EX-99.1 2 k17298exv99w1.htm PRESS RELEASE exv99w1
 

         
Exhibit 99.1
     
 
  NEWS RELEASE
 
  FOR MORE INFORMATION, CONTACT:
 
  Paul D. Borja
 
  Executive Vice President / CFO
 
  (248) 312-2000
 
 
  FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS 2007 SECOND QUARTER RESULTS
TROY, Mich. (July 31, 2007) – Flagstar Bancorp, Inc. (NYSE:FBC), today reported 2007 second quarter net earnings of $15.1 million, or $0.25 per share (diluted). Second quarter 2006 net earnings were $28.6 million, or $0.44 per share (diluted). For the six months ended June 30, 2007, net earnings totaled $22.9 million, or $0.37 per share diluted compared to $47.6 million, or $ 0.74 per share (diluted) for the same six month period in 2006. On a linked-quarter basis, net earnings increased from $7.8 million, or $0.12 per share (diluted) in the first quarter 2007.
Return on average equity and return on average assets for the second quarter 2007 were 7.69% and 0.38%, respectively, as compared to 14.46% and 0.76% for the same period in 2006 and 3.85% and 0.19% for the first quarter 2007. Return on average equity and average assets for the six months ended June 30, 2007 were 5.79% and 0.29%, respectively, as compared to 12.12% and 0.63% for the six months ended June 30, 2006.
The 2007 second quarter earnings as compared to the same period in 2006 reflect, among other factors, a decrease in net interest income, a decrease in gains on sales of mortgage servicing rights and an increase in non-interest expense. These were offset, in part, by an improvement in gain on loan sales, an increase in loan servicing income, and an increase in other non-interest income.
On a linked quarter basis, net earnings increased as a result of an increase in other income, an increase in gain on sales of mortgage servicing rights, and an increase in gain on loan sales. These were offset, in part, by a decrease in net interest income, an increase in the provision for loan losses, and an increase in non-interest expense. A significant portion of other income for the second quarter relates to recoveries that Flagstar realized as part of its continual efforts to mitigate losses incurred in connection with a fraud discovered in March 2004 relating to a series of warehouse loans.
Balance Sheet and Capital
Consolidated assets, increased $0.7 billion or 4.5%, from $15.5 billion at December 31, 2006 to $16.2 billion at June 30, 2007 and increased $1.0 billion or 6.6% from $15.2 billion at June 30, 2006. The increase from March 31, 2007 reflects an increase in loans available for sale. Flagstar Bank, our wholly owned subsidiary, was considered “well-capitalized” for regulatory purposes at June 30, 2007, with regulatory capital ratios of 6.04% core capital and 10.96% risk-based capital.
Net Interest Margin
Flagstar Bank’s net interest margin for the second quarter 2007 was 1.43%, which was unchanged from the first quarter 2007 and as compared to 1.54% for the second quarter 2006. For the six months ended June 30, 2007 the net interest margin was 1.42% as compared to 1.64% reported for the six months ended June 30, 2006.

 

 

