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Press release from PR Newswire

Flagstar Reports Third Quarter 2013 Net Income of $12.8 million or $0.16 per Diluted Share

Tuesday, October 22, 2013

Flagstar Reports Third Quarter 2013 Net Income of $12.8 million or $0.16 per Diluted Share

16:55 EDT Tuesday, October 22, 2013

TROY, Mich., Oct. 22, 2013 /PRNewswire/ --

Results demonstrate the Company's continued progress reducing risk, improving credit performance and disposing of legacy assets

Non-performing loans declined by 46 percent, TDRs decreased by 21 percent, while allowance coverage ratio increased to 153 percent

Purchase mortgage originations increased 17 percent, reflecting industry shift to more purchase-driven market

Executing initiatives to optimize cost structure; non-interest expense decreased by $16 million during quarter, with further savings anticipated

Flagstar Bancorp, Inc. (NYSE: FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported third quarter 2013 net income applicable to common stockholders of $12.8 million, or $0.16 per share (diluted), as compared to $65.8 million, or $1.10 per share (diluted), in the second quarter 2013 and $79.7 million, or $1.36 per share (diluted), in the third quarter 2012.  Book value per common share increased to $17.96 at September 30, 2013, as compared to $17.66 at June 30, 2013.

"As expected, mortgage-related revenues were lower this quarter, with higher interest rates driving a significant decline in refinance volume," said Sandro DiNello, the Company's President and Chief Executive Officer.  "The 17 percent increase in purchase mortgage originations, along with improved credit performance and decreased fixed and variable expenses, helped to partially offset the reduction in refinance activity." 

DiNello continued, "Mortgage banking continues to be a key component of Flagstar's overall strategy, and we are adapting to a shift in the mortgage industry from a primarily refinance-driven market to a purchase market by further reducing our cost structure and focusing our efforts on appropriate growth opportunities.  We also have worked to reduce various risks in the organization.  At the same time, we increased our capital and liquidity position, and improved our reserve coverage, to provide Flagstar with the ability to capitalize on growth opportunities and deliver improved shareholder returns despite a weaker mortgage environment."       

"Our third quarter results demonstrate significant progress in our ongoing efforts to optimize Flagstar's cost structure, improve the Company's risk profile and dispose of legacy assets," said Lee Smith, the Company's Chief Operating Officer.  "During the third quarter, we executed a series of company-wide expense cutting initiatives, leading to a reduction in non-interest expense by almost $16 million from the prior quarter.  We sold approximately $167 million (unpaid principle balance) of non-performing loans and troubled debt restructurings, which significantly improved asset quality ratios and contributed to lower credit costs.  Total non-performing loans decreased to the lowest level since 2007, and our allowance increased to over 150 percent coverage of non-performing loans."

Smith added, "We have made great progress in addressing Flagstar's legacy issues and believe our actions have significantly improved the Company's financial performance and have placed Flagstar in a position to drive diversified and sustainable long-term revenue growth.  We are also working to create a sub-servicing platform which we believe will give us the ability to further diversify and increase revenues in the future."

Third Quarter 2013 Highlights:

  • Net income applicable to common stockholders decreased to $12.8 million, as compared to $65.8 million in the prior quarter (which included the benefit of $44.1 million in income arising from the settlement agreements).
    • Gain on loan sales decreased by $69.7 million from the prior quarter.
    • Net interest income decreased by $4.4 million from the prior quarter.
    • Total credit-related costs decreased by $59.7 million from the prior quarter.
    • Non-interest expense decreased by $15.9 million from the prior quarter.
  • Book value per common share increased to $17.96, compared to $17.66 in the prior quarter.
  • Tier 1 leverage ratio increased by 98 basis points from the prior quarter to 11.98 percent.
  • Total mortgage originations decreased by 28.9 percent from the prior quarter to $7.7 billion, driven by a decline in refinance mortgage originations.
    • Purchase mortgage originations increased by 17.0 percent from the prior quarter, partially offsetting the decline in refinance mortgage originations.
  • Credit performance continued to improve:
    • Sold $167.2 million in unpaid principal balance of residential first mortgage non-performing loans and total troubled debt restructuring loans ("TDRs"), resulting in a net gain (after broker fees) of $1.6 million.
    • Total non-performing loans decreased by 46.2 percent to $138.8 million.
    • Total TDRs decreased by 20.9 percent to $432.7 million, of which $387.9 million were performing.
    • Ratio of allowance for loan losses to non-performing loans held-for-investment increased to 152.6 percent.
    • Net charge-offs decreased to $40.1 million, as compared to $78.6 million in the prior quarter.

Net Interest Income

Third quarter 2013 net interest income decreased to $42.7 million, as compared to $47.1 million for the second quarter 2013 and $73.1 million for the third quarter 2012.  The decrease from the prior quarter is in-line with expectations and largely due to a decrease in the average balance of interest-earning assets, primarily within the residential first mortgage loan (both available-for-sale and held-for-investment) and warehouse loan portfolios.  These decreases in average balances were partially offset by an increase in the yield earned on residential first mortgage loans held-for-sale and an improvement in the Bank's deposit mix.  Net interest margin for the Bank decreased to 1.68 percent for third quarter 2013, as compared to 1.72 percent for the second quarter 2013 and 2.21 percent for the third quarter 2012. 

The average cost of funds for the third quarter 2013 was 1.58 percent, unchanged from the second quarter 2013 and decreased from 1.73 percent for the third quarter 2012.  While the average cost of funds was flat from the prior quarter, the average cost of total deposits decreased to 0.67 percent for the third quarter 2013, as compared to 0.75 percent for the second quarter 2013 and 1.02 percent for the third quarter 2012.  The decrease from the prior quarter was driven primarily by a reduction in higher-cost retail certificates of deposit and a decrease in the average rate paid on retail savings accounts.

