EX-99.1 2 pressreleasefourthquarter2.htm EXHIBIT 99.1 Press Release Fourth Quarter 2012


EXHIBIT 99.1

NEWS RELEASE
For more information, contact:        
Paul D. Borja
Chief Financial Officer
Bradley T. Howes
Investor Relations Officer
(248) 312-2000
                                
                                        
Flagstar Reports Fourth Quarter and Full Year 2012 Results

Delivers third consecutive quarter of profitability, net income of $223.7 million for 2012
Continues to emphasize risk management, quality control and strengthening and de-risking the balance sheet

TROY, Mich. (January 23, 2013) - Flagstar Bancorp, Inc. (NYSE:FBC) (the "Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported fourth quarter 2012 net income applicable to common stockholders of $66.8 million, or $1.12 per share (diluted), as compared to third quarter 2012 net income of $79.7 million, or $1.36 per share (diluted), and a fourth quarter 2011 net loss of $(78.2) million, or $(1.41) per share (diluted). The full year 2012 net income applicable to common stockholders was $223.7 million, or $3.74 per share (diluted), compared to a full year 2011 net loss of $(198.9) million, or $(3.62) per share (diluted).

“We are pleased to report fourth quarter and full year financial results that demonstrate continued performance improvement and sustainable profitability,” said Michael Tierney, President and Chief Executive Officer of the Company. “During the fourth quarter we significantly reduced credit costs, further strengthened and de-risked the balance sheet, and improved the Tier 1 leverage capital ratio by over 100 basis points from the previous quarter. We remain dedicated to building a strong culture of compliance, and we believe that the initiatives we completed during the fourth quarter demonstrate our continued emphasis on quality, risk management and sound governance. Our sustained profitability is a testament to the hard work of Flagstar’s talented employees, and I thank them for their continued dedication.”

Mr. Tierney continued, “With the recently announced sale of a substantial portion of Flagstar's Northeast-based commercial loan portfolio, we are refocusing our business strategy on our national mortgage presence and our Michigan-based community banking model. We remain committed to being the largest bank headquartered in Michigan, through our 111 branches and our commercial banking team, and we look forward to continuing to meet and exceed the needs of our clients and communities. At the same time, we will continually strive to improve our risk management systems and processes, and deliver enhanced value to all of our stakeholders."


1

Highlights

•
Delivered strong financial performance:
◦
Net income applicable to common stockholders of $66.8 million, or $1.12 per diluted share.
◦
Gain on loan sale income remained strong, at $239.0 million, reflecting a margin of 1.53 percent.
◦
Net interest income increased slightly from the prior quarter to $73.9 million.
◦
Total provisions related to the representation and warranty reserve decreased by 75.2 percent from the prior quarter to $32.5 million.

•
Strengthened and de-risked the balance sheet:
◦
Total repurchase pipeline decreased by $201.4 million from the prior quarter to $224.2 million, as the Company continued to work through the existing population of repurchase requests.
◦
Continued to add reserves for pending and threatened litigation.
◦
Entered into a definitive agreement to sell a substantial portion of Northeast-based commercial loan portfolio, which is expected to be capital accretive (discussed in Commercial Loan Sale below).

•
Improved capital ratios, liquidity remained strong:
◦
Tier 1 capital ratio (to adjusted total assets) increased by 110 basis points to 10.41 percent.
◦
Cash on hand and interest-earning deposits of approximately $1.0 billion.

•
Non-performing loans were flat from prior quarter, but declined significantly from December 31, 2011:
◦
Consumer non-performing loans increased by 13.4 percent from the prior quarter, driven primarily by an increase in performing nonaccrual TDRs, but declined by 19.1 percent from December 31, 2011.
◦
Commercial non-performing loans declined by 29.5 percent from the prior quarter and 14.5 percent from December 31, 2011.

Commercial Loan Sale

As previously announced, effective December 31, 2012 the Bank entered into a definitive Transaction Purchase and Sale Agreement (the "Agreement") with CIT Bank, the wholly-owned U.S. commercial bank subsidiary of CIT Group Inc. (NYSE: CIT) ("CIT"). Under the terms of the Agreement, CIT will acquire $1.3 billion in commercial loan commitments, $785.0 million of which is currently outstanding. The Company expects that the total purchase price for the portfolio will be approximately $779.0 million and that a vast majority of the assets will be sold during the first quarter of 2013.

Net Interest Income

Fourth quarter 2012 net interest income increased slightly to $73.9 million, as compared to $73.1 million for the third quarter 2012. Net interest margin for the Bank also increased to 2.26 percent, as compared to 2.21 percent for the third quarter 2012, driven primarily by an improvement in our funding costs.