Retail Banking Operations
Flagstar Bank had 156 retail banking branches at June 30, 2007, an increase of 7.6% as compared to 145 branches as of June 30, 2006 and an increase of 3.3% from 151 branches at December 31, 2006. During the second quarter of 2007, the total number of retail accounts increased 7.8% to over 288,800 as compared to approximately 267,900 at June 30, 2006 and 3.9% to over approximately 277,900 at December 31, 2006.
Mortgage Banking Operations
Loan production for second quarter 2007 increased 39.6% to $7.4 billion, including $7.2 billion of residential loans, as compared to $5.3 billion, including $4.9 billion of residential loans, for second quarter of 2006. It increased 27.6% as compared to loan originations of $5.8 billion, including $5.5 billion in residential loans in the first quarter 2007. During the second quarter of 2007, Flagstar originated $11.5 million in subprime loans, which comprised 0.2% of residential loan originations and as to which we retained $0.2 million for our investment loan portfolio.
For the six months ended June 30, 2007 loan production increased 33.3% to $13.2 billion, including $12.7 billion of residential loans, as compared to, $9.9 billion, including $9.2 billion of residential loans, for the six months ended June 30, 2006. During the six months ending June 30, 2007, Flagstar originated $43.3 million in subprime loans, which comprised 0.3% of residential loan originations and as to which we retained $7.6 million for our investment loan portfolio. At June 30, 2007, subprime loans comprised 0.5% of total assets.
Flagstar’s gain on sale spread increased to 47 basis points during the quarter ended June 30, 2007, as compared to 44 basis points for the first quarter 2007 and 20 basis points for the quarter ended June 30, 2006. For the six months ending June 30, 2007, the gain on sale increased 20 basis points to 46 basis points, as compared to 26 basis points for the same period in 2006.
At June 30, 2007, Flagstar’s mortgage servicing portfolio totaled $21.5 billion with a weighted average service fee of 36.9 basis points. This is a decrease from $22.4 billion at June 30, 2006 with a weighted average servicing fee of 35.6 basis points and an increase from $15.0 billion at December 31, 2006 with a weighted average servicing fee of 37.1 basis points. The capitalized value of Flagstar’s servicing portfolio at June 30, 2007 was $266.5 million, or 1.24% of the outstanding balance of loans serviced for others, with an estimated market value of $333.3 million. This compares to the capitalized value at December 31, 2006 of $173.3 million, or 1.15% with an estimated market value of $197.6 million and a capitalized value at June 30, 2006 of $231.0 million, or 1.03% with an estimated market value of $328.7 million.
Asset Quality
Net charge-offs of loans during the second quarter 2007 increased to $6.5 million from $5.6 million during the first quarter 2007 and $5.8 million during the second quarter 2006. Second quarter 2007 total non-performing assets were $190.7 million at June 30, 2007, as compared to $160.2 million at December 31, 2006 and $150.4 million at June 30, 2006. Of non-performing assets, real estate owned decreased 2.6% to $78.9 million at June 30, 2007 from $81.0 million at December 31, 2006 and $69.3 million at June 30, 2006. Repurchased and non-performing assets decreased 43.4% to $12.5 million at June 30, 2007 compared to $22.1 million at December 31, 2006 and $9.9 million at June 30, 2006.
Non-performing loans, which include loans 90 days or more past due and matured loans, increased to $99.3 million at June 30, 2007 as compared to $57.1 million at December 31, 2006 and $50.0 million recorded at June 30, 2006. At June 30, 2007, 78.2% of non-performing loans were secured by first or second mortgages on single-family homes as compared to 90.7% at December 31, 2006 and 89.9% at June 30, 2006.
Loans 90 days or more past due were 1.30% of loans held for investment at June 30, 2007 as compared to 0.64% at December 31, 2006 and 0.53% at June 30, 2006. The aggregate of loans past due 30 days or less and 60 days or less increased 29.4% to $80.6 million at June 30, 2007 from $62.3 million at December 31, 2006.
During the second quarter 2007, Flagstar increased its allowance for loan losses to $53.4 million, or 0.70% of loans held for investment at June 30, 2007, from $45.8 million, or 0.51% of loans held for investment, at December 31, 2006 and from $39.6 million, or 0.42% of loans held for investment, at June 30, 2006.

 

 

Single-family residential first mortgage loans held for investment at June 30, 2007 had an average FICO credit score of 720 and an average original loan-to-value ratio of 73.2%.
Stock Repurchase Plan
Through June 30, 2007, Flagstar repurchased 3,388,430 shares for a total of $41.7 million under its previously announced stock repurchase plan.
As Previously Announced
The Company’s quarterly earnings conference call will be held on Wednesday, August 1, 2007 from 11 a.m. until noon (Eastern).
Questions for discussion at the conference call may only be submitted in advance by e-mail to investors@flagstar.com.
The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company’s Web site, www.flagstar.com, with replays available at that site for at least 10 days.
To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (913) 981-5517 or toll free at (800) 289-0468, passcode: 3411266.
Flagstar Bancorp, with $16.2 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest. At June 30, 2007, Flagstar operated 156 banking centers in Michigan, Indiana and Georgia and 73 home loan centers in 19 states. Flagstar Bank originates loans nationwide and is one of the leading 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
(Dollars in thousands, except per share data)
(unaudited)
                         
