-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P0x5YPez0XmHX5ji8I4iXamg/I+gU9FhXkGH8lwSrjqM/75rLTfaCbVg8QY9Y+8z nzjUf3gVqBn827o6xsLBLQ== 0000928385-97-001003.txt : 19970610 0000928385-97-001003.hdr.sgml : 19970610 ACCESSION NUMBER: 0000928385-97-001003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970606 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLAGSTAR BANCORP INC CENTRAL INDEX KEY: 0001033012 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 383150651 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22353 FILM NUMBER: 97620078 BUSINESS ADDRESS: STREET 1: 2600 TELEGRAPH ROAD CITY: BLOOMFIELD HILLS STATE: MI ZIP: 48032-0953 BUSINESS PHONE: 8103387700 10-Q 1 FORM 10Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Mark One [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No.: 333-21621 ------------- FLAGSTAR BANCORP, INC. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) Michigan 38-3150651 - ---------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2600 Telegraph Road, Bloomfield Hills, Michigan 48302-0953 - ----------------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (248) 338-7700 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. Yes No X . ----- ----- As of June 6, 1997, 13,670,000 shares of the registrant's Common Stock, $0.01 par value, were issued and outstanding. PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited condensed consolidated financial statements of the Registrant and its wholly-owned subsidiaries are as follows: Condensed Unaudited Consolidated Balance Sheets - March 31, 1997 and December 31, 1996. Condensed Unaudited Consolidated Statements of Earnings - For the three months ended March 31, 1997 and 1996. Condensed Unaudited Consolidated Statements of Cash Flows - For the three months ended March 31, 1997 and 1996. Notes to Condensed Consolidated Financial Statements. 2 FLAGSTAR BANCORP, INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (In thousands except share data)
ASSETS March 31, 1997 December 31, 1996 ------ -------------------- --------------------- (unaudited) Cash and cash equivalents.......................................................... $ 30,935 $ 44,187 Loans receivable Mortgage loans held for sale................................................. 1,091,136 840,767 Loans held for investment.................................................... 240,833 273,569 Less allowance for losses.................................................... (3,995) (3,500) ----------- ----------- 1,327,974 1,110,836 Federal Home Loan Bank stock....................................................... 25,500 19,725 Other investments.................................................................. 543 887 ----------- ----------- Total earning assets.................................................... 1,354,017 1,131,448 Accrued interest receivable........................................................ 7,146 6,626 Repossessed assets................................................................. 9,916 10,363 Premises and equipment............................................................. 23,854 20,866 Mortgage servicing rights.......................................................... 30,331 30,064 Other assets....................................................................... 62,890 53,672 ----------- ----------- Total assets....................................................... $ 1,519,099 $ 1,297,226 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Liabilities Deposit accounts............................................................. $ 767,293 $ 624,485 Federal Home Loan Bank advances.............................................. 465,614 389,801 ----------- ----------- Total interest bearing liabilities...................................... 1,232,907 1,014,286 Accrued interest payable..................................................... 3,492 2,712 Undisbursed payments on loans serviced for others............................ 61,255 61,445 Escrow accounts.............................................................. 72,971 61,009 Liability for checks issued.................................................. 38,681 39,813 Federal income taxes payable................................................. 13,131 22,548 Other liabilities............................................................ 13,673 16,945 ----------- ----------- Total liabilities....................................................... 1,436,110 1,218,758 Stockholders' Equity Common stock -- $0.01 par value, 40,000,000 shares authorized, 11,250,000 shares issued and outstanding at March 31, 1997 and December 31, 1996................................................... 112 112 Additional paid in capital................................................... 2,816 2,816 Retained earnings............................................................ 80,061 75,540 ----------- ----------- Total stockholders' equity.............................................. 82,989 78,468 ----------- ----------- Total liabilities and stockholders' equity......................... $ 1,519,099 $ 1,297,226 =========== ===========
3 FLAGSTAR BANCORP, INC. CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except share data)
