EX-99.1 2 k06969exv99w1.htm PRESS RELEASE DATED JULY 20, 2006 exv99w1
 

EXHIBIT 99.1
   
(FLAGSTAR LOGO)
NEWS RELEASE
FOR MORE INFORMATION, CONTACT:
Paul D. Borja
Executive Vice President / CFO
(248) 312-2000

FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS 2006 SECOND QUARTER RESULTS
TROY, Mich. (July 20, 2006) — Flagstar Bancorp, Inc. (NYSE:FBC), today reported 2006 second quarter net earnings of $28.6 million, or $0.44 per share — diluted. For the six months ended June 30, 2006 net earnings totaled $47.6 million, or $0.74 — diluted.
For the 2005 second quarter, net earnings were $27.8 million, or $0.43 per share — diluted. For the six months ended June 30, 2005, net earnings were $47.6 million, or $0.74 per share — diluted.
“We performed as we expected in a challenging environment,” said Mark Hammond, President and Chief Executive Officer. “Competitive price pressures on deposits and loans, as well as the flat yield curve, continued to strain net interest margins and loan sale margins. Nevertheless, we are actively engaged in managing the short-term challenges, while also continuing to implement our long-term strategic initiatives.
“In particular,” noted Mr. Hammond, “ we are continuing to expand our bank branch network and build our core deposit accounts. We have also been introducing new products to improve our loan origination volume and provide opportunities for non-agency securitization, while maintaining high credit standards in our held for investment portfolio. Additionally, we have been diligent in reducing overhead and making investments in systems to improve processes and workflow. Lastly, as long-term yields have risen, we have resumed our historic practice of strategically selling mortgage servicing rights as opportunities arise.”
Highlights for the 2006 second quarter include the following:
  •   A return on average equity of 14.5%
  •   Opening of the 145th banking center
  •   Loan production of $5.3 billion, including residential mortgages of $4.9 billion
  •   Loans serviced for others of $22.4 billion
  •   Sale of mortgage servicing rights related to $9.9 billion in underlying loans
Balance Sheet and Capital Adequacy
Consolidated assets were $15.2 billion at June 30, 2006 as compared to $15.1 billion at December 31, 2005 and $14.9 billion at June 30, 2005. With a core capital ratio of 6.4% and a risk-based capital ratio of 11.2%, at June 30, 2006, Flagstar Bank, our wholly-owned subsidiary, was considered “well-capitalized” for regulatory purposes.
Net Interest Margin
The net interest margin for the second quarter of 2006 was 1.49%, as compared to 1.72% for the first quarter of 2006 and 1.79% for the second quarter of 2005. For the six months ended June 30, 2006 the net interest margin was 1.60% as compared to 1.90% reported for the six months ended June 30, 2005.

 

 

Retail Banking Operations
Flagstar Bank had 145 branches in operation at June 30, 2006 and expects to open approximately seven more branches by the end of 2006. During the second quarter, Flagstar completed its bank wide implementation of its Loyalty Pricing Program to build its core deposit base. This program enhanced the Company’s cross-sell ratio. The households in this program had an average of 4.8 accounts versus 1.8 accounts for other households.
Mortgage Banking Operations
Flagstar’s gain on sale spread decreased to 20 basis points during the quarter ended June 30, 2006 as compared to 33 basis points recorded during first quarter of 2006. During the 2005 second quarter, the gain decreased 27 basis points as compared to 47 basis points gain on sale. For the six months ended June 30, 2006 gain on sale decreased 6 basis points to 26 basis points as compared to 32 basis points recorded for the six months ended June 30, 2005.
During the second quarter of 2006, Flagstar sold servicing rights related to underlying loans of $9.9 billion of servicing as compared to $2.4 billion during the first quarter of 2006 and none during the second quarter of 2005. Sales of servicing rights totaled $12.2 billion for the six months ended June 30, 2006 and $2.5 billion during the same period in 2005.
At June 30, 2006, Flagstar’s mortgage servicing portfolio totaled $22.4 billion with a weighted average service fee of 35.6 basis points, a decrease from $29.2 billion at March 31, 2006 with a weighted average servicing fee of 34.8 basis points. The decrease is the result of the bulk sale that occurred in the second quarter. The capitalized value of Flagstar’s servicing portfolio was $231 million, or 1.03% of the outstanding balance of loans serviced for others, at June 30, 2006 as compared to $321 million, or 1.10%, at March 31, 2006. The estimated market value of the portfolio was $328.7 million at June 30, 2006 and $442.6 million March 31, 2006.
Asset Quality
Non-performing loans totaled $50.0 million at June 30, 2006, a decrease of $8.0 million as compared to $58.0 million recorded at March 31, 2006. Delinquencies (30 day +) as a percent of loans held for investment also decreased slightly to 0.53% at June 30, 2006, from 0.59% at March 31, 2006. At June 30, 2006, 89.9% of non-performing loans were secured by first or second mortgages on single-family homes. Single-family residential first mortgage loans held by Flagstar for investment at June 30, 2006 had an average FICO credit score of 720 and an average loan-to-value ratio of 71%.
As Previously Announced
The Company’s quarterly earnings conference call will be held on Friday, July 21, 2006 from 11 a.m. until noon (Eastern).
Questions for discussion at the conference call may only be submitted in advance by email to investors@flagstar.com.
The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company’s website, www.flagstar.com.
To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (719) 457-2638 or toll free at (800) 946-0706, passcode: 7944706.
Flagstar Bancorp, which has $15.2 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest. Flagstar currently operates 145 banking centers located throughout southern

