidelines for "well-capitalized" institutions. At June 30, 2013, the Bank had a Tier 1 leverage ratio of 11.00 percent, as compared to 10.14 percent at March 31, 2013. At June 30, 2013, the Company had an equity-to-assets ratio of 9.84 percent.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, July 24, 2013 from 11 a.m. until Noon (Eastern).

It is preferred that questions are emailed in advance to investors@flagstar.com, or they may be asked during the conference call.

To join the call, please dial (888) 726-2423 toll free or (913) 312-1480, and use passcode: 7813813. Please call at least 10 minutes before the call is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, using passcode: 7813813.

The conference call will also be available as a live audio cast on the Investor Relations section of flagstar.com. It will be archived on that site and will be available for replay and download. A slide presentation to accompany the conference call will also be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. is the holding company for Flagstar Bank, FSB, a full-service financial institution offering a range of products and services to consumers, businesses, and homeowners. With $12.7 billion in total assets at June 30, 2013, Flagstar is the largest publicly held savings bank headquartered in the Midwest. Flagstar operates 111 banking centers, all of which are located in Michigan and 40 home lending centers located in 17 states, which primarily originate one-to-four family residential first mortgage loans. Originating loans nationwide, Flagstar is one of the leading originators of residential first mortgage loans. For more information, please visit flagstar.com.

Non-GAAP

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that are difficult to predict and could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Forward-looking statements contained in this press release and any information related to expectations about future events or results are based upon information available to the Company as of the date hereof. Forward-looking statements can be identified by such words as "anticipates," "intends," "plans," "seeks," "believes," "expects", "estimates," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements made regarding the Company's current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the suspension of dividend payments on preferred stock, the deferral of interest payment on trust preferred securities, the result of improvements to the Company's servicing processes, the Company's strategy for outsourcing its non-core default servicing business and other similar matters. Although we believe that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies, and other factors. Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on any forward-looking statement and to consider all of the following uncertainties and risks, as well as those more fully discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, our Form 10-K and Forms 10-Q: volatile interest rates that impact, among other things, the mortgage banking business, our ability to originate loans and sell assets at a profit, prepayment speeds and our cost of funds; changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios; actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures; uncertainty regarding pending and threatened litigation; our ability to control credit related costs and forecast the adequacy of reserves; the imposition of regulatory enforcement actions against us; our compliance with the Supervisory Agreement with the Board of Governors of the Federal Reserve System and the Consent Order with the Office of the Comptroller of the Currency. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the SEC, the Company undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made.

 

Flagstar Bancorp, Inc.Consolidated Statements of Financial Condition(Dollars in thousands)

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Assets

(Unaudited)

(Unaudited)

(Unaudited)

Cash and cash equivalents

Cash and cash items

$

51,252

$

50,840

$

38,070

$

71,184

Interest-earning deposits

2,653,191

2,179,846

914,723

1,199,205

Total cash and cash equivalents

2,704,443

2,230,686

952,793

1,270,389

Trading securities

50,039

170,139

170,086

169,834

Investment securities available-for-sale

92,930

169,827

184,445

424,765

Loans held-for-sale

2,331,458

2,677,239

3,939,720

2,459,482

Loans repurchased with government guarantees

1,509,365

1,604,906

1,841,342

1,999,110

Loans, net

Loans held-for-investment

4,491,153

4,743,266

5,438,101

6,550,257

Less: allowance for loan losses

(243,000)

(290,000)

(305,000)

(287,000)

Total loans held-for-investment, net

4,248,153

4,453,266

5,133,101

6,263,257

Mortgage servicing rights

729,019

727,207

710,791

638,865

Repossessed assets, net

86,382

114,356

120,732

107,235

Federal Home Loan Bank stock

301,737

301,737

301,737

301,737

Premises and equipment, net

227,771

223,276

219,059

209,126

Other assets

453,720

421,511

508,206

524,646

Total assets

$

12,735,017

$

13,094,150

$

14,082,012

$

14,368,446

Liabilities and Stockholders' Equity

Deposits

Non-interest bearing

$

1,181,226

$

1,112,313

$

1,308,317

$

2,079,456

Interest bearing

6,288,841

6,734,978

6,985,978

6,843,391

Total deposits

7,470,067

7,847,291

8,294,295

8,922,847

Federal Home Loan Bank advances

2,900,000

2,900,000

3,180,000

3,400,000

Long-term debt

367,415

247,435

247,435

248,585

Representation and warranty reserve

185,000

185,000

193,000

161,000

Other liabilities

558,800

730,396

1,007,920

457,665

Total liabilities

11,481,282

11,910,122

12,922,650

13,190,097

Stockholders' Equity

Preferred stock

263,277

261,828

260,390

257,556

Common stock

561

561

559

558

Additional paid in capital

1,477,484

1,476,624

1,476,569

1,473,924

Accumulated other comprehensive (loss) income

988

(656)