    For the Three Months Ended  
Summary of the Consolidated   June 30,     March 31,     June 30,  
Statements of Earnings   2007     2007     2006  
Interest income
   $ 222,464     $ 220,570     $ 192,648  
Interest expense
     (172,547 )     (168,598 )     (141,910 )
 
                  
Net interest income
     49,917       51,972       50,738  
Provision for loan losses
     (11,452 )     (8,293 )     (5,859 )
 
                  
Net interest income after provision
     38,465       43,679       44,879  
Non-interest income
                        
Loan fees and charges, net
     837       638       1,239  
Deposit fees and charges
     5,710       4,978       5,692  
Loan servicing fees, net
     3,149       2,615       309  
Gain on loan sales, net
     28,144       25,154       9,650  
Gain on MSR sales, net
     5,610       115       34,932  
Net loss on securities available for sale
     —       729       —  
Other income
     13,994       5,669       9,750  
 
                  
Total non-interest income
     57,444       39,898       61,572  
Non-interest expenses
                        
Compensation and benefits
     (42,847 )     (42,424 )     (38,758 )
Commissions
     (19,517 )     (15,306 )     (20,911 )
Occupancy and equipment
     (17,038 )     (16,786 )     (16,748 )
General and administrative
     (11,178 )     (12,007 )     (10,957 )
Other
     (5,366 )     (3,504 )     (749 )
 
                  
Total non-interest expense
     (95,946 )     (90,027 )     (88,123 )
 
                  
Capitalized direct cost of loan closing
     23,712       18,629       25,769  
 
                  
Total non-interest expense after capitalized direct cost of loan closing
     (72,234 )     (71,398 )     (62,354 )
 
                  
Earnings before federal income tax
     23,675       12,179       44,097  
Provision for federal income taxes
     (8,544 )     (4,420 )     (15,457 )
 
                  
Net earnings
   $ 15,131     $ 7,759     $ 28,640  
 
                  
Basic earnings per share
   $ 0.25     $ 0.12     $ 0.45  
Diluted earnings per share
   $ 0.25     $ 0.12     $ 0.44  
Dividends paid per common share
   $ 0.10     $ 0.10     $ 0.15  
Dividend payout ratio
     39.7 %     77.7 %     33.3 %
Net interest spread — Consolidated
     1.27 %     1.33 %     1.41 %
Net interest margin — Consolidated
     1.35 %     1.42 %     1.49 %
Interest rate spread — Bank only
     1.30 %     1.34 %     1.30 %
Net interest margin — Bank only
     1.43 %     1.43 %     1.54 %
Return on average assets
     0.38 %     0.19 %     0.76 %
Return on average equity
     7.69 %     3.85 %     14.46 %
Efficiency ratio
     67.28 %     77.72 %     55.52 %
Average interest earning assets
   $ 14,799,436     $ 14,792,298     $ 13,650,019  
Average interest paying liabilities
   $ 14,582,350     $ 14,702,275     $ 13,427,419  
Average stockholders’ equity
   $ 786,768     $ 806,110     $ 791,998  
Equity/assets ratio (average for the period)
     4.99 %     5.22 %     5.22 %
Ratio of charge-offs to average loans held for investment
     0.36 %     0.23 %     0.23 %

 

 

Flagstar Bancorp, Inc.
                 