Interest income decreased by $4.3 million from the prior quarter, driven primarily by a lower average balance of investment securities available-for-sale primarily resulting from the sale of non-agency collateralized mortgage obligation securities during the third quarter 2012 and lower average balances of loans held-for-investment. Fourth quarter 2012 average yield on interest-earnings assets was 3.44 percent, as compared to 3.54 percent for the third quarter 2012.

Interest expense decreased by $5.2 million during the fourth quarter 2012 from the third quarter 2012, more than offsetting the decline in interest income. The decrease in interest expense from prior quarter was primarily due to an improvement in the funding mix and a lower average cost of deposits.

The Company's average cost of funds for the fourth quarter 2012 was 1.60 percent, a decrease from the third quarter 2012 of 1.73 percent, driven primarily by a decrease in the average rate paid on retail certificates of deposits.

2

During the fourth quarter 2012, the Company reduced higher cost retail deposits. The average cost of total deposits decreased during the fourth quarter 2012 to 0.86 percent, as compared to 1.02 percent during the third quarter 2012.

Non-interest Income

Fourth quarter 2012 non-interest income increased to $285.8 million, as compared to $273.7 million for the third quarter 2012. Excluding the provision related to the representation and warranty reserve - change in estimate, which decreased by $99.3 million (discussed in Credit-Related Costs and Asset Quality below), non-interest income would have totaled $311.0 million for the fourth quarter 2012, as compared to $398.2 million for the third quarter 2012. This decrease from the prior quarter was primarily due to lower net gain on loan sales.

Fourth quarter 2012 net gain on loan sales decreased to $239.0 million, as compared to $334.4 million for the third quarter 2012, but increased as compared to $106.9 million for the fourth quarter 2011. The decrease from the prior quarter was reflective of both a decrease in mortgage rate lock commitments and a decrease in margin on rate lock commitments. Mortgage rate lock commitments decreased to $16.2 billion for the fourth quarter 2012, as compared to $18.1 billion for the third quarter 2012, driven by seasonal and competitive mortgage patterns, as well as actions to manage volume levels.

As compared to the fourth quarter 2011, net gain on loan sales increased by $132.1 million, primarily driven by increases in mortgage rate lock commitments and increased margin on rate lock commitments.

Gain on loan sale margin is calculated based on residential first mortgage rate lock commitments and actual sales of residential first mortgage loans, and is net of sales expenses, hedging costs and provisions related to the representation and warranty reserve (i.e., the portion of the reserve established at the time of sale). Gain on loan sale margin decreased to 1.53 percent for the fourth quarter 2012, as compared to 2.42 percent for the third quarter 2012, but increased from 1.02 percent for the fourth quarter 2011. The decrease from the prior quarter was largely attributable to a decrease in gross gain on sale margin, as well as a 12.5 percent increase in mortgage loan sales (which serves as the denominator in computing the reported margin) as compared to the prior quarter. As compared to the fourth quarter 2011, gain on loan sale margin increased by 51 basis points, reflective of strong consumer demand for the refinancing of residential mortgage loans in a declining interest rate environment and fewer competitors in the marketplace.

Loan fees and charges increased to $40.8 million for the fourth quarter 2012, as compared to $37.4 million for the third quarter 2012. Loan fees are driven by mortgage loan originations, which increased to $15.4 billion for the fourth quarter 2012, as compared to $14.5 billion for the third quarter 2012.

Net servicing revenue, which is the combination of net loan administration income (including the off-balance sheet hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), increased to $25.0 million for the fourth quarter 2012, as compared to $11.3 million for the third quarter 2012. This increase from the prior quarter was primarily attributable to effective hedge positioning, despite significant rate volatility intra-quarter and the absence of uncertainty from the central banks with respect to quantitative easing.

The Company also recorded a net loss on sales of mortgage servicing rights of $7.7 million during the fourth quarter 2012, due to bulk sales of mortgage servicing rights related to $13.8 billion in underlying mortgage loans. The Company intends to continue to look for opportunistic ways to reduce its concentration of mortgage servicing rights.

Credit-Related Costs and Asset Quality

For the fourth quarter 2012, total credit-related costs (see non-GAAP reconciliation) decreased to $97.6 million, as compared to $189.7 million for the third quarter 2012 and $173.2 million for the fourth quarter 2011. The declines from the prior quarter, and the same quarter in 2011, were driven primarily by a decrease in representation and

3

warranty reserve - change in estimate provisions (exclusive of provisions for representation and warranty reserve which are taken through gain on loan sale income).
   