(1,658)

8,274

Accumulated deficit

(488,575)

(554,329)

(576,498)

(561,963)

Total stockholders' equity

1,253,735

1,184,028

1,159,362

1,178,349

Total liabilities and stockholders' equity

$

12,735,017

$

13,094,150

$

14,082,012

$

14,368,446

 

Flagstar Bancorp, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Interest Income

Loans

$

81,731

$

91,950

$

115,611

$

173,680

$

229,519

Investment securities available-for-sale or   trading

1,838

2,094

6,850

3,932

15,421

Interest-earning deposits and other

1,489

946

462

2,435

874

Total interest income

85,058

94,990

122,923

180,047

245,814

Interest Expense

Deposits

12,148

13,508

18,321

25,656

37,307

Federal Home Loan Bank advances

24,171

24,161

27,386

48,332

54,779

Other

1,643

1,652

1,738

3,295

3,517

Total interest expense

37,962

39,321

47,445

77,283

95,603

Net interest income

47,096

55,669

75,478

102,764

150,211

Provision for loan losses

31,563

20,415

58,428

51,978

173,101

Net interest income (expense) after provision for loan losses

15,533

35,254

17,050

50,786

(22,890)

Non-Interest Income

Loan fees and charges

29,916

33,360

34,783

63,276

64,757

Deposit fees and charges

5,193

5,146

5,039

10,339

9,961

Loan administration

36,157

20,356

25,012

56,513

63,898

Gain (loss) on trading securities

21

51

3,711

72

(2,260)

Net gain on loan sales

144,791

137,540

212,666

282,331

417,518

Net transactions costs on sales of mortgage servicing rights

(4,264)

(4,219)

(983)

(8,483)

(3,299)

Net gain on investment securities available-for-sale

?

?

20

?

330

Net gain (loss) on sale of assets

1,064

958

(26)

2,022

?

Total other-than-temporary impairment (loss) gain

(8,789)

?

(1,707)

(8,789)

2,810

Gain (loss) recognized in other     comprehensive income before taxes

?

?

690

?

(5,002)

Net impairment losses recognized in earnings

(8,789)

?

(1,017)

(8,789)

(2,192)

Representation and warranty reserve - change in estimate

(28,940)

(17,395)

(46,028)

(46,336)

(106,566)

Other non-interest income

44,810

9,146

7,157

53,957

19,563

Total non-interest income

219,959

184,943

240,334

404,902

461,710

Non-Interest Expense

Compensation and benefits

70,935

77,208

65,402

148,144

131,390

Commissions

15,402

17,462

17,838

32,863

33,305

Occupancy and equipment

22,198

19,375

18,706

41,574

35,656

Asset resolution

15,921

16,445

20,851

32,366

57,621

Federal deposit insurance premiums

7,791

11,240

12,104

19,031

24,428

Loan processing expense

15,389

17,111

11,132

32,500

21,818

Legal and professional expense

16,390

28,839

13,084

45,229

29,901

Other non-interest expense

10,371

8,910

10,380

19,279

24,124

Total non-interest expense

174,397

196,590

169,497

370,986

358,243

Income before federal income taxes

61,095

23,607

87,887

84,702

80,577

(Benefit) provision for federal income taxes

(6,108)

?

500

(6,108)

500

Net income

67,203

23,607

87,387

90,810

80,077

Preferred stock dividend/accretion

(1,449)

(1,438)

(1,417)

(2,887)

(2,824)

Net income applicable to common stockholders

$

65,754

$

22,169

$

85,970

$

87,923

$

77,253

Income per share

     Basic

$

1.11

$

0.33

$

1.48

$

1.44

$

1.26

     Diluted

$

1.10

$

0.33

$

1.47

$

1.43

$

1.26

 

Flagstar Bancorp, Inc.Summary of Selected Consolidated Financial and Statistical Data(Dollars in thousands, except per share data)(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

Return on average assets

2.03

%

0.65

%

2.37

%

1.32

%

1.08

%

Return on average equity

21.23

%

7.55

%

31.09

%

14.57

%

13.78

%

Efficiency ratio

65.3

%

81.7

%

53.7

%

73.1

%

58.5

%

Efficiency ratio (credit-adjusted) (1)