Non-interest Income

Third quarter 2013 non-interest income decreased to $134.3 million, as compared to $220.0 million for the second quarter 2013 and $273.7 million for the third quarter 2012.  The decrease from the prior quarter was driven by a decrease in net gain on loan sales, partially offset by a decrease in representation and warranty provision - change in estimate (discussed in Credit-Related Costs and Asset Quality, below).  The Company's non-interest income in the prior quarter included $36.8 million of the $44.1 million in total income related to settlement agreements with Assured and MBIA.   

Third quarter 2013 net gain on loan sales decreased to $75.1 million, as compared to $144.8 million for the second quarter 2013 and $334.4 million for the third quarter 2012.  The decrease from the prior quarter reflects both a lower level of mortgage rate lock commitments (given the rising interest rate environment) and a decrease in gain on loan sale margin.  Fallout adjusted mortgage rate lock commitments were $6.6 billion for the third quarter 2013, a 32.9 percent decrease from the prior quarter.

Mortgage originations also decreased to $7.7 billion for the third quarter 2013, as compared to $10.9 billion for second quarter 2013 and $14.5 billion for the third quarter 2012.  The decrease from the prior quarter was driven by a decline in refinance originations, consistent with the increase in mortgage interest rate levels as compared to prior quarter.  The decrease in refinance originations was partially offset by an increase in purchase mortgage originations, which increased by 17.0 percent from the prior quarter.  Purchase originations comprised 47.6 percent of the Company's overall residential first mortgage originations in the third quarter 2013, an increase from 28.9 percent in the prior quarter, consistent with the industry shift to a more purchase-driven market.   

Gain on loan sale margin (based on the amount of rate lock commitments net of estimated cancellations, or "fallout-adjusted locks") decreased to 1.14 percent for the third quarter 2013, as compared to 1.47 percent for the second quarter 2013 and 2.39 percent for the third quarter 2012.  The decrease from the prior quarter was driven by a number of factors, principally due to lower hedge performance.   

Loan fees and charges decreased to $20.9 million for the third quarter 2013, as compared to $29.9 million for the second quarter 2013 and $37.4 million for the third quarter 2012.  Loan fees and charges are driven by mortgage loan originations, and the decline from the prior quarter was consistent with the decline in mortgage originations during the third quarter 2013.

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), was $30.4 million for the third quarter 2013, as compared to $36.2 million for the second quarter 2013 and $11.3 million for the third quarter 2012.  The decrease from the prior quarter was primarily attributable to higher income in the second quarter 2013 resulting from bulk sales of mortgage servicing rights. There were no bulk sales of mortgage servicing rights during the third quarter 2013.

Non-interest Expense

Non-interest expense was $158.4 million for the third quarter 2013, as compared to $174.4 million for the second quarter 2013 and $233.5 million for the third quarter 2012.  Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality, below), non-interest expense would have totaled $142.1 million for the third quarter 2013, as compared to $158.5 million for the second quarter 2013 and $221.0 million for the third quarter 2012.  The decrease from the prior quarter reflected lower variable expenses related to the decrease in mortgage originations from the prior quarter, as well as reduced fixed costs as a result of the Company's ongoing initiatives to optimize its cost structure in light of the changing mortgage origination market. 

Compensation and benefits decreased to $61.6 million for the third quarter 2013, as compared to $70.9 million for the second quarter 2013 and $67.4 million for the third quarter 2012.  The decrease from the prior quarter was driven by a reduction in annual incentive compensation and a decrease in both headcount and contract employees, both consistent with the Company's ongoing efforts to optimize its cost structure and manage expenses more in line with revenues.  Full-time equivalent employees plus loan officers and account executives decreased by 331 from the prior quarter, and the number of long-term subcontract employees decreased by 155 from the prior quarter.  

Commission expense decreased to $12.1 million for the third quarter 2013, as compared to $15.4 million for the second quarter 2013 and $19.9 million for the third quarter 2012.  Loan processing expense also decreased to $10.9 million for the third quarter 2013, as compared to $15.4 million for the second quarter 2013 and $15.7 million for the third quarter 2012.  Commissions and loan processing expense are both related to mortgage originations, and the decreases were consistent with the decrease in mortgage originations during the third quarter 2013. 

Third quarter 2013 occupancy and equipment expense decreased to $18.6 million, as compared to $22.2 million for the second quarter 2013 and $18.8 million for the third quarter 2012. The decrease from the prior quarter was primarily due to a reduction in capitalized projects, as a result of the Company's ongoing cost reduction initiatives.  

Third quarter 2013 legal and professional expenses increased to $19.6 million, as compared to $16.4 million for the second quarter 2013, and decreased from $57.2 million for the third quarter 2012.  The prior quarter included a $10.0 million release of reserves for pending and threatened litigation associated with the settlement agreements with Assured and MBIA.  Excluding the $10.0 million release of reserves in the prior quarter, legal and professional expenses would have decreased by $6.8 million from the prior quarter, driven largely by a reduction in third party legal expenses as a result of the resolution of the Assured and MBIA litigation, as well as and lower expenses related to the Company's vendor management and procurement initiatives. 

Credit-Related Costs and Asset Quality

For the third quarter 2013, total credit-related costs (see non-GAAP reconciliation) decreased to $25.6 million, as compared to $85.2 million for the second quarter 2013 and $189.7 million for the third quarter 2012.  The decrease from the prior quarter was primarily driven by decreases in the provision for loan losses and the representation and warranty reserve - change in estimate.