Three Months Ended March 31, ------------------------------------ 1997 1996 ---- ---- (unaudited) (unaudited) Interest Income Loans.......................................................................... $ 25,472 $ 19,111 Other.......................................................................... 519 407 ------------- ------------- 25,991 19,518 Interest Expense Deposits....................................................................... 9,736 7,399 FHLB advances.................................................................. 5,213 3,987 Other.......................................................................... 297 336 ------------- ------------- 15,246 11,722 ------------- ------------- Net interest income............................................................ 10,745 7,796 Provision for losses........................................................... 662 308 ------------- ------------- Net interest income after provision for losses................................. 10,083 7,488 Non-Interest Income Loan administration............................................................ 3,180 3,736 Net gain on loan sales and sales of mortgage servicing rights.................. 9,192 3,505 Other fees and charges......................................................... 214 1,143 ------------- ------------- 12,586 8,384 ------------- ------------- Non-Interest Expense Compensation and benefits...................................................... 7,235 5,165 Occupancy and equipment........................................................ 3,365 2,192 General and administrative..................................................... 4,965 5,123 ------------- ------------- 15,565 12,480 ------------- ------------- Earnings before federal income taxes........................................... 7,104 3,392 Provision for federal income taxes............................................. 2,583 1,142 ------------- ------------- Net Earnings................................................................... $ 4,521 $ 2,250 ============= ============= Earnings per common share...................................................... $ 0.40 $ 0.20 ============= =============
4 FLAGSTAR BANCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands except share data)
Three Months Ended March 31, -------------------------------- 1997 1996 ---- ---- (unaudited) (unaudited) Operating Activities Net earnings ............................................................................ $ 4,521 $ 2,250 Adjustments to reconcile net earnings to net cash used in operating activities Provision for losses ............................................................... 662 308 Depreciation and amortization ...................................................... 3,864 3,649 Net loss on the sale of assets ..................................................... 111 12 Net gain on loan sales and sales of mortgage servicing rights ...................... (9,192) (3,505) (Benefit) provision for deferred federal income taxes .............................. (773) 3,415 Proceeds from sales of loans held for sale ......................................... 1,245,651 2,104,439 Originations and repurchases of loans held for sale, net of principal repayments ... (1,497,159) (2,272,716) Increase in accrued interest receivable ............................................ (520) (873) Increase in other assets ........................................................... (9,557) (15,318) Increase in accrued interest payable ............................................... 780 34 Decrease in liability for checks issued ............................................ (1,132) (8,918) Decrease in federal taxes payable .................................................. (8,644) (2,243) (Decrease) increase in other liabilities ........................................... (3,272) 1,869 ----------- ----------- Net cash used in operating activities ......................................... (274,660) (187,597) Investing Activities Maturity of other investments ........................................................... 344 418 Originations of loans held for investment, net of principal repayments .................. 32,736 56,220 Purchase of Federal Home Loan Bank Stock ................................................ (5,775) (2,200) Proceeds from the disposition of repossessed assets ..................................... 1,346 -- Acquisitions of premises and equipment .................................................. (4,651) (2,635) Increase in mortgage servicing rights ................................................... (13,499) (19,762) Proceeds from the sale of mortgage servicing rights ..................................... 20,515 17,769 ----------- ----------- Net cash provided by investing activities ..................................... 31,016 49,810 Financing Activities Net increase in deposit accounts ........................................................ 142,807 12,396 Net increase in reverse repurchase agreements ........................................... -- 5,036 Net increase in Federal Loan Bank advances .............................................. 75,813 96,844 Net (disbursement) receipt of payments of loans serviced for others ..................... (190) 46,049 Net receipt (disbursement) of escrow payments ........................................... 11,962 (27,186) Dividends paid to stockholders .......................................................... -- (1,000) ----------- ----------- Net cash provided by financing activities ..................................... 230,392 132,139 ----------- ----------- Net decrease in cash and cash equivalents .................................................. (13,252) (5,648) Beginning cash and cash equivalents ........................................................ 44,187 29,119 ----------- ----------- Ending cash and cash equivalents ........................................................... $ 30,935 $ 23,471 =========== =========== Supplemental disclosure of cash flow information: Loans receivable transferred to repossessed assets ...................................... $ 824 $ 1,348 =========== =========== Total interest payments made on deposits and other borrowings ........................... $ 14,466 $ 11,688 =========== =========== Federal income taxes paid ............................................................... $ 12,000 $ -- =========== ===========