53.5

%

69.8

%

41.1

%

61.1

%

41.8

%

Equity-to-assets ratio (average for the period)

9.56

%

8.57

%

7.62

%

9.06

%

7.81

%

Mortgage loans originated (2)

$

10,882,129

$

12,423,364

$

12,547,017

$

23,305,492

$

23,716,426

Other loans originated

$

67,763

$

74,739

$

203,584

$

142,503

$

475,029

Mortgage loans sold and securitized

$

11,123,821

$

12,822,879

$

12,777,311

$

23,946,700

$

23,607,109

Interest rate spread - bank only (3)

1.46

%

1.64

%

2.10

%

1.55

%

2.12

%

Net interest margin - bank only (4)

1.72

%

1.89

%

2.37

%

1.81

%

2.39

%

Interest rate spread - consolidated (3)

1.43

%

1.61

%

2.08

%

1.52

%

2.10

%

Net interest margin - consolidated (4)

1.66

%

1.83

%

2.32

%

1.75

%

2.34

%

Average common shares outstanding

56,053,922

55,973,888

55,740,558

56,014,126

55,701,431

Average fully diluted shares outstanding

56,419,163

56,415,057

56,182,130

56,417,122

56,008,232

Average interest-earning assets

$

11,311,945

$

12,075,212

$

12,943,237

$

11,691,470

$

12,791,952

Average interest paying liabilities

$

9,642,543

$

10,338,644

$

11,100,307

$

9,988,671

$

11,047,283

Average stockholder's equity

$

1,238,787

$

1,173,982

$

1,106,224

$

1,206,563

$

1,121,421

Charge-offs to average investment loans (annualized) (5)

6.96

%

2.93

%

3.24

%

4.88

%

6.18

%

Charge-offs, excluding one-time charge-off, to average investment loans (annualized) (5)(6)

3.56

%

2.93

%

3.24

%

3.24

%

6.18

%

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Equity-to-assets ratio

9.84

%

9.04

%

8.23

%

8.20

%

Book value per common share

$

17.66

$

16.46

$

16.12

$

16.50

Number of common shares outstanding

56,077,528

56,033,204

55,863,053

55,772,262

Mortgage loans serviced for others

$

68,320,534

$

73,933,296

$

76,821,222

$

76,192,099

Weighted average service fee (basis points)

29.5

29.3

29.2

30.4

Capitalized value of mortgage servicing rights

1.07

%

0.98

%

0.93

%

0.84

%

Ratio of allowance for loan losses to non-performing loans held-for-investment (7)

94.2

%

78.5

%

76.3

%

66.5

%

Ratio of allowance for loan losses to loans held-for-investment (5) (7)

5.75

%

6.11

%

5.61

%

4.38

%

Ratio of non-performing assets to total assets (bank only)

2.71

%

3.70

%

3.70

%

3.75

%

Number of bank branches

111

111

111

111

Number of loan origination centers

40

41

31

30

Number of FTE employees (excluding loan officers and account executives)

3,418

3,456

3,328

3,184

Number of loan officers and account executives

341

322

334

336

(1) See Non-GAAP reconciliation. (2) Includes residential first mortgage and second mortgage loans.  (3) Interest rate spread is the difference between the annualized average yield earned on average interest-earning assets for the period and the annualized average rate of interest paid on average interest-bearing liabilities for the period.(4) Net interest margin is the annualized effect of the net interest income divided by that period's average interest-earning assets.(5) Excludes loans carried under the fair value option. (6) Excludes charge-offs of $38.3 million related to the sale of non-performing loans and TDRs, during both the three and six months ended June 30, 2013, respectively.(7) Only includes non-performing loans held-for-investment.

 

Regulatory Capital(Dollars in thousands)(Unaudited)

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

Tier 1 leverage (to adjusted tangible assets) (1)

$

1,390,582

11.00

%

$

1,318,770

10.14

%

$

1,295,841

9.26

%

$

1,295,962

9.07

%

Total adjusted tangible asset base

$

12,646,776

$

13,007,694

$

13,999,636

$

14,282,922

Tier 1 capital (to risk weighted assets) (1)

$

1,390,582

23.73

%

$

1,318,770

21.24

%

$

1,295,841

15.90

%

$

1,295,962

15.76

%

Total capital (to risk weighted assets) (1)

1,465,860

25.01

%

1,398,914

22.53

%

1,400,126

17.18

%

1,400,975

17.03

%

Risk weighted asset base

$

5,861,221

$

6,208,327

$

8,146,771

$

8,224,348

(1) Based on adjusted total assets for purposes of core capital and risk-weighted assets for purposes of total risk-based capital. These ratios are applicable to the Bank only.