At September 30, 2013, the Company's allowance for loan losses decreased to $207.0 million, as compared to $243.0 million at June 30, 2013 and $305.0 million at September 30, 2012.  The decrease from the prior quarter was primarily the result of a release of reserves associated with the non-performing loans and TDRs sold during the quarter, as well as decreased reserves from normal loan run-off.  At September 30, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment increased to 152.6 percent, as compared to 94.2 percent at June 30, 2013 and 76.5 percent at September 30, 2012.

Net charge-offs for the third quarter were $40.1 million, a decrease of $38.5 million as compared to $78.6 million for the prior quarter, and a slight increase from $34.6 million for the third quarter 2012.  Provision for loan losses decreased to $4.1 million for the third quarter 2013, as compared to $31.6 million for the prior quarter and $52.6 million for the third quarter 2012. The decrease from the prior quarter reflects the lower level of allowance for loan losses and the decrease in net charge-offs.

Total non-performing loans held-for-investment were $138.8 million at September 30, 2013, a decrease as compared to $257.9 million at June 30, 2013 and $398.9 million at September 30, 2012.  The decrease from the prior quarter was driven by lower consumer non-performing loans reflecting the sales completed during the quarter, as well as lower commercial non-performing loans driven by discounted pay-offs and note sales.  The ratio of non-performing loans held-for-investment to loans held-for-investment also decreased to 3.46 percent at September 30, 2013, from 5.74 percent at June 30, 2013 and 6.09 percent at September 30, 2012.

Real estate-owned and other non-performing assets decreased to $66.5 million at September 30, 2013, as compared to $86.4 million at June 30, 2013 and $119.5 million at September 30, 2012.  The decrease from the prior quarter was driven by sales of commercial real estate-owned properties and normal run-off in the consumer real estate-owned portfolio.

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 with the GSEs.  At September 30, 2013, the representation and warranty reserve was $174.0 million, as compared to $185.0 million at June 30, 2013 and $202.0 million at September 30, 2012.  The decrease from the prior quarter was consistent with a $14.1 million decrease in net charge-offs of loan repurchases from the prior quarter.  As a result, provisions related to the representation and warranty reserve - change in estimate decreased to $5.2 million for the third quarter 2013, as compared to $28.9 million for the second quarter 2013 and $124.5 million for the third quarter 2012. 

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 $16.3 million for the third quarter 2013, relatively flat as compared to $15.9 million for the second quarter 2013 and increased from $12.5 million for the third quarter 2012. 

Balance Sheet and Funding

Total assets decreased to $11.8 billion at September 30, 2013, as compared to $12.7 billion at June 30, 2013, driven primarily by decreases in the Company's loan portfolios, as a result of reduced mortgage production and the sales of non-performing loans and TDRs.  These decreases were partially offset by a $402.5 million increase in investment securities available-for-sale, as the Company invested a portion of its excess cash.

Loans repurchased with government guarantees decreased to $1.2 billion at September 30, 2013, as compared to $1.5 billion at June 30, 2013 and $1.9 billion at September 30, 2012.  This portfolio represents delinquent loans which have been repurchased from Ginnie Mae pools that are insured or guaranteed by the Federal Housing Administration.  The balance of this portfolio has continued to decrease, driven primarily by normal pay-downs, re-sales and accelerated dispositions.      

Total deposits decreased to $6.6 billion at September 30, 2013, as compared to $7.5 billion at June 30, 2013, due to lower funding needs resulting from a reduction in mortgage originations.  This decrease was primarily driven by a reduction in higher-cost retail certificates of deposit.

At September 30, 2013, the Company had $2.6 billion of cash on hand and interest-earning deposits, as compared to $2.7 billion at June 30, 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 September 30, 2013, the Bank had medium-term outstanding borrowings from the FHLB of $2.9 billion and an additional $0.4 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 September 30, 2013, the Bank had a Tier 1 leverage ratio of 11.98 percent, as compared to 11.00 percent at June 30, 2013.  At September 30, 2013, the Company had an equity-to-assets ratio of 10.78 percent.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, October 23, 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 (800) 768-6563 toll free or (785) 830-7991, and use passcode: 9201691.  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: 9201691.

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. ("Flagstar") 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 $11.8 billion in total assets at September 30, 2013, Flagstar is the largest bank headquartered in Michigan.  Flagstar operates 111 banking centers, all of which are located in Michigan and 45 home lending centers located in 19 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)

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

Assets

(Unaudited)

(Unaudited)

(Unaudited)

Cash and cash equivalents

Cash and cash items

$

68,228

$

51,252

$

38,070

$

53,883

Interest-earning deposits

2,482,882

2,653,191

914,723

949,514

Total cash and cash equivalents

2,551,110

2,704,443

952,793

1,003,397

Trading securities

50,053

50,039

170,086

170,073

Investment securities available-for-sale

495,423

92,930

184,445

198,861

Loans held-for-sale

1,879,290

2,331,458

3,939,720

3,251,936

Loans repurchased with government guarantees

1,231,765

1,509,365

1,841,342

1,931,163

Loans, net

Loans held-for-investment

4,013,507

4,491,153

5,438,101

6,552,399

Less: allowance for loan losses

(207,000)

(243,000)

(305,000)

(305,000)