 

 

Michigan, Indiana and Georgia and operates 87 loan centers in 26 states. Flagstar Bank originates loans nationwide and is one of the nation’s top 30 originators of residential mortgage loans.
The information contained in this release is not intended as a solicitation to buy Flagstar Bancorp, Inc. stock and is provided for general information. This release contains certain statements that may constitute “forward-looking statements” within the meaning of federal securities laws. These forward-looking statements include statements about the Company’s beliefs, plans, objectives, goals, expectations, anticipations, estimates, and intentions, that are subject to significant risks and uncertainties, and are subject to change based upon various factors (some of which may be beyond the Company’s control). The words “may,” “could,” “should,” “would,” “believe,” and similar expressions are intended to identify forward-looking statements.

 

 

Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial Data
(in thousands, except share data)
(unaudited)
                                         
    At or for the three months ended     At or for the six months ended  
Summary of the Consolidated   June 30,     March 31,     June 30,     June 30,     June 30,  
Statements of Earnings   2006     2006     2005     2006     2005  
     
 
                                        
Interest income
   $ 192,648     $ 191,299     $ 166,111     $ 383,947     $ 329,237  
Interest expense
     (141,910 )     (132,624 )     (107,670 )     (274,534 )     (205,586 )
         
Net interest income
     50,738       58,675       58,441       109,413       123,651  
Provision for losses
     (5,859 )     (4,063 )     (2,903 )     (9,923 )     (9,150 )
         
Net interest income after provision
     44,879       54,612       55,538       99,490       114,501  
Non-interest income
                                        
Loan fees and charges, net
     1,239       1,611       3,213       2,850       5,835  
Deposit fees and charges
     5,692       4,812       4,400       10,503       7,977  
Loan servicing fees, net
     309       4,355       1,669       4,664       7,614  
Gain on loan sales, net
     9,650       17,085       32,347       26,735       41,924  
Gain on MSR sales, net
     34,932       8,586       2,262       43,518       6,510  
Net loss on securities available for sale
     —       (3,557 )     —       (3,557 )     —  
Other income
     9,750       9,731       10,978       19,481       20,570  
Non-interest expenses
                                        
Compensation and benefits
     (38,758 )     (39,873 )     (38,477 )     (78,631 )     (76,032 )
Commissions
     (20,911 )     (16,967 )     (22,887 )     (37,878 )     (43,967 )
Occupancy and equipment
     (16,748 )     (16,908 )     (18,302 )     (33,656 )     (34,953 )
General and administrative
     (10,957 )     (9,871 )     (11,860 )     (20,828 )     (23,300 )
Other
     (749 )     (5,886 )     (6,421 )     (6,635 )     (12,462 )
Capitalized direct cost of loan closing
     25,770       21,434       30,873       47,204       59,918  
         
Earnings before federal income tax
     44,099       29,163       43,333       73,260       74,135  
Provision for federal income taxes
     (15,457 )     (10,253 )     (15,533 )     (25,710 )     (26,557 )
         
Net earnings
     28,640     $ 18,910     $ 27,800     $ 47,550     $ 47,578  
         
Basic earnings per share
   $ 0.45     $ 0.30     $ 0.45     $ 0.75     $ 0.77  
Diluted earnings per share
   $ 0.44     $ 0.29     $ 0.43     $ 0.74     $ 0.74  
Dividends paid per common share
   $ 0.15     $ 0.15     $ 0.25     $ 0.30     $ 0.50  
Interest rate spread
     1.41 %     1.57 %     1.71 %     1.48 %     1.71 %
Net interest margin
     1.49 %     1.72 %     1.79 %     1.60 %     1.90 %
 