 

Loan Originations

(Dollars in thousands)

(Unaudited)

Three Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

Consumer loans

Mortgage (1)

$

10,882,129

99.4

%

$

12,423,364

99.4

%

$

12,547,017

98.4

%

Other consumer (2)

11,659

0.1

%

8,553

0.1

%

6,501

0.1

%

Total consumer loans

10,893,788

99.5

%

12,431,917

99.5

%

12,553,518

98.5

%

Commercial loans (3)

56,104

0.5

%

66,186

0.5

%

197,083

1.5

%

Total loan originations

$

10,949,892

100.0

%

$

12,498,103

100.0

%

$

12,750,601

100.0

%

Six Months Ended

June 30, 2013

June 30, 2012

Consumer loans

Mortgage (1)

$

23,305,492

99.4

%

$

23,716,426

98.1

%

Other consumer (2)

20,212

0.1

%

10,980

?

%

Total consumer loans

23,325,704

99.5

%

23,727,406

98.1

%

Commercial loans (3)

122,291

0.5

%

464,049

1.9

%

Total loan originations

$

23,447,995

100.0

%

$

24,191,455

100.0

%

(1) Includes residential first mortgage and second mortgage loans.

(2) Other consumer loans include: warehouse lending, HELOC and other consumer loans.

(3) Commercial loans include: commercial real estate, commercial and industrial and commercial lease financing loans.

 

Loans Held-for-Investment(Dollars in thousands)(Unaudited)

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Consumer loans

Residential first mortgage

$

2,627,979

58.5

%

$

2,991,394

63.1

%

$

3,009,251

55.3

%

$

3,102,137

47.4

%

Second mortgage

180,802

4.0

%

112,385

2.4

%

114,885

2.1

%

127,434

1.9

%

Warehouse lending

676,454

15.1

%

750,765

15.8

%

1,347,727

24.8

%

1,261,442

19.3

%

HELOC

321,576

7.2

%

167,815

3.5

%

179,447

3.3

%

198,228

3.0

%

Other

42,293

0.9

%

44,488

0.9

%

49,611

0.9

%

57,605

0.9

%

Total consumer loans

3,849,104

85.7

%

4,066,847

85.7

%

4,700,921

86.4

%

4,746,846

72.5

%

Commercial loans

Commercial real estate

476,500

10.6

%

562,916

11.9

%

640,315

11.8

%

1,075,015

16.4

%

Commercial and industrial

160,259

3.6

%

107,688

2.3

%

90,565

1.7

%

569,288

8.7

%

Commercial lease financing

5,290

0.1

%

5,815

0.1

%

6,300

0.1

%

159,108

2.4

%

Total commercial loans

642,049

14.3

%

676,419

14.3

%

737,180

13.6

%

1,803,411

27.5

%

Total loans held-for-        investment

$

4,491,153

100.0

%

$

4,743,266

100.0

%

$

5,438,101

100.0

%

$

6,550,257

100.0

%

 

Allowance for Loan Losses(Dollars in thousands)(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

Beginning balance

$

290,000

$

305,000

$

281,000

$

305,000

$

318,000

Provision for loan losses

31,563

20,415

58,428

51,978

173,101

Charge-offs

Consumer loans

Residential first mortgage

(63,099)

(25,692)

(22,570)

(88,791)

(118,002)

Second mortgage

(2,033)

(1,955)

(4,057)

(3,988)

(9,340)

HELOC

(812)

(2,061)

(4,257)

(2,873)

(10,676)

Other

(587)

(699)

(728)

(1,286)

(1,918)

Total consumer loans

(66,531)

(30,407)

(31,612)

(96,938)

(139,936)

Commercial loans

Commercial real estate

(21,350)

(13,162)

(31,277)

(34,512)

(76,310)

Commercial and industrial

?

?

(23)

?