    For the Six Months Ended  
Summary of the Consolidated   June 30,     June 30,  
Statements of Earnings   2007     2006  
Interest income
   $ 443,033     $ 383,947  
Interest expense
     (341,145 )     (274,534 )
 
            
Net interest income
     101,888       109,413  
Provision for losses
     (19,745 )     (9,923 )
 
            
Net interest income after provision
     82,143       99,490  
Non-interest income
                
Loan fees and charges, net
     1,475       2,850  
Deposit fees and charges
     10,688       10,503  
Loan servicing fees, net
     5,764       4,664  
Gain on loan sales, net
     53,298       26,735  
Gain on MSR sales, net
     5,725       43,518  
Net gain (loss) on securities available for sale
     729       (3,557 )
Other income
     19,663       19,481  
 
            
Total non-interest income
     97,342       104,194  
Non-interest expenses
                
Compensation and benefits
     (85,271 )     (78,631 )
Commissions
     (34,822 )     (37,878 )
Occupancy and equipment
     (33,824 )     (33,656 )
General and administrative
     (23,183 )     (20,828 )
Other
     (8,872 )     (6,635 )
 
            
Total non-interest expense
     (185,972 )     (177,628 )
 
            
Capitalized direct cost of loan closing
     42,340       47,204  
 
            
Total non interest expense after capitalized direct cost of loan closing
     (143,632 )     (130,424 )
 
            
Earnings before federal income tax
     35,853       73,260  
Provision for federal income taxes
     (12,963 )     (25,710 )
 
            
Net earnings
   $ 22,890     $ 47,550  
 
            
Basic earnings per share
   $ 0.37     $ 0.75  
Diluted earnings per share
   $ 0.37     $ 0.74  
Dividends paid per common share
   $ 0.20     $ 0.30  
Dividend payout ratio
     53.9 %     40.1 %
Net interest spread — Consolidated
     1.21 %     1.48 %
Net interest margin — Consolidated
     1.39 %     1.60 %
Interest rate spread — Bank only
     1.26 %     1.45 %
Net interest margin — Bank only
     1.42 %     1.64 %
Return on average assets
     0.29 %     0.63 %
Return on average equity
     5.79 %     12.12 %
Efficiency ratio
     72.09 %     61.06 %
Average interest earning assets
   $ 14,795,867     $ 13,747,769  
Average interest paying liabilities
   $ 14,642,313     $ 13,509,251  
Average stockholders’ equity
   $ 790,410     $ 784,828  
Equity/assets ratio (average for the period)
     4.93 %     5.18 %
Ratio of charge-offs to average loans held for investment
     0.33 %     0.20 %

 

 

Flagstar Bancorp, Inc.
                                 
Summary of the Consolidated   June 30,   March 31,   December 31,   June 30,
Statements of Financial Condition:   2007   2007   2006   2006
Total assets
   $ 16,179,468     $ 15,432,122     $ 15,497,205     $ 15,225,864  
Mortgage backed securities held to maturity
     1,069,350       1,156,805       1,565,421       1,664,171  
Loans held for sale
     5,110,768       3,791,142       3,188,795       2,817,428  
Loans held for investment, net
     7,602,073       7,933,445       8,893,906       9,387,460  
Allowance for loan losses
     53,400       48,500       45,779       39,606  
Servicing rights
     266,545       226,794       173,288       230,984  
Deposits
     7,697,810       7,975,382       7,623,488       7,843,249  
FHLB advances
     5,529,055       5,604,000       5,407,000       4,290,000  
Repurchase agreements
     1,705,418       625,426       990,806       1,145,578  
Stockholders’ equity
     770,275       797,658       812,234       803,944  
 
                                
Other Financial and Statistical Data:
                                
Equity/assets ratio
     4.76 %     5.17 %     5.24 %     5.28 %
Core capital ratio
     6.04 %     6.29 %     6.37 %     6.39 %
Total risk-based capital ratio
     10.96 %     11.42 %     11.55 %     11.15 %
Book value per share
   $ 12.78     $ 12.79     $ 12.77     $ 12.65  
Shares outstanding
     60,260       62,360       63,605       63,529  
Average shares outstanding
     60,691       63,427       63,588       63,438  
Average diluted shares outstanding
     61,110       64,041       64,328       64,333  
Loans serviced for others
   $ 21,508,835     $ 19,124,378     $ 15,032,504     $ 22,379,937  
Weighted average service fee (bps)
     36.9       37.0       37.1       35.6  
Value of servicing rights
     1.24 %     1.19 %     1.15 %     1.03 %
Allowance for loan losses to non performing loans
     53.8 %     65.0 %     80.2 %     79.20 %
Allowance for loan losses to loans held for investment
     0.70 %     0.61 %     0.51 %     0.42 %
Non performing assets to total assets
     1.18 %     1.04 %     1.03 %     0.99 %
Number of bank branches
     156       155       151       145  
Number of loan origination centers
     73       72       76       87  
Number of employees (excluding loan officers & account executives)
     2,689       2,522       2,510       2,548  
Number of loan officers and account executives
     462       448       444       530  