The Company maintains a representation and warranty reserve on the balance sheet, which reflects an estimate of losses that may occur on both loans that have been sold or securitized into the secondary market and those currently in the repurchase pipeline, primarily to the GSEs. At December 31, 2012, the representation and warranty reserve was $193.0 million, a decrease as compared to $202.0 million at September 30, 2012, but an increase of $73.0 million as compared to $120.0 million at December 31, 2011. The decrease from the prior quarter includes an $11.0 million reclassification of reserves associated with loans insured by the MBIA Insurance Corporation ("MBIA"). This reclassification reflects the nature of the reserves following the filing by MBIA of its lawsuit against the Bank (discussed in Non-interest Expense below).

Representation and warranty reserve - change in estimate provision was $25.2 million for the fourth quarter 2012, as compared to $124.5 million for the third quarter 2012 and $69.3 million for the fourth quarter 2011. The declines from the prior quarter, and the same quarter in 2011, primarily reflect decreases in net charge-offs of loan repurchases.

At December 31, 2012, the total repurchase pipeline decreased to $224.2 million, as compared to $425.6 million at September 30, 2012, as the Company continued to work through the existing population of repurchase requests. New audit file review requests increased by 12.7 percent from the prior quarter, which management believes is a reflection of the GSEs continuing their reviews as they transition to a new review process.

The provision for loan losses in the fourth quarter 2012 decreased to $50.4 million, as compared to $52.6 million for the third quarter 2012 and $63.5 million for the fourth quarter 2011. At December 31, 2012, the allowance for loan losses remained unchanged at $305.0 million, as compared to September 30, 2012, and decreased as compared to $318.0 million at December 31, 2011. At December 31, 2012, the ratio of the allowance for loan losses to non-performing loans held-for-investment was 76.3 percent, relatively unchanged as compared to 76.5 percent at September 30, 2012, but increased as compared to 65.1 percent at December 31, 2011.

The consumer allowance for loan losses increased to $260.7 million at December 31, 2012, as compared to $244.6 million at September 30, 2012, which reflects management's view of potentially higher losses from re-defaults within the portfolio of troubled debt restructurings ("TDRs"), as well as an increase in the level of TDRs. The total commercial allowance for loan losses decreased to $44.3 million at December 31, 2012, as compared to $60.4 million at September 30, 2012, reflecting the continued run-off in the commercial loan portfolio and reversal of $12.6 million in reserves associated with the December sale of commercial loans under the Agreement with CIT.

Total non-performing loans were $399.8 million as of December 31, 2012, essentially unchanged as compared to $398.9 million at September 30, 2012, but decreased by 18.1 percent from December 31, 2011. Consumer non-performing loans increased to $313.4 million at December 31, 2012, as compared to $276.3 million at September 30, 2012, but decreased by 19.1 percent from December 31, 2011. The increase from the prior quarter was driven primarily by an increase in TDRs, virtually all of which were performing as agreed, as a result of the implementation of the Office of the Comptroller of the Currency guidance on bankruptcies. Commercial non-performing loans decreased to $86.4 million at December 31, 2012, as compared to $122.6 million at September 30, 2012 and $101.0 million at December 31, 2011. The decrease from the prior quarter was primarily driven by continued work-outs and individual note sales within the portfolio.

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) increased to $21.2 million for the fourth quarter 2012, as compared to $12.5 million for the third quarter 2012, but decreased as compared to $32.4 million for the fourth quarter 2011. The increase from the prior quarter was driven primarily by the recognition of a $7.8 million benefit applied against asset resolution expense in the third quarter 2012, as a result of the Company's participation in a HUD-coordinated market auction of loans repurchased with government guarantees.

4

Non-interest Expense

Non-interest expense was $237.0 million for the fourth quarter 2012, as compared to $233.5 million for the third quarter 2012 and $205.8 million for the fourth quarter 2011. Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality above), non-interest expense would have totaled $215.7 million for the fourth quarter 2012, as compared to $221.0 million for the third quarter 2012 and $173.4 for the fourth quarter 2011. The decrease in non-interest expense (excluding asset resolution expense) from the prior quarter is primarily due to a $15.2 million decrease in loss on extinguishment of debt resulting from the Company's prepayment of FHLB advances during the third quarter 2012.

As compared to the fourth quarter 2011, the increase in non-interest expense was driven by an increase in compensation and benefits related to significant staffing increases in the default servicing and loss mitigation areas, an increase in commissions driven by increased mortgage loan originations, and an increase in general and administrative expense from additional legal reserves for pending and threatened litigation.