(1,604)

Total commercial loans

(21,350)

(13,162)

(31,300)

(34,512)

(77,914)

Total charge-offs

(87,881)

(43,569)

(62,912)

(131,450)

(217,850)

Recoveries

Consumer loans

Residential first mortgage

6,687

5,353

6,582

12,040

7,132

Second mortgage

87

390

1,039

477

1,288

HELOC

457

105

93

562

350

Other

(80)

454

395

374

607

Total consumer loans

7,151

6,302

8,109

13,453

9,377

Commercial loans

Commercial real estate

2,159

1,843

2,344

4,002

4,336

Commercial and industrial

8

9

31

17

36

Total commercial loans

2,167

1,852

2,375

4,019

4,372

Total recoveries

9,318

8,154

10,484

17,472

13,749

Charge-offs, net of recoveries

(78,563)

(35,415)

(52,428)

(113,978)

(204,101)

Ending balance

$

243,000

$

290,000

$

287,000

$

243,000

$

287,000

Net charge-off ratio (annualized) (1)

6.96

%

2.93

%

3.24

%

4.88

%

6.18

%

Net charge-off ratio, excluding one-time charge-off (annualized) (1)(2)

3.56

%

2.93

%

3.24

%

3.24

%

6.18

%

(1) Excludes loans carried under the fair value option. (2) Excludes charge-offs of $38.3 million related to the sale of non-performing loans and TDRs, during both the three and six months ended June 30, 2013, respectively.

 

Representation and Warranty Reserve(Dollars in thousands)(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

Balance, beginning of period

$

185,000

$

193,000

$

142,000

$

193,000

$

120,000

Provision

Charged to gain on sale for current loan sales

5,052

5,817

5,643

10,870

10,694

Charged to representation and warranty reserve - change in estimate

28,941

17,396

46,028

46,336

106,566

Total

33,993

23,213

51,671

57,206

117,260

Charge-offs, net

(33,993)

(31,213)

(32,671)

(65,206)

(76,260)

Balance, end of period

$

185,000

$

185,000

$

161,000

$

185,000

$

161,000

 

Composition of Allowance for Loan Losses(Dollars in thousands)(Unaudited)

June 30, 2013

Collectively Evaluated Reserves

Individually Evaluated Reserves

Total

Consumer loans

Residential first mortgage

$

67,264

$

110,070

$

177,334

Second mortgage

10,870

7,969

18,839

Warehouse lending

721

?

721

HELOC

11,735

3,133

14,868

Other

1,780

?

1,780

Total consumer loans

92,370

121,172

213,542

Commercial loans

Commercial real estate

27,253

69

27,322

Commercial and industrial

2,052

84

2,136

Commercial lease financing

?

?

?

Total commercial loans

29,305

153

29,458

Total allowance for loan losses

$

121,675

$

121,325

$

243,000

March 31, 2013

Collectively Evaluated Reserves

Individually Evaluated Reserves

Total

Consumer loans

Residential first mortgage

$

63,144

$

150,932

$

214,076

Second mortgage

12,839

7,844

20,683

Warehouse lending

532

?

532

HELOC

14,835

3,283

18,118

Other

2,215

?

2,215

Total consumer loans

93,565

162,059

255,624

Commercial loans

Commercial real estate

32,521

199

32,720

Commercial and industrial

1,562

10

1,572

Commercial lease financing

84

?

84

Total commercial loans

34,167

209

34,376

Total allowance for loan losses

$

127,732

$

162,268

$

290,000

 

Non-Performing Loans and Assets(Dollars in thousands)(Unaudited)

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Non-performing loans

$

161,725

$

223,388

$

254,581

$

298,511

Non-performing TDRs

24,025

56,498

60,516

58,240

Non-performing TDRs at inception but performing for less than six months

72,186

89,417

84,728

74,848

Total non-performing loans held-for-investment

257,936

369,303

399,825

431,599

Real estate and other non-performing assets, net

86,382

114,356

120,732

107,235

Non-performing assets held-for-investment, net

344,318

483,659

520,557

538,834

Non-performing loans held-for-sale

3,351

394

1,835

2,430

Total non-performing assets including loans held-for-sale

$

347,669

$

484,053

$

522,392

$

541,264

Ratio of non-performing assets to total assets (Bank only)

2.71

%

3.70

%

3.72

%

3.77

%

Ratio of non-performing loans held-for-investment to loans held-for-investment

5.74

%

7.79

%

7.35

%

6.59

%

Ratio of non-performing assets to loans held-for-investment and repossessed assets

7.52

%

9.96

%

9.36

%

8.09

%

 

Asset Quality - Loans Held-for-Investment(Dollars in thousands)(Unaudited)