                                        
Return on average assets
     0.76 %     0.50 %     0.77 %     0.63 %     0.67 %
Return on average equity
     14.46 %     9.73 %     14.88 %     12.12 %     12.80 %
Efficiency ratio
     55.52 %     67.20 %     59.20 %     61.06 %     61.10 %
 
                                        
Average interest earning assets
   $ 13,650,019     $ 13,845,517     $ 13,061,681     $ 13,747,768     $ 13,108,399  
Average interest paying liabilities
   $ 13,427,419     $ 13,591,084     $ 12,795,846     $ 13,509,251     $ 12,576,554  
Average stockholders’ equity
   $ 791,998     $ 777,620     $ 747,452     $ 784,828     $ 743,618  
Equity/assets ratio (average for the period)
     5.22 %     5.14 %     5.15 %     5.18 %     5.25 %
 
                                        
Ratio of charge-offs to average loans held for investment
     0.23 %     0.15 %     0.19 %     0.20 %     0.19 %

 

 

                                 
Summary of the Consolidated   June 30,   March 31,   December 31,   June 30,
Statements of Financial Condition:   2006   2006   2005   2005
         
 
                                
Total assets
   $ 15,225,864     $ 15,051,458     $ 15,075,430     $ 14,926,516  
Loans held for sale
     2,817,428       2,442,616       1,773,394       1,961,977  
Loans held for investment, net
     9,387,460       9,794,612       10,537,331       11,751,110  
Allowance for loan losses
     39,606       39,520       39,140       36,944  
Servicing rights
     230,984       321,167       315,678       284,331  
Deposits
     7,843,249       8,208,435       7,979,000       7,887,028  
FHLB advances
     4,290,000       3,844,000       4,225,000       5,161,035  
Repurchase agreements
     1,145,578       1,103,537       1,060,097       —  
Stockholders’ equity
     803,944       783,084       771,883       749,395  
 
                                
Other Financial and Statistical Data:
                                
 
                                
Equity/assets ratio
     5.28 %     5.20 %     5.12 %     5.02 %
Core capital ratio
     6.39 %     6.33 %     6.26 %     6.07 %
Total risk-based capital ratio
     11.15 %     11.20 %     11.09 %     10.50 %
 
                                
Book value per share
   $ 12.65     $ 12.33     $ 12.21     $ 12.04  
Shares outstanding
     63,529       63,488       63,208       62,244  
 
                                
Loans serviced for others
   $ 22,379,937     $ 29,242,906     $ 29,648,088     $ 26,646,532  
Weighted average service fee (bps)
     35.6       34.8       34.7       34.8  
Value of servicing rights
     1.03 %     1.10 %     1.06 %     1.07 %
 
                                
Allowance for loan losses to non performing loans
     79.2 %     68.2 %     60.7 %     56.7 %
 
                                
Allowance for loan losses to loans held for investment
     0.42 %     0.40 %     0.37 %     0.31 %
 
                                
Non performing assets to total assets
     0.99 %     1.00 %     0.98 %     0.93 %
 
                                
Number of bank branches
     145       141       137       128  
Number of loan origination centers
     87       97       101       114  
Number of employees (excluding loan officers & account executives)
     2,548       2,421       2,405       2,431  
Number of loan officers and account executives
     530       594       689       800  

 

 

Flagstar Bancorp, Inc.
Loan Originations
(in millions)
(unaudited)
                                                                                 
    For the three months ended     For the six months ended  
Loan type   June 30, 2006     %     March 31, 2006     %     June 30, 2005     %     June 30, 2006     %     June 30, 2005     %  
     
Residential mortgage loans
   $ 4,901       93.2     $ 4,348       93.0     $ 7,104       94.3     $ 9,249       93.1     $ 14,317       94.8  
Consumer loans
     194       3.7       180       3.8       323       4.3       374       3.8       571       3.8  
Commercial loans
     165       3.1       146       3.2       104       1.4       311       3.1       214       1.4  
         
Total loan production
   $ 5,260       100.0     $ 4,674       100.0     $ 7,531       100.0     $ 9,934       100.0     $ 15,102       100.0  
         
Gain on Loan Sales
(in thousands)
(unaudited)
                                                                                 
    For the three months ended     For the six months ended  
Description   June 30, 2006             March 31, 2006             June 30, 2005             June 30, 2006             June 30, 2005          
     
Net gain on loan sales
   $ 9,651             $ 17,084             $ 32,347             $ 26,735             $ 41,924          
Plus: FASB 133 adjustment
     (3,337 )             (5,381 )             (5,866 )             (8,718 )             (9,001 )        
Plus: secondary market reserve
     1,420               1,006               1,282               2,426               2,463          
         
Gain on loan sales
   $ 7,734             $ 12,709             $ 27,763             $ 20,443             $ 35,386          
         