Compensation and benefits increased to $72.1 million for the fourth quarter 2012, as compared to $67.4 million for the third quarter 2012, reflecting incentive compensation and retention expenses. Commission expense also increased to $22.2 million for the fourth quarter 2012, as compared to $19.9 million for the third quarter 2012. This increase from the prior quarter was consistent with an increase in mortgage loan originations during the quarter.
  
The fourth quarter 2012 general and administrative expense includes approximately $27.0 million with respect to the Company's assessment of exposure from pending and threatened litigation. This includes the reclassification of $11.0 million previously recorded in the representation and warranty reserve. The total amount reserved by the Company for pending and threatened litigation, including amounts paid in anticipation of a future settlement, was approximately $82.7 million at December 31, 2012. Included in this reserve are amounts for the previously disclosed lawsuit filed by Assured Guaranty Municipal Corp., formerly known as Financial Security Assurance Inc. ("Assured"), and for the lawsuit that MBIA filed against the Bank on January 11, 2013. The MBIA claims relate to approximately $1.1 billion of non-agency securitization transactions in 2006 and 2007 involving fixed and adjustable rate second mortgage loans that Flagstar held at the time in its investment portfolio. MBIA guaranteed the offered securities. The Assured and MBIA cases are pending in the United States District Court for the Southern District of New York. The bench trial in the Assured case concluded on November 13, 2012, and the Company expects a decision in late January. Although there can be no assurance as to the ultimate outcome of the Assured and MBIA lawsuits, the Company believes that the Bank has meritorious defenses and intends to continue to defend itself vigorously. The actual costs of resolving the Assured and MBIA claims, and the other pending and threatened litigation, may be materially higher or lower than the amounts reserved.

Capital

The Bank was considered "well-capitalized" for regulatory purposes at December 31, 2012, and had regulatory capital ratios of 10.41 percent for the Tier 1 capital ratio (to adjusted total assets) and 19.16 percent for the total risk-based capital ratio (to risk-weighted assets).

At December 31, 2012, the Company had an equity-to-assets ratio of 9.38 percent.

Balance Sheet and Funding

Total assets at December 31, 2012 were $14.1 billion, as compared to $14.9 billion at September 30, 2012. The decrease from the prior quarter was primarily driven by a decrease in held-for-sale residential first mortgage loans resulting from an excess of residential first mortgage loan sales over residential first mortgage loan originations, and a decrease in commercial real estate loans held-for-investment driven by the Company's continued emphasis on reducing the balances of loans originated prior to 2009. During the quarter, commercial loans related to the Agreement with CIT were transferred from the loans held-for-investment portfolio to the loans held-for-sale portfolio.

5

Loans are primarily funded with deposits obtained through branches in Michigan and from public entities. Funds are also obtained through loan repayments and sales of loans and securities in the ordinary course of business, advances from the FHLB in varying maturities depending on current needs, customer escrow accounts and security repurchase agreements. Several of these sources are relied upon at different times to address daily and forecasted liquidity needs for operational requirements and policy levels while managing overall net interest costs and interest rate risk.

Total deposits were $8.3 billion at December 31, 2012, a decrease of $1.2 billion as compared to September 30, 2012. The decrease from the prior quarter was primarily attributable to a $1.2 billion transfer of principal and interest custodian accounts serviced for GSEs to a third party. Retail checking and savings balances increased, more than offsetting a decrease in retail and wholesale certificates of deposit, as the Company continued to replace higher costing funding with core deposits.

At December 31, 2012 and September 30, 2012, the Bank had approximately $1.0 billion of cash on hand and interest-earning deposits. The Bank also 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 December 31, 2012, the Bank had outstanding borrowings from the FHLB of $3.2 billion, as compared to $3.1 billion at September 30, 2012. At December 31, 2012, the Bank had an additional $1.1 billion of collateralized borrowing capacity available at the FHLB.

Earnings Conference Call

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

Questions may be asked during the conference call or by emailing questions in advance to investors@flagstar.com

To join the call, please dial (800) 684-1259 toll free or (913) 312-1503, and use passcode: 3359641. 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: 3359641.

The conference call will also be available as a live audiocast 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. (NYSE: FBC) is the holding company for Flagstar Bank, a full-service financial institution offering a range of products and services to consumers, businesses, and homeowners. With $14.1 billion in total assets at December 31, 2012, Flagstar is the largest publicly held savings bank headquartered in the Midwest. Flagstar originates loans nationwide and 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.


6

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, 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 Forms 10-K and 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 Consent Order with the Office of the Comptroller of the Currency, which was disclosed on October 23, 2012; and the commercial loan sale may not have the projected impact or be consummated in a timely manner. 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.