30-59 Days Past Due

60-89 Days Past Due

Greater than 90 days

Total Past Due

Total Investment Loans

June 30, 2013

Consumer loans

$

60,872

$

13,421

$

194,151

$

268,444

$

3,849,104

Commercial loans

188

22,736

63,785

86,709

642,049

Total loans

$

61,060

$

36,157

$

257,936

$

355,153

$

4,491,153

March 31, 2013

      Consumer loans

$

58,368

$

20,481

$

303,168

$

382,017

$

4,066,847

    Commercial loans

1,465

6,400

66,135

74,000

676,419

Total loans

$

59,833

$

26,881

$

369,303

$

456,017

$

4,743,266

December 31, 2012

Consumer loans

$

66,687

$

18,578

$

313,418

$

398,683

$

4,700,921

Commercial loans

6,979

6,990

86,408

100,377

737,180

Total loans

$

73,666

$

25,568

$

399,826

$

499,060

$

5,438,101

June 30, 2012

Consumer loans

$

62,123

$

24,762

$

293,474

$

380,359

$

4,746,846

Commercial loans

1,719

2,345

138,125

142,189

1,803,411

Total loans

$

63,842

$

27,107

$

431,599

$

522,548

$

6,550,257

 

Troubled Debt Restructurings(Dollars in thousands)(Unaudited)

TDRs

Performing

Non-performing

Non-performing TDRs at inception but performing for less than six months

Total

June 30, 2013

Consumer loans

$

451,097

$

24,025

$

71,951

$

547,073

Commercial loans

?

?

235

235

Total TDRs

$

451,097

$

24,025

$

72,186

$

547,308

March 31, 2013

Consumer loans

$

598,041

$

56,498

$

87,971

$

742,510

Commercial loans

?

?

1,446

1,446

Total TDRs

$

598,041

$

56,498

$

89,417

$

743,956

December 31, 2012

Consumer loans

$

588,475

$

60,493

$

82,695

$

731,663

Commercial loans

1,287

23

2,033

3,343

Total TDRs

$

589,762

$

60,516

$

84,728

$

735,006

June 30, 2012

Consumer loans

$

574,359

$

57,914

$

68,398

$

700,671

Commercial loans

1,738

326

6,450

8,514

Total TDRs

$

576,097

$

58,240

$

74,848

$

709,185

 

Gain on Loan Sales and Securitizations(Dollars in thousands)(Unaudited)

Three Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

Description

Valuation gain (loss)

Value of interest rate locks

$

(75,040)

(0.68)%

$

(35,327)

(0.28)%

$

64,123

0.50

%

Value of forward sales

166,941

1.51

%

(4,339)

(0.03)%

(47,126)

(0.37)%

Fair value of loans held-for-sale

(19,336)

(0.17)%

87,644

0.68

%

176,741

1.38

%

LOCOM adjustments on loans held-for-    investment

?

?

%

(1,797)

(0.01)%

?

?

%

Total valuation gains

72,565

0.66

%

46,181

0.36

%

193,738

1.51

%

Sales gains (losses)

Marketing gains, net of adjustments

28,753

0.25

%

25,859

0.21

%

180,691

1.41

%

Pair-off (losses) gains

48,525

0.44

%

71,317

0.55

%

(156,120)

(1.22)%

Provision for representation and warranty reserve

(5,052)

(0.05)%

(5,817)

(0.05)%

(5,643)

(0.04)%

Total sales gains

72,226

0.64

%

91,359

0.71

%

18,928

0.15

%

Total gain on loan sales and securitizations

$

144,791

$

137,540

$

212,666

Total mortgage rate lock commitments (gross)

$

12,359,000

$

12,142,000

$

17,534,000

Total loan sales and securitizations

$

11,123,821

1.30

%

$

12,822,879

1.07

%

$

12,777,311

1.66

%

Total mortgage rate lock commitments (fallout adjusted) (1)

$

9,837,573

1.47

%

$

9,848,417

1.40

%

$

13,346,568

1.59

%

Six Months Ended

June 30, 2013

June 30, 2012

Description

Valuation gain (loss)

Value of interest rate locks

$

(110,367)

(0.46)%

$

61,423

0.26

%

Value of forward sales

162,602

0.68

%

(3,316)

(0.01)%

Fair value of loans held-for-sale

68,307

0.29

%

297,805

1.26

%

LOCOM adjustments on loans held-for-investment

(1,797)

(0.01)%

(21)

?