5 FLAGSTAR BANCORP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1. Nature of Business ------------------ Flagstar Bancorp, Inc. is a non-diversified, unitary thrift holding company. The Company provides retail banking services in southern Michigan and mortgage lending services nationwide. Note 2. Basis of Presentation --------------------- The accompanying condensed consolidated financial statements of Flagstar Bancorp, Inc. (the "Company"), and its subsidiaries, have been prepared in accordance with generally accepted accounting principles for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All interim amounts are subject to year-end audit and the results of operations for the interim period herein are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. Note 3. Initial Public Offering ----------------------- On April 30, 1997, the Company's common stock began trading on the Nasdaq Stock Market under the symbol "FLGS" on a "when-issued" basis. On May 5, 1997, the Company sold 2,200,000 shares of its Common Stock as part of the initial public offering of 5,000,000 shares of Common Stock, including 2,800,000 shares sold by the stockholders of the Company. On May 12, 1997, the Company sold an additional 220,000 shares of its Common Stock in connection with exercise by the underwriters in the initial public offering of an option to acquire additional shares equal to not more than 10% of the shares sold in the initial public offering. The net proceeds received by the Company totaled approximately $27.3 million. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Selected Financial Ratios
Three Months Ended March 31, ------------------------------------ 1997 1996 ---- ---- (unaudited) Return on average assets......................... 1.28% 0.80% Return on average equity......................... 22.85% 14.55% Interest rate spread............................. 2.52% 2.04% Net interest margin.............................. 3.32% 3.02% Efficiency ratio................................. 65.3% 75.1%
Bank Regulatory Capital Ratios
At March 31, 1997 At December 31, 1996 ----------------- -------------------- % of Assets /(1)/ % of Assets /(1)/ ----------------- ------------------- Tangible capital............... 5.09% 5.58% Core capital................... 5.43% 6.01% Total risk-based capital....... 10.06% 10.91%
- ------------- /(1)/ Based on adjusted total assets for purposes of tangible capital and core capital requirements, and risk-weighted assets for purposes of the risk-based capital requirement. Comparison of Results of Operations for the Three Months Ended March 31, 1997 and 1996. The Company's consolidated net earnings for the three months ended March 31, 1997 were $4.5 million, an increase of $2.2 million, or 95.7%, from net earnings of $2.3 million for the three months ended March 31, 1996. This increase in net earnings was due to increases in net interest income and non- interest income, offset by an increase in non-interest expense and the provision for losses. The Company's net interest income increased $2.9 million, or 37.2%, to $10.7 million for the three months ended March 31, 1997, from $7.8 million for the three months ended March 31, 1996, reflecting continuing substantial growth in average assets combined with a significant increase in the net increase margin (from 3.02% to 3.32%). Non-interest income increased $4.2 million, or 50.0%, to $12.6 million for the three months ended March 31, 1997, from $8.4 million for the three months ended March 31, 1996. The majority of this increase in non-interest income resulted from increased net gains on loan sales and sales of mortgage servicing rights, offset by decreases in loan administration and other income. Non-interest expense increased $3.1 million, or 24.8%, to $15.6 million for the three months ended March 31, 1997, from $12.5 million for the three months ended March 31, 1996. This increase was the result of an increase in compensation and benefits of $2.1 million and an increase in other expenses of $1.0 million. The Company's provision for losses also increased by $354,000, or 114.9%, to $662,000 for the three months ended March 31, 1997 from $308,000 for the three months ended March 31, 1996. The increase in the provision increased the Company's allowance for losses, to $4.0 million at March 31, 1997 (or 10.62% of non-performing loans) compared to $3.5 million at December 31, 1996 (or 11.43% of non-performing loans). The increased provision reflects the higher level of non-performing loans compared to the first quarter of 1996. The Company had net charge-offs to average loans outstanding of 0.05% (annualized) in the first quarter of 1997 compared to 0.00% (annualized) during the first quarter of 1996 and 0.13% for all of 1996. 7 Average Balances, Interest Rates and Yields. Net interest income is affected by (i) the difference ("interest rate spread") between rates of interest earned on interest-earning assets and rates of interest paid on interest-bearing liabilities and (ii) the relative amounts of interest-bearing liabilities and interest-earning assets. When the total of interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. Financial institutions have traditionally used interest rate spreads as a measure of net interest income. Another indication of an institution's net interest income is its "net yield on interest-earning assets or net interest margin" which is net interest income divided by average interest-earning assets. The following table sets forth certain information relating to the Company's consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods indicated. Such yields and costs are derived by dividing income or expense by the average balance of assets or liabilities, respectively, for the periods presented. During the periods indicated, non-accruing loans, if any, are included in the net loan category. Average balances are derived from daily average balances.