7

Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(In thousands, except share data)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Assets
(Unaudited)
 
(Unaudited)
 
 
    Cash and cash items
$
38,070

 
$
53,883

 
$
49,715

    Interest-earning deposits
914,723

 
949,514

 
681,343

         Cash and cash equivalents
952,793

 
1,003,397

 
731,058

    Securities classified as trading
170,086

 
170,073

 
313,383

    Securities classified as available-for-sale
184,445

 
198,861

 
481,352

Loans held-for-sale
3,791,188

 
3,251,936

 
1,800,885

    Loans repurchased with government guarantees
1,841,342

 
1,931,163

 
1,899,267

Loans held-for-investment
5,586,633

 
6,552,399

 
7,038,587

         Less: allowance for loan losses
(305,000
)
 
(305,000
)
 
(318,000
)
         Loans held-for-investment, net
5,281,633

 
6,247,399

 
6,720,587

             Total interest-earning assets
12,183,417

 
12,748,946

 
11,896,817

    Accrued interest receivable
91,992

 
106,458

 
105,200

    Repossessed assets, net
120,732

 
119,468

 
114,715

    Federal Home Loan Bank stock
301,737

 
301,737

 
301,737

    Premises and equipment, net
219,059

 
211,981

 
203,578

    Mortgage servicing rights
710,791

 
686,799

 
510,475

    Other assets
416,214

 
669,950

 
455,236

             Total assets
$
14,082,012

 
$
14,899,222

 
$
13,637,473

Liabilities and Stockholders' Equity
 
 
 
 
 
    Deposits
$
8,294,295

 
$
9,489,169

 
$
7,689,988

    Federal Home Loan Bank advances
3,180,000

 
3,088,000

 
3,953,000

    Long-term debt
247,435

 
248,560

 
248,585

            Total interest-bearing liabilities
11,721,730

 
12,825,729

 
11,891,573

    Accrued interest payable
13,420

 
12,522

 
8,723

    Representation and warranty reserve
193,000

 
202,000

 
120,000

Other liabilities
833,500

 
608,372

 
537,461

            Total liabilities
12,761,650

 
13,648,623

 
12,557,757

    Stockholders' Equity
 
 
 
 
 
Preferred stock
260,390

 
258,973

 
254,732

Common stock
559

 
558

 
556

    Additional paid in capital
1,476,569

 
1,475,380

 
1,471,463

    Accumulated other comprehensive loss
(1,658
)
 
(2,042
)
 
(7,819
)
    Accumulated deficit
(415,498
)
 
(482,270
)
 
(639,216
)
            Total stockholders' equity
1,320,362

 
1,250,599

 
1,079,716

            Total liabilities and stockholders' equity
$
14,082,012

 
$
14,899,222

 
$
13,637,473



8

Flagstar Bancorp, Inc.
 Consolidated Statements of Operations
 (In thousands, except per share data)
 
 
For the Three Months Ended
 
For the Year Ended
 
December 31,
2012
 
September 30,
2012
 
December 31,
2011
 
December 31,
2012
 
December 31,
2011
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 Interest Income
 
 
 
 
 
 
 
 
 
 Loans
$
112,464

 
$
114,158

 
$
116,790

 
$
456,141

 
$
427,022

 Securities classified as available-for-sale
 or trading
2,277

 
4,912

 
8,929

 
22,609

 
35,602

 Interest-earning deposits and other
674

 
672

 
426

 
2,220

 
2,785

    Total interest income
115,415

 
119,742

 
126,145

 
480,970

 
465,409

 Interest Expense
 
 
 
 
 
 
 
 
 
 Deposits
15,017

 
17,819

 
20,944

 
70,143

 
95,546

 FHLB advances
24,756

 
27,091

 
27,646

 
106,625

 
117,963

 Other
1,701

 
1,753

 
1,692

 
6,971

 
6,527

    Total interest expense
41,474

 
46,663

 
50,282

 
183,739

 
220,036

 Net interest income
73,941

 
73,079

 
75,863

 
297,231

 
245,373

 Provision for loan losses
50,351

 
52,595

 
63,548

 
276,047

 
176,931

Net interest income after provision for loan losses
23,590

 
20,484

 
12,315

 
21,184

 
68,442

 Non-Interest Income
 
 
 
 
 
 
 
 
 
 Loan fees and charges
40,793

 
37,359

 
28,610

 
142,908

 
77,843

 Deposit fees and charges
5,154

 
5,255

 
6,332

 
20,370

 
29,629

 Loan administration
25,010

 
11,099

 
28,295

 
100,007

 
94,604

 Gain on trading securities
12

 
237

 
674

 
(2,011
)
 
21,088

 Loss on transferors' interest
(780
)
 
(118
)
 