%

Total valuation gains

118,745

0.5

%

355,891

1.51

%

Sales gains (losses)

Marketing gains, net of adjustments

54,612

0.23

%

312,203

1.33

%

Pair-off gains (losses)

119,842

0.5

%

(239,883)

(1.02)%

Provision for representation and warranty reserve

(10,869)

(0.05)%

(10,693)

(0.05)%

Total sales gains

163,585

0.68

%

61,627

0.26

%

Total gain on loan sales and securitizations

$

282,330

$

417,518

Total mortgage rate lock commitments volume

$

24,501,000

$

32,401,000

Total loan sales and securitizations

$

23,946,700

1.18

%

$

23,607,109

1.77

%

Total mortgage rate lock commitments (fallout adjusted) (1)

$

19,685,990

1.43

%

$

24,072,186

1.73

%

(1) Fallout adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates. The net margin is based on net gain on loan sales to fallout adjusted mortgage rate lock commitments.

 

Average Balances, Yields and Rates(Dollars in thousands)(Unaudited)

Three Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Interest-Earning Assets

Loans held-for-sale

$

2,630,309

3.38

%

$

3,616,195

2.97

%

$

2,977,233

3.91

%

Loans repurchased with government guarantees

1,540,798

3.43

%

1,774,235

3.38

%

2,067,022

3.36

%

Loans held-for-investment

Consumer loans (1) (2)

3,845,503

4.08

%

4,136,420

4.15

%

4,635,259

4.38

%

Commercial loans (1)

669,253

4.18

%

698,269

4.27

%

1,835,897

3.97

%

Total loans held-for-investment

4,514,756

4.10

%

4,834,689

4.16

%

6,471,156

4.27

%

Investment securities available-for-sale or trading

240,296

3.06

%

348,525

2.41

%

642,389

4.27

%

Interest-earning deposits and other

2,385,786

0.25

%

1,501,568

0.26

%

785,437

0.24

%

Total interest-earning assets

11,311,945

3.01

%

12,075,212

3.15

%

12,943,237

3.80

%

Other assets

1,649,000

1,617,359

1,571,239

Total assets

$

12,960,945

$

13,692,571

$

14,514,476

Interest-Bearing Liabilities

Retail deposits

Demand deposits

$

395,137

0.21

%

$

388,466

0.25

%

$

361,916

0.24

%

Savings deposits

2,627,166

0.73

%

2,316,859

0.75

%

1,829,592

0.75

%

Money market deposits

345,694

0.26

%

387,699

0.35

%

482,296

0.49

%

Certificate of deposits

2,353,775

0.91

%

2,931,558

0.90

%

3,113,134

1.27

%

Total retail deposits

5,721,772

0.74

%

6,024,582

0.76

%

5,786,938

0.98

%

Government deposits

Demand deposits

114,707

0.40

%

98,442

0.44

%

95,805

0.49

%

Savings deposits

169,122

0.29

%

308,811

0.47

%

272,119

0.56

%

Certificate of deposits

413,177

0.44

%

471,842

0.60

%

361,315

0.66

%

Total government deposits

697,006

0.40

%

879,095

0.53

%

729,239

0.60

%

Wholesale deposits

73,910

5.07

%

81,976

4.92

%

339,018

3.78

%

Total deposits

6,492,688

0.75

%

6,985,653

0.78

%

6,855,195

1.07

%

Federal Home Loan Bank advances

2,901,102

3.34

%

3,105,556

3.16

%

3,996,527

2.76

%

Other

248,753

2.65

%

247,435

2.71

%

248,585

2.81

%

Total interest-bearing liabilities

9,642,543

1.58

%

10,338,644

1.54

%

11,100,307

1.72

%

Other liabilities (3)

2,079,615

2,179,945

2,307,945

Stockholder's equity

1,238,787

1,173,982

1,106,224

Total liabilities and stockholder's equity

$

12,960,945

$

13,692,571

$

14,514,476

(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.

(2) Excludes loans that are consolidated variable interest entities (VIEs) and carried at fair value.

(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

 

Average Balances, Yields and Rates(Dollars in thousands)(Unaudited)

Six Months Ended

June 30, 2013

June 30, 2012

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Interest-Earning Assets

Loans held-for-sale

$

3,120,529

3.14

%

$

2,685,479

3.97

%

Loans repurchased with government guarantees

1,656,872

3.41

%

2,044,680

3.37

%

Loans held-for-investment

Consumer loans (1) (2)

3,990,157

4.12

%

4,813,043

4.36

%

Commercial loans (1)