Loans sold
   $ 3,964,625             $ 3,894,070             $ 5,891,492             $ 7,858,695             $ 11,329,539          
         
Sales spread
     0.20 %             0.33 %             0.47 %             0.26 %             0.32 %        
         
Loans Held for Investment
(in thousands)
(unaudited)
                                                                 
Description   June 30, 2006     March 31, 2006     Dec. 31, 2005     June 30, 2005  
     
First mortgage loans
   $ 7,091,818       75.2 %   $ 7,309,685       74.3 %   $ 8,248,897       78.0 %   $ 9,371,300       79.5 %
Second mortgage loans
     470,885       5.0 %     762,918       7.8 %     700,492       6.6 %     293,582       2.5 %
Commercial real estate loans
     1,210,212       12.8 %     1,091,179       11.1 %     995,410       9.4 %     850,260       7.2 %
Construction loans
     62,847       0.7 %     63,998       0.7 %     65,646       0.6 %     67,749       0.6 %
Warehouse lending
     190,466       2.0 %     187,610       1.9 %     146,694       1.4 %     289,244       2.5 %
Consumer loans
     389,167       4.1 %     406,267       4.1 %     410,920       3.9 %     908,185       7.7 %
Non-real estate commercial loans
     11,670       0.1 %     12,475       0.1 %     8,411       0.1 %     7,732       0.1 %
         
Total loans held for investment
   $ 9,427,065       100.0 %   $ 9,834,132       100.0 %   $ 10,576,470       100.0 %   $ 11,788,052       100.0 %
         

 

 

Deposit Portfolio
(in thousands)
(unaudited)
                                                                 
Description   June 30, 2006     March 31, 2006     Dec. 31, 2005     June 30, 2005  
    Balance     Rate     Balance     Rate     Balance     Rate     Balance     Rate  
    ($ '000)     (%)     ($ '000)     (%)     ($ '000)     (%)     ($ '000)     (%)  
         
Demand deposits
   $ 340,843       0.75     $ 355,487       0.64     $ 374,816       0.60     $ 331,842       0.69  
Savings deposits
     184,103       1.65       207,131       1.41       239,215       1.52       388,363       1.78  
Money market deposits
     656,902       3.89       661,067       3.24       781,087       2.98       1,027,099       2.77  
Certificates of deposits
     3,723,086       4.50       3,687,232       4.25       3,450,450       3.94       2,819,086       3.67  
         
Total retail deposits
     4,904,934       4.06       4,910,917       3.74       4,845,568       3.41       4,566,390       3.09  
 
                                                                
Municipal deposits
     1,448,077       5.16       1,688,691       4.75       1,353,633       4.30       1,463,333       3.41  
Wholesale deposits
     1,490,238       3.53       1,608,827       3.48       1,779,799       3.42       1,857,305       3.28  
         
Total deposits
   $ 7,843,249       4.17     $ 8,208,435       3.89     $ 7,979,000       3.56     $ 7,887,028       3.19  
         
Asset Quality & Reserves
(in thousands)
(unaudited)
                                                                 
    Delinquencies at  
    June 30, 2006     March 31, 2006     Dec. 31, 2005     June 30, 2005  
Days delinquent   June 30, 2006     %     $     %     $     %     $     %  
     
 30
   $ 28,703       30.5     $ 24,462       24.5     $ 30,972       26.7 %   $ 28,728       24.3 %
 60
     15,253       16.2       17,244       17.3       20,456       17.7 %     24,155       20.5 %
 90
     49,530       52.7       56,469       56.7       61,816       53.3 %     65,003       55.1 %
Matured — Delinquent
     497       0.5       1,501       1.5       2,650       2.3 %     165       0.1 %
         
Total
   $ 93,983       100.0     $ 99,676       100.0     $ 115,894       100.0 %   $ 118,051       100.0 %
         
Investment loans
   $ 9,427,065             $ 9,834,132             $ 10,576,471             $ 11,784,482          
         
Delinquency % (90+ Days and Matured)
     0.53 %             0.59 %             0.61 %             0.55 %        
         
                                                                 
    Non-Performing Loans and Assets at
    June 30, 2006           March 31, 2006           Dec. 31, 2005           June 30, 2005        
     
Non-Performing Loans
   $ 50,027             $ 57,970             $ 64,466             $ 65,168          
As a Percentage of Investment Loans
     0.53 %             0.59 %             0.61 %             0.55 %        
Non-Performing Assets
   $ 150,369             $ 150,975             $ 146,967             $ 137,922          
As a Percentage of Total Assets
     0.99 %             1.00 %             0.98 %             0.93 %