(847
)
 
(2,552
)
 
(5,673
)
 Net gain on loan sales
238,953

 
334,427

 
106,919

 
990,898

 
300,789

 Net loss on sales of mortgage servicing rights
(7,687
)
 
(1,332
)
 
(2,823
)
 
(12,319
)
 
(7,903
)
 Net (loss) gain on securities available-for-sale
(310
)
 
2,616

 
—

 
2,636

 
—

 Net gain on sale of assets
—

 
—

 
21,379

 
—

 
22,676

    Total other-than-temporary impairment
    (loss) gain
—

 
—

 
(11,569
)
 
2,810

 
(30,456
)
Gain (loss) recognized in other comprehensive income before taxes
—

 
—

 
4,437

 
(5,002
)
 
6,417

 Net impairment losses recognized in
 earnings
—

 
—

 
(7,132
)
 
(2,192
)
 
(24,039
)
 Representation and warranty reserve -
 change in estimate
(25,231
)
 
(124,492
)
 
(69,279
)
 
(256,289
)
 
(150,055
)
 Other fees and charges, net
9,881

 
8,686

 
6,493

 
39,786

 
26,557

    Total non-interest income
285,795

 
273,737

 
118,621

 
1,021,242

 
385,516


9

Flagstar Bancorp, Inc.
 Consolidated Statements of Operations
 (In thousands, except per share data)
 
 
For the Three Months Ended
 
For the Year Ended
 
December 31,
2012
 
September 30,
2012
 
December 31,
2011
 
December 31,
2012
 
December 31,
2011
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
 
 Non-Interest Expense
 
 
 
 
 
 
 
 
 
 Compensation and benefits
72,081

 
67,386

 
60,011

 
270,859

 
224,711

 Commissions
22,154

 
19,888

 
14,151

 
75,345

 
39,345

 Occupancy and equipment
19,184

 
18,833

 
19,448

 
73,674

 
70,117

 Asset resolution
21,241

 
12,487

 
32,408

 
91,349

 
128,313

 Federal insurance premiums
12,202

 
12,643

 
11,401

 
49,273

 
41,581

 Other taxes
856

 
2,036

 
606

 
4,219

 
2,784

 Warrant expense (income)
5,422

 
1,516

 
138

 
8,935

 
(6,889
)
 Loss on extinguishment of debt
—

 
15,246

 
—

 
15,246

 
—

 General and administrative
83,822

 
83,456

 
67,674

 
239,795

 
134,718

    Total non-interest expense
236,962

 
233,491

 
205,837

 
828,695

 
634,680

 Income (loss) before federal income taxes
72,423

 
60,730

 
(74,901
)
 
213,731

 
(180,722
)
 Provision (benefit) for federal income taxes
4,235

 
(20,380
)
 
264

 
(15,645
)
 
1,056

 Net income (loss)
68,188

 
81,110

 
(75,165
)
 
229,376

 
(181,778
)
 Preferred stock dividend/accretion (1)
(1,417
)
 
(1,417
)
 
(3,016
)
 
(5,658
)
 
(17,165
)
 Net income (loss) applicable to common
 stockholders
$
66,771

 
$
79,693

 
$
(78,181
)
 
$
223,718

 
$
(198,943
)
 Income (loss) per share
 
 
 
 
 
 
 
 
 
       Basic (2)
$
1.13

 
$
1.37

 
$
(1.41
)
 
$
3.77

 
$
(3.62
)
       Diluted (2)
$
1.12

 
$
1.36

 
$
(1.41
)
 
$
3.74

 
$
(3.62
)

(1)
The preferred stock dividend/accretion for the three months ended December 31, 2012 and September 30, 2012 and the year ended December 31, 2012, respectively, represents only the accretion. On January 27, 2012, the Company elected to defer payment of dividends and interest on the preferred stock.
(2)
The three months and year ended December 31, 2011 have been restated for a one-for-ten reverse stock split announced September 27, 2012 and began trading on October 11, 2012.