683,681

4.23

%

1,795,907

4.09

%

Total loans held-for-investment

4,673,838

4.13

%

6,608,950

4.28

%

Investment securities available-for-sale or trading

294,112

2.67

%

714,332

4.32

%

Interest-earning deposits and other

1,946,119

0.25

%

738,511

0.24

%

Total interest-earning assets

11,691,470

3.08

%

12,791,952

3.84

%

Other assets

1,633,267

1,568,874

Total assets

$

13,324,737

$

14,360,826

Interest-Bearing Liabilities

Retail deposits

Demand deposits

$

391,820

0.23

%

$

354,229

0.25

%

Savings deposits

2,472,870

0.74

%

1,719,894

0.79

%

Money market deposits

366,581

0.30

%

484,602

0.51

%

Certificate of deposits

2,641,070

0.90

%

3,099,009

1.31

%

Total retail deposits

5,872,341

0.75

%

5,657,734

1.01

%

Government deposits

Demand deposits

106,619

0.42

%

97,265

0.49

%

Savings deposits

238,581

0.40

%

271,360

0.57

%

Certificate of deposits

442,347

0.52

%

376,985

0.66

%

Total government deposits

787,547

0.47

%

745,610

0.61

%

Wholesale deposits

77,921

4.99

%

348,275

3.76

%

Total deposits

6,737,809

0.77

%

6,751,619

1.11

%

FHLB advances

3,002,764

3.25

%

4,047,079

2.72

%

Other

248,098

2.68

%

248,585

2.84

%

Total interest-bearing liabilities

9,988,671

1.56

%

11,047,283

1.74

%

Other liabilities (3)

2,129,503

2,192,122

Stockholder's equity

1,206,563

1,121,421

Total liabilities and stockholder's equity

$

13,324,737

$

14,360,826

(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.

(2) Excludes loans that are consolidated variable interest entities (VIEs) and carried at fair value.

(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

 

Non-GAAP Reconciliation(Dollars in thousands)(Unaudited)

Three Months Ended

Six Months Ended

June 30, 2013

March 31, 2013

June 30, 2012

June 30, 2013

June 30, 2012

Pre-tax, pre-credit-cost revenue

Income before tax provision

$

61,095

$

23,607

$

87,887

$

84,702

$

80,577

Add back

Provision for loan losses

31,563

20,415

58,428

51,978

173,101

Asset resolution

15,921

16,445

20,851

32,366

57,621

Other than temporary impairment on AFS     investments

8,789

?

1,017

8,789

2,192

Representation and warranty reserve      - change in estimate

28,940

17,395

46,028

46,336

106,566

Write down of residual interest

?

174

1,244

174

1,653

Total credit-related costs

85,213

54,429

127,568

139,643

341,133

Pre-tax, pre-credit-cost net revenue

$

146,308

$

78,036

$

215,455

$

224,345

$

421,710

Efficiency ratio (credit-adjusted)

Net interest income (a)

$

47,096

$

55,669

$

75,478

$

102,764

$

150,211

Non-interest income (b)

219,959

184,943

240,334

404,902

461,710

Add: Representation and warranty reserve     - change in estimate (d)

28,940

17,395

46,028

46,336

106,566

Adjusted income

295,995

258,007

361,840

554,002

718,487

Non-interest expense (c)

174,397

196,590

169,497

370,986

358,243

Less: Asset resolution expense (e)

(15,921)

(16,445)

(20,851)

(32,366)

(57,621)

Adjusted non-interest expense

$

158,476

$

180,145

$

148,646

$

338,620

$

300,622

Efficiency ratio (c/(a+b))

65.3

%

81.7

%

53.7

%

73.1

%

58.5

%

Efficiency ratio (credit-adjusted)((c-e)/((a+b)+d)))

53.5

%

69.8

%

41.1

%

61.1

%

41.8

%

June 30, 2013

March 31, 2013

December 31, 2012

June 30, 2012

Non-performing assets / Tier 1 capital + allowance for loan losses

Non-performing assets

$

344,318

$

483,659

$

520,557

$

538,834

Tier 1 capital (1)

1,390,582

1,318,770

1,295,841

1,295,962

Allowance for loan losses

243,000

290,000

305,000

287,000

Tier 1 capital + allowance for loan losses

$

1,633,582

$

1,608,770

$

1,600,841

$

1,582,962

Non-performing assets / Tier 1 capital + allowance for loan losses

21.1

%

30.1

%

32.5

%

34.0

%

(1) Represents Tier 1 capital for Bank.

 

SOURCE Flagstar Bancorp, Inc.

For further information: Paul D. Borja, Chief Financial Officer, or Bradley T. Howes, Investor Relations Officer, (248) 312-2000

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