 

 

Flagstar Bancorp, Inc.
Loan Originations
(Dollars in millions)
(unaudited)
                                                 
    For the Three Months Ended
    June 30,   March 31,   June 30,
Loan type   2007   2007   2006
 
Residential mortgage loans
   $ 7,162       96.5 %   $ 5,489       95.4 %   $ 4,901       93.2 %
Consumer loans
     110       1.5       104       1.8       194       3.7  
Commercial loans
     150       2.0       160       2.8       165       3.1  
     
Total loan production
   $ 7,422       100.0 %   $ 5,753       100.0 %   $ 5,260       100.0 %
     
                                 
    For the Six Months Ended
    June 30,   June 30,
Loan type   2007   2006
 
Residential mortgage loans
   $ 12,652       96.0 %   $ 9,249       93.1 %
Consumer loans
     214       1.6       374       3.8  
Commercial loans
     309       2.4       311       3.1  
     
Total loan production
   $ 13,175       100.0 %   $ 9,934       100.0 %
     
Gain on Loan Sales
(Dollars in thousands)
(unaudited)
                         
    For the Three Months Ended
    June 30,   March 31,   June 30,
Description   2007   2007   2006
 
Net gain on loan sales
   $ 28,144     $ 25,154     $ 9,650  
Plus: FASB 133 adjustment
     (3,604 )     (3,945 )     (3,337 )
Plus: LOCOM adjustment
     63       26       —  
Plus: secondary market reserve
     2,379       2,163       1,420  
     
Gain on loan sales
   $ 26,982     $ 23,398     $ 7,733  
     
Loans sold
   $ 5,370,633     $ 5,289,617     $ 3,964,625  
     
Sales spread
     0.47 %     0.44 %     0.20 %
     
                 
    For the Six Months Ended
    June 30,   June 30,
Description   2007   2006
 
Net gain on loan sales
   $ 53,298     $ 26,735  
Plus: FASB 133 adjustment
     (7,549 )     (8,719 )
Plus: LOCOM adjustment
     89       —  
Plus: secondary market reserve
     4,543       2,426  
Gain on loan sales
   $ 50,381     $ 20,442  
     
Loans sold
   $ 11,020,249     $ 7,858,695  
     
Sales spread
     0.46 %     0.26 %
     

 

 

Flagstar Bancorp, Inc.
Loans Held for Investment
(Dollars in thousands)
(unaudited)
                                 
Description   June 30, 2007   March 31, 2007
 
First mortgage loans
   $ 5,542,471       72.4 %   $ 5,909,807       74.0 %
Second mortgage loans
     61,107       0.8       65,601       0.8  
Commercial real estate loans
     1,381,552       18.0       1,325,057       16.8  
Construction loans
     82,301       1.1       75,178       0.9  
Warehouse lending
     267,740       3.5       271,493       3.4  
Consumer loans
     302,047       3.9       315,267       3.9  
Non-real estate commercial loans
     18,255       0.3       19,542       0.2  
     
Total loans held for investment
   $ 7,655,473       100.0 %   $ 7,981,945       100.0 %
     
                                 
Description   December 31, 2006   June 30, 2006
 
First mortgage loans
   $ 6,211,765       69.4 %   $ 7,091,818       75.3 %
Second mortgage loans
     715,154       8.0       470,885       5.0  
Commercial real estate loans
     1,301,819       14.6       1,210,212       12.8  
Construction loans
     64,528       0.7       62,847       0.7  
Warehouse lending
     291,656       3.3       190,466       2.0  
Consumer loans
     340,157       3.8       389,168       4.1  
Non-real estate commercial loans
     14,606       0.2       11,670       0.1  
     