Total loans held-for-investment, net

3,806,507

4,248,153

5,133,101

6,247,399

Mortgage servicing rights

797,029

729,019

710,791

686,799

Repossessed assets, net

66,530

86,382

120,732

119,468

Federal Home Loan Bank stock

301,737

301,737

301,737

301,737

Premises and equipment, net

229,117

227,771

219,059

211,981

Other assets

399,254

453,720

508,206

776,408

Total assets

$

11,807,815

$

12,735,017

$

14,082,012

$

14,899,222

Liabilities and Stockholders' Equity

Deposits

Non-interest bearing

$

1,002,472

$

1,182,204

$

1,309,649

$

2,504,873

Interest bearing

5,646,813

6,287,863

6,984,646

6,984,296

Total deposits

6,649,285

7,470,067

8,294,295

9,489,169

Federal Home Loan Bank advances

2,907,598

2,900,000

3,180,000

3,088,000

Long-term debt

360,389

367,415

247,435

248,560

Representation and warranty reserve

174,000

185,000

193,000

202,000

Other liabilities

444,188

558,800

1,007,920

620,894

Total liabilities

10,535,460

11,481,282

12,922,650

13,648,623

Stockholders' Equity

Preferred stock

264,726

263,277

260,390

258,973

Common stock

561

561

559

558

Additional paid in capital

1,478,391

1,477,484

1,476,569

1,475,380

Accumulated other comprehensive income (loss)

4,429

988

(1,658)

(2,042)

Accumulated deficit

(475,752)

(488,575)

(576,498)

(482,270)

Total stockholders' equity

1,272,355

1,253,735

1,159,362

1,250,599

Total liabilities and stockholders' equity

$

11,807,815

$

12,735,017

$

14,082,012

$

14,899,222

 

Flagstar Bancorp, Inc.

 Consolidated Statements of Operations

 (Dollars in thousands, except per share data)

Three Months Ended

Nine Months Ended

September 30,2013

June 30, 2013

September 30,2012

September 30, 2013

September 30, 2012

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Interest Income

Loans

$

75,633

$

81,731

$

114,158

$

249,312

$

343,677

Investment securities available-for-sale or trading

1,465

1,838

4,912

5,397

20,333

Interest-earning deposits and other

1,709

1,489

672

4,145

1,546

  Total interest income

78,807

85,058

119,742

258,854

365,556

Interest Expense

Deposits

10,023

12,148

17,819

35,680

55,126

Federal Home Loan Bank advances

24,434

24,171

27,091

72,766

81,870

Other

1,665

1,643

1,753

4,960

5,270

  Total interest expense

36,122

37,962

46,663

113,406

142,266

Net interest income

42,685

47,096

73,079

145,448

223,290

Provision for loan losses

4,053

31,563

52,595

56,030

225,696

Net interest income (expense) after provision for loan losses

38,632

15,533

20,484

89,418

(2,406)

Non-Interest Income

Loan fees and charges

20,876

29,916

37,359

84,152

102,116

Deposit fees and charges

5,410

5,193

5,255

15,749

15,216

Loan administration

30,434

36,157

11,099

86,947

74,997

Gain (loss) on trading securities

13

21

237

85

(2,023)

Net gain on loan sales

75,073

144,791

334,427

357,404

751,945

Net transactions costs on sales of mortgage servicing rights

(1,763)

(4,264)

(1,332)

(10,246)

(4,631)

Net gain on investment securities available-for-sale

?

?

2,616

?

2,946

Total other-than-temporary impairment (loss) gain

?

(8,789)

?

(8,789)

2,810

Gain (loss) recognized in other comprehensive income before taxes

?

?

?

?

(5,002)

Net impairment losses recognized in earnings

?

(8,789)

?

(8,789)

(2,192)

Representation and warranty reserve - change in estimate

(5,205)

(28,940)

(124,492)

(51,541)

(231,058)

Other non-interest income

9,458

45,874

8,568

65,437

28,132

  Total non-interest income

134,296

219,959

273,737

539,198

735,448

Non-Interest Expense

Compensation and benefits

61,552

70,935

67,386

209,696

198,776

Commissions

12,099

15,402

19,888

44,962

53,193

Occupancy and equipment

18,644

22,198

18,833

60,218

54,490

Asset resolution

16,295

15,921

12,487

48,661

70,108

Federal deposit insurance premiums

7,910

7,791

12,643

26,941

37,071

Loss on extinguishment of debt

?

?

15,246

?

15,246

Loan processing expense

10,890

15,389

15,662

43,390

37,480

Legal and professional expense

19,593

16,390

57,209

64,822

87,110

Other non-interest expense

11,453

10,371

14,137

30,732

38,261

  Total non-interest expense

158,436

174,397

233,491

529,422

591,735

Income before federal income taxes

14,492

61,095

60,730

99,194

141,307

(Benefit) provision for federal income taxes

220

(6,108)

(20,380)

(5,888)

(19,880)

Net income

14,272

67,203

81,110

105,082

161,187

Preferred stock dividend/accretion

(1,449)

(1,449)

(1,417)

(4,336)

(4,241)

Net income applicable to common stockholders

$

12,823

$

65,754

$

79,693

$

100,746

$

156,946

Income per share

     Basic

$

0.16

$

1.11

$

1.37

$

1.61

$

2.63

     Diluted

$

0.16

$

1.10

$

1.36

$

1.59

$

2.61

 

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in thousands, except per share data)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

2013

June 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

Return on average assets

0.42

%

2.03

%

2.10

%

1.03

%

1.43

%

Return on average equity

4.05

%

21.23

%

25.78

%

10.95

%

18.04

%

Efficiency ratio

89.5

%

65.3

%

67.3

%

77.3

%

61.7

%

Efficiency ratio (credit-adjusted) (1)

78.0

%

53.5

%

46.9

%

65.3

%

43.8

%

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

10.26

%

9.56

%

8.16

%

9.44

%

7.93

%

Mortgage loans originated (2)

$

7,737,143

$

10,882,129

$

14,513,635

$

31,042,635

$

38,230,061

Other loans originated

$

93,347

$

67,763

$

165,668

$

235,850

$

640,697

Mortgage loans sold and securitized

$

8,344,737

$

11,123,821

$

13,876,626

$

32,291,437

$

37,483,736

Interest rate spread - bank only (3)

1.42

%

1.46

%

1.84

%

1.51

%

2.02

%

Net interest margin - bank only (4)