For the three months ended March 31, -------------------------------------------------------------------------------------------- 1997 1996 ------------------------------------------- --------------------------------------- Amount Interest % Amount Interest % =========================================== ======================================= Interest-earning assets: Loans receivable, net $1,243,050 $25,472 8.20% $991,716 $19,111 7.71% FHLB stock 23,419 471 8.16% 18,533 367 8.03% Other 3,318 48 5.91% 2,259 40 6.02% ------------------------------------------- --------------------------------------- Total 1,269,787 25,991 8.19% 1,012,508 19,518 7.71% ------------- ------------ Noninterest-earning assets 126,367 113,461 ----------------- ----------------- Total assets $1,105,744 $1,125,969 ================= ================= Interest-bearing liabilities: Demand deposits $61,150 $342 2.27% $42,693 $225 2.14% Savings deposits 63,798 620 3.94% 58,284 440 3.06% Certificates of deposit 590,293 8,774 6.03% 426,480 6,734 6.40% FHLB advances 356,394 5,213 5.93% 288,151 3,987 5.61% Other 19,364 297 6.22% 22,149 336 6.19% ------------------------------------------- --------------------------------------- Total interest-bearing liabilities: 962,571 15,246 5.67% 837,757 11,722 5.67% Noninterest-bearing liabilities 78,294 226,374 ----------------- ----------------- Total liabilities: 1,040,865 1,064,131 Equity 64,879 61,838 ----------------- ----------------- Total liabilities and equity $1,105,744 $1,125,969 ================= ================= Net interest-earning assets $16,806 $174,751 ------------ ----------- Net interest income $10,745 $7,796 ============ =========== ------------ ---------- Interest rate spread 2.52% 2.04% ============ ========== Net interest margin 3.32% 3.02% ============ ========== Ratio of average interest earning assets to interest bearing liabilities 116% 121% ============ ==========
8 Liquidity and Capital Resources Liquidity. Liquidity refers to the ability or the financial flexibility to manage future cash flows to meet the needs of depositors and borrowers and fund operations on a timely and cost-effective basis. The Company has no other significant business other than that of its wholly owned subsidiary, Flagstar Bank, FSB (the "Bank"). The Company's primary source of liquidity is dividends paid by the Bank. Management of the Company believes that dividends that may be paid by the Bank to the Company following the Offering will provide sufficient funds for its operations and liquidity needs; however, no assurance can be given that the Company will not have a need for additional funds in the future. Further, the Bank is subject to certain regulatory limitations with respect to the payment of dividends to the Company. The Bank is required by the Office of Thrift Supervision ("OTS") regulations to maintain minimum levels of liquid assets. This requirement, which may be changed at the direction of the OTS depending upon economic conditions and deposit flows, is based upon a percentage of deposits and short-term borrowings. The required minimum ratio is currently 5.00%. While the Bank's liquidity ratio varies from time to time, the Bank has generally maintained liquid assets substantially in excess of the minimum requirements. The Bank's average daily liquidity ratio was 8.90% for the month ended March 31, 1997. A significant source of cash flow for the Company is the sale of mortgage loans held for sale. Additionally, the Company receives funds from net interest income, mortgage loan servicing fees, loan principal repayments, advances from the FHLB, deposits from customers and cash generated from operations. Mortgage loans sold during the three months ended March 31, 1997 totaled $1.2 billion, a decrease of $900.0 million, or 42.9% from $2.1 billion sold during the same period in 1996. This decrease in mortgage loan sales was attributable to the 31.8% decrease in mortgage loan originations and the $250.3 million increase in the amount of mortgage loans available for sale. The Company sold 83.2% and 93.7% of its mortgage loan originations during the three month periods ended March 31, 1997 and 1996, respectively. The Company typically uses FHLB advances to fund its daily operational liquidity needs and to assist in funding loan originations. The Company will continue to use this source of funds unless a more cost-effective source of funds becomes available. FHLB advances are used because of their flexibility. These funds are typically borrowed for 90-day terms with no prepayment penalty, of which $465.6 million was outstanding at March 31, 1997. Such advances are repaid with the proceeds from the sale of mortgage loans held for sale. The Company currently has an authorized line of credit equal to $650 million. This line is collateralized by non-delinquent mortgage loans. To the extent the amount of retail deposits or customer escrow accounts can be increased, the Company expects that they will eventually replace FHLB advances as a funding source. At March 31, 1997, the Company had outstanding rate-lock commitments to lend $655.7 million for mortgage loans, along with outstanding commitments to make other types of loans totaling $10.5 million. Because such commitments may expire without being drawn upon, they do not necessarily represent future cash commitments. Also, as of March 31, 1997, the Company had outstanding commitments to sell $580.3 million of mortgage loans. These commitments will be funded within 90 days. Total commercial and consumer unused collateralized lines of credit totaled $ 112.7 million at March 31, 1997. Such commitments include $105.0 million in warehouse lines of credit to various mortgage companies, of which $30.8 million was drawn upon as of March 31, 1997. Capital Resources. At March 31, 1997, the Bank exceeded all applicable regulatory minimum capital requirements. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company and its subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. Management currently is not aware of any material legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject. Item 2. Changes in Securities None. Item 3. Defaults upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit 27 Financial Data Schedule(for SEC use only) (b) Reports on Form 8-K None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FLAGSTAR BANCORP, INC. Date: June 6, 1997 /s/ Thomas J. Hammond -------------------------------- Thomas J. Hammond Chairman of the Board and Chief Executive Officer (Duly Authorized Officer) /s/ Michael W. Carrie -------------------------------- Michael W. Carrie Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FLAGSTAR BANCORP, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1997 30,935 0 0 0 0 0 0 1,331,979 3,995 1,327,984 767,293 465,614 203,203 0 0 0 112 82,877 1,519,099 25,472 0 519 25,991 9,736 5,510 10,745 662 0 15,565 7,104 4,521 0 0 4,521 .40 .40 .033 37,603 0 0 0 3,500 167 0 3,995 2,495 0 1,500
-----END PRIVACY-ENHANCED MESSAGE-----