Total loans held for investment
   $ 8,939,685       100.0 %   $ 9,427,066       100.0 %
     
Deposit Portfolio
(Dollars in thousands)
(unaudited)
                                 
Description   June 30, 2007   March 31, 2007
    Balance   Rate   Balance   Rate
     
Demand deposits
   $ 404,837       1.58 %   $ 392,476       1.52 %
Savings deposits
     133,099       1.48       140,349       1.50  
Money market deposits
     611,506       4.19       609,754       4.13  
Certificates of deposits
     3,756,718       5.00       3,775,817       4.97  
     
Total retail deposits
     4,906,160       4.52       4,918,396       4.49  
Company controlled custodial deposits
     369,861       —       305,378       —  
Municipal deposits
     1,540,177       5.35       1,772,324       5.36  
Wholesale deposits
     881,612       3.72       979,284       3.70  
     
Total deposits
   $ 7,697,810       4.38 %   $ 7,975,382       4.42 %
     
                                 
Description   December 31, 2006   June 30, 2006
    Balance   Rate   Balance   Rate
     
Demand deposits
   $ 380,162       1.28 %   $ 340,843       0.75 %
Savings deposits
     144,460       1.55       184,103       1.64  
Money market deposits
     608,282       4.05       656,902       3.88  
Certificates of deposits
     3,763,781       4.86       3,723,086       4.52  
     
Total retail deposits
     4,896,685       4.38       4,904,934       4.06  
Company controlled custodial deposits
     244,193       —       —       —  
Municipal deposits
     1,419,964       5.33       1,448,077       5.16  
Wholesale deposits
     1,062,646       3.66       1,490,238       3.53  
     
Total deposits
   $ 7,623,488       4.30 %   $ 7,843,249       4.17 %
     

 

 

Flagstar Bancorp, Inc.
Asset Quality
(Dollars in thousands)
(unaudited)
                                 
    Delinquencies at
Days delinquent   June 30, 2007     March 31, 2007  
 
30
   $ 50,202       27.9 %   $ 32,251       24.7 %
60
     30,451       16.9       23,863       18.3  
90
     97,789       54.3       73,906       56.5  
Matured — Delinquent
     1,509       0.9       664       0.5  
     
Total
   $ 179,951       100.0 %   $ 130,684       100.0 %
     
Investment loans
   $ 7,655,473             $ 7,981,945          
     
Delinquency % (90+ Days and Matured)
     1.30 %             0.93 %        
     
                                 
    Delinquencies at
Days delinquent   December 31, 2006     June 30, 2006  
 
30
   $ 40,140       33.6 %   $ 28,703       30.5 %
60
     22,163       18.6       15,253       16.2  
90
     56,554       47.4       49,530       52.8  
Matured — Delinquent
     517       0.4       497       0.5  
     
Total
   $ 119,374       100.0 %   $ 93,983       100.0 %
     
Investment loans
   $ 8,939,685             $ 9,427,066          
     
Delinquency % (90+ Days and Matured)
     0.64 %             0.53 %        
     
                                 
    Non-Performing Loans and Assets at
    June 30,     March 31,     December 31,     June 30,  
    2007     2007     2006     2006  
 
Non-Performing Loans
   $ 99,298     $ 74,570     $ 57,071     $ 50,027  
Real Estate Owned
     78,916       76,765       80,995       69,253  
Repurchased Assets/Non-Performing Assets
     12,501       9,178       22,096       31,089  
 
                        
Non-Performing Assets
   $ 190,715     $ 160,513     $ 160,162     $ 150,369  
 
                        
Non-Performing Loans as a Percentage of Investment Loans
     1.30 %     0.93 %     0.64 %     0.53 %
Non-Performing Assets as a Percentage of Total Assets
     1.18 %     1.04 %     1.03 %     0.99 %