1.68

%

1.72

%

2.21

%

1.77

%

2.33

%

Interest rate spread - consolidated (3)

1.39

%

1.43

%

1.81

%

1.48

%

2.00

%

Net interest margin - consolidated (4)

1.62

%

1.66

%

2.16

%

1.71

%

2.28

%

Average common shares outstanding

56,096,376

56,053,922

55,801,692

56,041,844

55,735,095

Average fully diluted shares outstanding

56,541,089

56,419,163

56,233,165

56,458,898

56,083,757

Average interest-earning assets

$

10,564,417

$

11,311,945

$

13,476,917

$

11,311,033

$

13,021,941

Average interest paying liabilities

$

9,054,952

$

9,642,543

$

10,737,734

$

9,673,571

$

10,943,347

Average stockholder's equity

$

1,266,267

$

1,238,787

$

1,236,411

$

1,226,683

$

1,160,031

Charge-offs to average LHFI (5)

3.96

%

6.96

%

2.12

%

4.60

%

4.83

%

Charge-offs, to average LHFI adjusted (5)(6)

1.30

%

3.56

%

2.12

%

2.65

%

4.83

%

 

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

Equity-to-assets ratio

10.78

%

9.84

%

8.23

%

8.39

%

Book value per common share

$

17.96

$

17.66

$

16.12

$

17.76

Number of common shares outstanding

56,114,572

56,077,528

55,863,053

55,828,470

Mortgage loans serviced for others

$

74,200,317

$

68,320,534

$

76,821,222

$

82,414,799

Weighted average service fee (basis points)

29.3

29.5

29.2

30.1

Capitalized value of mortgage servicing rights

1.07

%

1.07

%

0.93

%

0.83

%

Ratio of allowance for loan losses to non-performing LHFI (7)

152.6

%

94.2

%

76.3

%

76.5

%

Ratio of allowance for loan losses to LHFI (5) (7)

5.50

%

5.75

%

5.61

%

4.65

%

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

1.74

%

2.71

%

3.70

%

3.48

%

Number of bank branches

111

111

111

111

Number of loan origination centers

45

40

31

31

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

3,069

3,418

3,328

3,240

Number of loan officers and account executives

359

341

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 $26.8 million and $38.3 million related to the sale of non-performing loans and TDRs, during the three months ended September 30, 2013 and June 30, 2013, respectively, and $65.1 million during the nine months ended September 30, 2013.

(7) Only includes non-performing loans held-for-investment.

 

Regulatory Capital

(Dollars in thousands)

(Unaudited)

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

Amount

Ratio

Amount

Ratio

Amount

Ratio

Amount

Ratio

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

$

1,402,423

11.98

%

$

1,390,582

11.00

%

$

1,295,841

9.26

%

$

1,379,701

9.31

%

Total adjusted tangible asset base

$

11,708,635

$

12,646,776

$

13,999,636

$

14,819,100

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

$

1,402,423

26.57

%

$

1,390,582

23.73

%

$

1,295,841

15.90

%

$

1,379,701

16.31

%

Total capital (to risk weighted assets) (1)

1,470,060

27.85

%

1,465,860

25.01

%

1,400,126

17.18

%

1,487,851

17.58

%

Risk weighted asset base

$

5,278,254

$

5,861,221

$

8,146,771

$

8,461,130

(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

September 30, 2013

June 30, 2013

September 30, 2012

Consumer loans

    Mortgage (1)

$

7,737,142

98.8

%

$

10,882,129

99.4

%

$

14,513,635

98.8

%

    Other consumer (2)

24,811

0.3

%

11,659

0.1

%

8,489

0.1

%

Total consumer loans

7,761,953

99.1

%

10,893,788

99.5

%

14,522,124

98.9

%

Commercial loans (3)

68,537

0.9

%

56,104

0.5

%

157,179

1.1

%

Total loan originations

$

7,830,490

100.0

%

$

10,949,892

100.0

%

$

14,679,303

100.0

%

Nine Months Ended

September 30, 2013

September 30, 2012

Consumer loans

    Mortgage (1)

$

31,042,635

99.3

%

$

38,230,061

98.3

%

    Other consumer (2)

45,023

0.1

%

19,469

0.1

%

Total consumer loans

31,087,658

99.4

%

38,249,530

98.4

%

Commercial loans (3)

190,827

0.6

%

621,228

1.6

%

Total loan originations

$

31,278,485

100.0

%

$

38,870,758

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)

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

Consumer loans

Residential first mortgage

$

2,478,599

61.8

%

$

2,627,979

58.5

%

$

3,009,251

55.3

%

$

3,086,096

47.1

%

Second mortgage

174,383

4.3

%

180,802

4.0

%

114,885

2.1

%

122,286

1.9

%

Warehouse lending

390,348

9.7

%

676,454

15.1

%

1,347,727

24.8

%

1,307,292

20.0

%

HELOC

307,552

7.7

%

321,576

7.2

%

179,447

3.3

%

192,117

2.9

%

Other

39,043

1.0

%

42,293

0.9

%

49,611

0.9

%

53,188

0.8

%

Total consumer loans

3,389,925

84.5

%

3,849,104

85.7

%

4,700,921

86.4

%

4,760,979

72.7

%

Commercial loans

Commercial real estate

420,879

10.4

%

476,500

10.6

%

640,315

11.8

%

1,005,498

15.3

%

Commercial and industrial

187,639

4.7

%

160,259

3.6

%

90,565

1.7

%

597,273

9.1

%

Commercial lease financing

15,064

0.4

%

5,290

0.1

%

6,300

0.1

%

188,649

2.9

%

Total commercial loans

623,582

15.5

%

642,049

14.3

%

737,180

13.6

%

1,791,420

27.3

%

Total loans held-for-investment

$

4,013,507

100.0

%

$

4,491,153

100.0

%

$

5,438,101

100.0

%

$

6,552,399

100.0

%

 

Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2013

June 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

Beginning balance

$

243,000

$

290,000

$

287,000

$

305,000

$

318,000

Provision for loan losses

4,053

31,563

52,595

56,030

225,696

Charge-offs

Consumer loans

Residential first mortgage

(34,666)

(63,099)

(23,999)

(123,456)

(142,001)

Second mortgage

(1,534)

(2,033)

(3,990)

(5,522)

(13,330)

Warehouse lending

(45)

?