10


Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)
 
For the Three Months Ended
 
For the Year Ended
 
December 31, 2012
 
September 30,
2012
 
December 31, 2011
 
December 31, 2012
 
December 31, 2011
Return on average assets
1.78
%
 
2.10
%
 
(2.21
)%
 
1.52
%
 
(1.49
)%
Return on average equity
20.70
%
 
25.78
%
 
(27.56
)%
 
18.76
%
 
(16.78
)%
Efficiency ratio
65.9
%
 
67.3
%
 
105.8
 %
 
62.9
%
 
100.6
 %
Efficiency ratio (credit-adjusted) (1)
56.0
%
 
46.9
%
 
65.8
 %
 
46.8
%
 
64.8
 %
Equity-to-assets ratio (average for the period)
8.59
%
 
8.16
%
 
8.02
 %
 
8.10
%
 
8.88
 %
Mortgage loans originated (2)
$
15,356,795

 
$
14,513,635

 
$
10,187,100

 
$
53,586,856

 
$
26,612,800

Other loans originated
$
113,458

 
$
165,668

 
$
199,529

 
$
754,155

 
$
700,969

Mortgage loans sold and securitized
$
15,610,590

 
$
13,876,626

 
$
10,476,542

 
$
53,094,326

 
$
27,451,362

Interest rate spread - bank only (3)
1.87
%
 
1.84
%
 
2.15
 %
 
1.98
%
 
1.86
 %
Net interest margin - bank only (4) 
2.26
%
 
2.21
%
 
2.43
 %
 
2.31
%
 
2.13
 %
Interest rate spread - consolidated (3) 
1.84
%
 
1.81
%
 
2.13
 %
 
1.96
%
 
1.85
 %
Net interest margin - consolidated (4)
2.21
%
 
2.16
%
 
2.37
 %
 
2.26
%
 
2.07
 %
Average common shares outstanding (5)
55,842,910

 
55,801,692

 
55,535,992

 
55,762,196

 
55,434,296

Average fully diluted shares outstanding (5)
56,520,403

 
56,233,165

 
55,535,992

 
56,193,515

 
55,434,296

Average interest-earning assets
$
13,349,991

 
$
13,476,917

 
$
12,752,968

 
$
13,104,401

 
$
11,803,670

Average interest paying liabilities
$
10,318,385

 
$
10,737,734

 
$
11,018,201

 
$
10,786,253

 
$
10,530,369

Average stockholder's equity
$
1,290,082

 
$
1,236,411

 
$
1,134,716

 
$
1,192,721

 
$
1,185,731

Charge-offs to average investment loans (annualized)
3.18
%
 
2.12
%
 
1.60
 %
 
4.43
%
 
2.14
 %
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Equity-to-assets ratio
9.38
%
 
8.39
%
 
7.92
%
Tier 1 capital ratio (to adjusted total assets) (6)
10.41
%
 
9.31
%
 
8.95
%
Total risk-based capital ratio (to risk-weighted assets) (6)
19.16
%
 
17.58
%
 
16.64
%
Book value per common share (5)
$
18.97

 
$
17.76

 
$
14.80

Number of common shares outstanding (5)
55,863,053

 
55,828,470

 
55,577,564

Mortgage loans serviced for others
$
76,821,222

 
$
82,414,799

 
$
63,770,676

Weighted average service fee (basis points)
29.2

 
30.1

 
30.8

Capitalized value of mortgage servicing rights
0.93
%
 
0.83
%
 
0.80
%
Ratio of allowance for loan losses to non-performing loans held-for-investment (7)
76.3
%
 
76.5
%
 
65.1
%
Ratio of allowance for loan losses to loans held-for-investment (7)
5.46
%
 
4.65
%
 
4.52
%
Ratio of non-performing assets to total assets (bank only)
3.70
%
 
3.48
%
 
4.43
%
Number of bank branches
111

 
111

 
113

Number of loan origination centers
31

 
31

 
27

Number of employees (excluding loan officers and account executives)
3,328

 
3,240

 
2,839

Number of loan officers and account executives
334

 
336

 
297


(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)
Restated for a 1-for-10 reverse stock split announced September 27, 2012 and began trading on October 11, 2012.
(6)
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.
(7)
Bank only and does not include non-performing loans held-for-sale.





11


Loan Originations
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Consumer loans
 
 
 
 
 
 
 
 
    Mortgage (1)
$
15,356,795

99.3
%
 
$
14,513,635

98.8
%
 
$
10,187,100

98.1
%
    Other consumer (2)
7,589

—
%
 
8,489

0.1
%
 
3,033

—
%
Total consumer loans
15,364,384

99.3
%
 
14,522,124

98.9
%
 
10,190,133

98.1
%
Commercial loans (3)
105,869

0.7
%
 
157,179

1.1
%
 
196,496

1.9
%
Total loan originations
$
15,470,253

100.0
%
 
$
14,679,303

100.0
%
 
$
10,386,629

100.0
%
 
For the Year Ended
 
December 31, 2012
 
December 31, 2011
Consumer loans
 
 
 
 
 