?

(45)

?

HELOC

(872)

(812)

(1,483)

(3,745)

(12,159)

Other

(1,341)

(587)

(892)

(2,627)

(2,810)

Total consumer loans

(38,458)

(66,531)

(30,364)

(135,395)

(170,300)

Commercial loans

Commercial real estate

(8,419)

(21,350)

(15,532)

(42,931)

(91,842)

Commercial and industrial

(302)

?

(12)

(302)

(1,616)

Total commercial loans

(8,721)

(21,350)

(15,544)

(43,233)

(93,458)

Total charge-offs

(47,179)

(87,881)

(45,908)

(178,628)

(263,758)

Recoveries

Consumer loans

Residential first mortgage

2,256

6,687

5,899

14,296

13,031

Second mortgage

348

87

428

825

1,716

HELOC

143

457

44

705

394

Other

470

(80)

448

844

1,055

Total consumer loans

3,217

7,151

6,819

16,670

16,196

Commercial loans

Commercial real estate

3,860

2,159

4,461

7,862

8,797

Commercial and industrial

49

8

33

66

69

Total commercial loans

3,909

2,167

4,494

7,928

8,866

Total recoveries

7,126

9,318

11,313

24,598

25,062

Charge-offs, net of recoveries

(40,053)

(78,563)

(34,595)

(154,030)

(238,696)

Ending balance

$

207,000

$

243,000

$

305,000

$

207,000

$

305,000

Net charge-off ratio (annualized) (1)

3.96

%

6.96

%

2.12

%

4.60

%

4.83

%

Net charge-off ratio, adjusted (annualized) (1)(2)

1.30

%

3.56

%

2.12

%

2.65

%

4.83

%

(1) Excludes loans carried under the fair value option.

(2) Excludes charge-offs of $26.8 million and $38.3 million related to the sale of non-performing loans and TDRs, during the three months ended September 30, 2013 and June 30, 2013, respectively, and $65.1 million during the nine months ended September 30, 2013.

 

Representation and Warranty Reserve

(Dollars in thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

September 30, 2013

June 30, 2013

September 30, 2012

September 30, 2013

September 30,2012

Balance, beginning of period

$

185,000

$

185,000

$

161,000

$

193,000

$

120,000

Provision

Charged to gain on sale for current loan sales

3,719

5,052

6,432

14,588

17,126

Charged to representation and warranty reserve - change in estimate

5,205

28,941

124,492

51,541

231,058

Total

8,923

33,993

130,924

66,129

248,184

Charge-offs, net

(19,924)

(33,993)

(89,924)

(85,129)

(166,184)

Balance, end of period

$

174,000

$

185,000

$

202,000

$

174,000

$

202,000

 

Composition of Allowance for Loan Losses

 (Dollars in thousands)

(Unaudited)

September 30, 2013

Collectively Evaluated Reserves

Individually Evaluated Reserves

Total

Consumer loans

Residential first mortgage

$

65,490

$

81,087

$

146,577

Second mortgage

10,124

8,571

18,695

Warehouse lending 

408

?

408

HELOC

8,567

540

9,107

Other

2,130

?

2,130

Total consumer loans

86,719

90,198

176,917

Commercial loans

Commercial real estate

25,331

1,161

26,492

Commercial and industrial

3,407

88

3,495

Commercial lease financing 

96

?

96

Total commercial loans

28,834

1,249

30,083

Total allowance for loan losses

$

115,553

$

91,447

$

207,000

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

 

Non-Performing Loans and Assets

(Dollars in thousands)

(Unaudited)

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

Non-performing loans

$

94,062

$

161,725

$

254,582

$

289,468

Non-performing TDRs

21,104

24,025

60,516

55,396

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

23,638

72,186

84,728

54,084

Total non-performing loans held-for-investment

138,804

257,936

399,826

398,948

Real estate and other non-performing assets, net

66,530

86,382

120,732

119,468

Non-performing assets held-for-investment, net

205,334

344,318

520,558

518,416

Non-performing loans held-for-sale

3,099

3,351

1,835

2,086

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

$

208,433

$

347,669

$

522,393

$

520,502

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

1.74

%

2.71

%

3.70

%

3.48

%

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

3.46

%

5.74

%

7.35

%

6.09

%

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

5.03

%

7.52

%

9.36

%

7.77

%

 

Asset Quality - Loans Held-for-Investment

(Dollars in thousands)

(Unaudited)

30-59 DaysPast Due

60-89 Days

 Past Due

Greater than 90 days

Total Past Due

Total Investment Loans

September 30, 2013

Consumer loans

$

51,176

$

18,244

$

123,289

$

192,709

$

3,389,925

Commercial loans

?

208

15,515

15,723

623,582

Total loans

$

51,176

$

18,452

$

138,804

$

208,432

$

4,013,507

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

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

September 30, 2012

Consumer loans

$

53,919

$

26,697

$

276,319

$

356,935

$

4,760,979

Commercial loans

9,563

432

122,629

132,624

1,791,420

Total loans

$

63,482

$

27,129

$

398,948

$

489,559

$

6,552,399

 

Troubled Debt Restructurings

(Dollars in thousands)

(Unaudited)

TDRs

Performing

Non-performing

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

Total

September 30, 2013

Consumer loans

$

387,671

$

21,104

$

21,353

$

430,128

Commercial loans

268

?

2,284

2,552

Total TDRs

$

387,939

$

21,104

$

23,637

$

432,680

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

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

September 30, 2012

Consumer loans

$

612,956

$

55,222

$

51,028

$

719,206

Commercial loans

1,329

173

3,057

4,559

Total TDRs

$

614,285

$

55,395

$

54,085

$

723,765

 

Gain on Loan Sales and Securitizations

(Dollars in thousands)

(Unaudited)

Three Months Ended

September 30, 2013

June 30, 2013

September 30, 2012

Description

Valuation gain (loss)

Value of interest rate locks

$

87,961

1.05

%

$

(75,040)

(0.68)

%

$

97,176

0.73

%

Value of forward sales

(217,987)

(2.61)

%

166,941

1.51

%

(91,329)

(0.68)

%

Fair value of loans held-for-sale

63,394

0.76

%

(19,336)

(0.17)

%

273,270

1.98

%

LOCOM adjustments on loans held-for-investment

?

?

%

?

?

%

?

?

%

Total valuation gains

(66,632)

(0.80)%

72,565

0.66

%

279,117

2.03

%

Sales gains (losses)

Marketing gains, net of adjustments

(52,120)

(0.63)

%

28,753

0.25

%

218,262

1.57

%

Pair-off (losses) gains

197,544

2.37

%

48,525

0.44

%

(156,520)

(1.13)

%

Provision for representation and warranty reserve

(3,719)

(0.04)

%

(5,052)

(0.05)

%

(6,432)

(0.05)

%

Total sales gains

141,705

1.70

%

72,226

0.64

%

55,310

0.39

%

Total gain on loan sales and securitizations

$

75,073

$

144,791

$

334,427

Total mortgage rate lock commitments (gross)

$

8,340,000

$

12,359,000

$

18,089,000

Total loan sales and securitizations

$

8,344,737

0.90

%

$

11,123,821

1.30

%

$

13,876,627

2.42

%

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

$

6,605,432

1.14

%

$

9,837,573

1.47

%

$

13,972,922

2.39

%

Nine Months Ended

September 30, 2013

September 30, 2012

Description

Valuation gain (loss)

Value of interest rate locks

$

(22,406)

(0.07)

%

$

158,599

0.86

%

Value of forward sales

(55,385)

(0.17)

%

(94,645)

(0.68)

%

Fair value of loans held-for-sale

131,702

0.41

%

571,075

1.52

%

LOCOM adjustments on loans held-for-investment

(1,797)

(0.01)

%

(21)

?

%

Total valuation gains

52,114

0.16

%

635,008

1.70

%

Sales gains (losses)

Marketing gains, net of adjustments

2,491

0.02

%

530,466

1.42

%

Pair-off gains (losses)

317,387

0.98

%

(396,403)

(1.06)

%

Provision for representation and warranty reserve

(14,588)

(0.05)

%

(17,126)

(0.05)

%

Total sales gains

305,290

0.95

%

116,937

0.31

%

Total gain on loan sales and securitizations

$

357,404

$

751,945

Total mortgage rate lock commitments volume

$

32,835,000

$

50,489,000

Total loan sales and securitizations

$

32,291,437

1.11

%

$

37,483,736

2.01

%

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

$

26,291,422

1.36

%

$

38,045,108

1.98

%

(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

September 30, 2013

June 30, 2013

September 30, 2012

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Interest-Earning Assets

Loans held-for-sale

$

2,156,966

4.14

%

$

2,630,309

3.38

%

$

3,301,860

3.70

%

Loans repurchased with government guarantees

1,364,949

3.61

%

1,540,798

3.43

%

2,070,813

2.98

%

Loans held-for-investment

Consumer loans (1) (2)

3,412,909

4.06

%

3,845,503

4.08

%

4,717,672

4.32

%

Commercial loans (1)

637,711

3.85

%

669,253

4.18

%

1,815,897

3.67

%

Total loans held-for-investment

4,050,620

4.03

%

4,514,756

4.10

%

6,533,569

4.14

%

Investment securities available-for-sale or trading

295,923

1.98

%

240,296

3.06

%

505,361

3.89

%

Interest-earning deposits and other

2,695,959

0.25

%

2,385,786

0.25

%

1,065,314

0.25

%

Total interest-earning assets

10,564,417

2.98

%

11,311,945

3.01

%

13,476,917

3.54

%

Other assets

1,775,102

1,649,000

1,680,208

Total assets

$

12,339,519

$

12,960,945

$

15,157,125

Interest-Bearing Liabilities

Retail deposits

Demand deposits

$

394,418

0.18

%

$

395,137

0.21

%

$

364,612

0.27

%

Savings deposits

2,815,893

0.60

%

2,627,166

0.73

%

1,768,897

0.65

%

Money market deposits

314,459

0.18

%

345,694

0.26

%

457,425

0.46

%

Certificate of deposits

1,787,318

0.90

%

2,353,775

0.91

%

3,227,201

1.21

%

Total retail deposits

5,312,088

0.65

%

5,721,772

0.74

%

5,818,135

0.92

%

Government deposits

Demand deposits

55,571

0.76

%

114,707

0.40

%

107,944

0.48

%

Savings deposits

163,869

0.27

%

169,122

0.29

%

291,046

0.55

%

Certificate of deposits

303,329

0.29

%

413,177

0.44

%

375,922

0.64

%

Total government deposits

522,769

0.33

%

697,006

0.40

%

774,912

0.58

%

Wholesale deposits

72,141

5.06

%

73,910

5.07

%

334,595

3.77

%

Total deposits

5,906,998

0.67

%

6,492,688

0.75

%

6,927,642

1.02

%

Federal Home Loan Bank advances

2,900,519

3.34

%

2,901,102

3.34

%

3,561,532

3.03

%

Other

247,435

2.67

%

248,753

2.65

%

248,560

2.81

%

Total interest-bearing liabilities

9,054,952

1.58

%

9,642,543

1.58

%

10,737,734

1.73

%

Other liabilities (3)

2,018,300

2,079,615

3,182,980

Stockholder's equity

1,266,267

1,238,787

1,236,411

Total liabilities and stockholder's equity

$

12,339,519

$

12,960,945

$

15,157,125

(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) Includes 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)

Nine Months Ended

September 30, 2013

September 30, 2012

Average Balance

Annualized

Yield/Rate

Average Balance

Annualized

Yield/Rate

Interest-Earning Assets

Loans held-for-sale

$

2,795,812

3.40

%

$

2,892,439

3.87

%

Loans repurchased with government guarantees

1,558,495

3.47

%

2,053,455

3.24

%

Loans held-for-investment

Consumer loans (1) (2)

3,795,003

4.10

%

4,781,021

4.35

%

Commercial loans (1)

668,189

4.10

%

1,802,619

3.95

%

Total loans held-for-investment

4,463,192

4.10

%

6,583,640

4.24

%

Investment securities available-for-sale or trading

294,722

2.44

%

644,166

4.21

%

Interest-earning deposits and other

2,198,812

0.25

%

848,241

0.24

%

Total interest-earning assets

11,311,033

3.05

%

13,021,941

3.74

%

Other assets

1,681,689

1,606,255

Total assets

$

12,992,722

$

14,628,196

Interest-Bearing Liabilities

Retail deposits

Demand deposits

$

392,695

0.21

%

$

357,715

0.26

%

Savings deposits

2,588,468

0.69

%

1,736,348

0.74

%

Money market deposits

349,016

0.27

%

475,477

0.50

%

Certificate of deposits

2,353,359

0.90

%

3,142,051

1.28

%

Total retail deposits

5,683,538

0.72

%

5,711,591

0.98

%

Government deposits

Demand deposits

89,416

0.49

%

100,850

0.49

%

Savings deposits

213,403

0.37

%

277,970

0.56

%

Certificate of deposits

395,499

0.46

%

376,628

0.65

%

Total government deposits

698,318

0.44

%

755,448

0.60

%

Wholesale deposits

75,973

5.01

%

343,682

3.77

%

Total deposits

6,457,829

0.74

%

6,810,721

1.08

%

FHLB advances

2,968,308

3.28

%

3,884,049

2.82

%

Other

247,435

2.68

%

248,577

2.83

%

Total interest-bearing liabilities

9,673,572

1.57

%

10,943,347

1.74

%

Other liabilities (3)

2,092,467

2,524,818

Stockholder's equity

1,226,683

1,160,031

Total liabilities and stockholder's equity

$

12,992,722

$

14,628,196

(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

Nine Months Ended

September 30, 2013

June 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

Pre-tax, pre-credit-cost revenue

Income before tax provision

$

14,492

$

61,095

$

60,730

$

99,194

$

141,307

Add back

Provision for loan losses

4,053

31,563

52,595

56,030

225,696

Asset resolution

16,295

15,921

12,487

48,661

70,108

Other than temporary impairment on AFS investments

?

8,789

?

8,789

2,192

Representation and warranty reserve - change in estimate

5,205

28,940

124,492

51,541

231,058

Write down of transferor interest

?

?

118

174

1,771

Total credit-related costs

25,553

85,213

189,692

165,195

530,825

Pre-tax, pre-credit-cost net revenue

$

40,045

$

146,308

$

250,422

$

264,389

$

672,132

Efficiency ratio (credit-adjusted)

Net interest income (a)

$

42,685

$

47,096

$

73,079

$

145,448

$

223,290

Non-interest income (b)

134,296

219,959

273,737

539,198

735,448

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

5,205

28,940

124,492

51,541

231,058

Adjusted income

182,186

295,995

471,308

736,187

1,189,796

Non-interest expense (c)

158,436

174,397

233,491

529,422

591,735

Less: Asset resolution expense (e)

(16,295)

(15,921)

(12,487)

(48,661)

(70,108)

Adjusted non-interest expense

$

142,141

$

158,476

$

221,004

$

480,761

$

521,627

Efficiency ratio (c/(a+b))

89.5

%

65.3

%

67.3

%

77.3

%

61.7

%

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

78.0

%

53.5

%

46.9

%

65.3

%

43.8

%

 

September 30, 2013

June 30, 2013

December 31, 2012

September 30, 2012

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

Non-performing assets

$

205,334

$

344,318

$

520,558

$

518,416

Tier 1 capital (1)

1,402,423

1,390,582

1,295,841

1,379,701

Allowance for loan losses

207,000

243,000

305,000

305,000

Tier 1 capital + allowance for loan losses

$

1,609,423

$

1,633,582

$

1,600,841

$

1,684,701

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

12.8

%

21.1

%

32.5

%

30.8

%

 

Mortgage servicing rights to Tier 1 capital ratio

September 30, 2013

June 30, 2013

March 31, 2013

December 31, 2012

September 30, 2012

Mortgage servicing rights

797,029

729,019

727,207

710,791

686,799

Tier 1 capital (to adjusted total assets) (1)

1,402,423

1,390,582

1,318,770

1,295,841

1,379,701

Mortgage servicing rights to Tier 1 capital ratio

56.8

%

52.4

%

55.1

%

54.9

%

49.8

%

(1) Represents Tier 1 Capital for the Bank.

 

SOURCE Flagstar Bancorp

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

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