    Mortgage (1)
$
53,586,856

98.6
%
 
$
26,612,800

97.4
%
    Other consumer (2)
27,058

0.1
%
 
11,024

0.1
%
Total consumer loans
53,613,914

98.7
%
 
26,623,824

97.5
%
Commercial loans (3)
727,097

1.3
%
 
689,945

2.5
%
Total loan originations
$
54,341,011

100.0
%
 
$
27,313,769

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)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Consumer loans
 
 
 
 
 
 
 
 
Residential first mortgage
$
3,009,251

53.9
%
 
$
3,086,096

47.1
%
 
$
3,749,821

53.1
%
Second mortgage
114,885

2.1
%
 
122,286

1.9
%
 
138,912

2.0
%
Warehouse lending
1,347,727

24.1
%
 
1,307,292

20.0
%
 
1,173,898

16.7
%
HELOC
179,447

3.2
%
 
192,117

2.9
%
 
221,986

3.2
%
Other
49,611

0.9
%
 
53,188

0.8
%
 
67,613

1.0
%
    Total consumer loans
4,700,921

84.2
%
 
4,760,979

72.7
%
 
5,352,230

76.0
%
Commercial loans
 
 
 
 
 
 
 
 
Commercial real estate
689,424

12.3
%
 
1,005,498

15.3
%
 
1,242,969

17.7
%
Commercial and industrial
189,988

3.4
%
 
597,273

9.1
%
 
328,879

4.7
%
Commercial lease financing
6,300

0.1
%
 
188,649

2.9
%
 
114,509

1.6
%
    Total commercial loans
885,712

15.8
%
 
1,791,420

27.3
%
 
1,686,357

24.0
%
     Total loans held-for-investment
$
5,586,633

100.0
%
 
$
6,552,399

100.0
%
 
$
7,038,587

100.0
%

12


Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
For the Year Ended
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
December 31, 2012
 
December 31, 2011
Beginning balance
$
305,000

 
$
287,000

 
$
282,000

 
$
318,000

 
$
274,000

Provision for loan losses
50,351

 
52,595

 
63,548

 
276,047

 
176,931

Charge-offs
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
     Residential first mortgage
(33,802
)
 
(23,999
)
 
(19,042
)
 
(175,803
)
 
(41,559
)
     Second mortgage
(5,423
)
 
(3,990
)
 
(2,672
)
 
(18,753
)
 
(19,217
)
     Warehouse lending
—

 
—

 
(562
)
 
—

 
(1,122
)
     HELOC
(5,000
)
 
(1,483
)
 
(3,515
)
 
(17,159
)
 
(16,980
)
     Other
(1,613
)
 
(892
)
 
(916
)
 
(4,423
)
 
(4,729
)
 Total consumer loans
(45,838
)
 
(30,364
)
 
(26,707
)
 
(216,138
)
 
(83,607
)
Commercial loans
 
 
 
 
 
 
 
 
 
     Commercial real estate
(13,443
)
 
(15,532
)
 
(2,527
)
 
(105,285
)
 
(57,626
)
     Commercial and industrial
(3,011
)
 
(12
)
 
—

 
(4,627
)
 
(644
)
     Commercial lease financing
(1,191
)
 
—

 
—

 
(1,191
)
 
—

 Total commercial loans
(17,645
)
 
(15,544
)
 
(2,527
)
 
(111,103
)
 
(58,270
)
Total charge-offs
(63,483
)
 
(45,908
)
 
(29,234
)
 
(327,241
)
 
(141,877
)
Recoveries
 
 
 
 
 
 
 
 
 
Consumer loans
 
 
 
 
 
 
 
 
 
     Residential first mortgage
5,530

 
5,899

 
401

 
18,561

 
1,656

     Second mortgage
196

 
428

 
65

 
1,912

 
1,642

     Warehouse lending
—

 
—

 
—

 
—

 
5

     HELOC
67

 
44

 
57

 
461

 
1,510

     Other
731

 
448

 
319

 
1,786

 
1,603

Total consumer loans
6,524

 
6,819

 
842

 
22,720

 
6,416

Commercial loans
 
 
 
 
 
 
 
 
 
     Commercial real estate
6,600

 
4,461

 
844

 
15,397

 
2,408

     Commercial and industrial
8

 
33

 
—

 
77

 
122

Total commercial loans
6,608

 
4,494

 
844

 
15,474

 
2,530

Total recoveries
13,132

 
11,313

 
1,686

 
38,194

 
8,946

Charge-offs, net of recoveries
(50,351
)
 
(34,595
)
 
(27,548
)
 
(289,047
)
 
(132,931
)
Ending balance
$
305,000

 
$
305,000

 
$
318,000

 
$
305,000

 
$
318,000

Net charge-off ratio (annualized)
3.18
%
 
2.12
%
 
1.60
%
 
4.43
%
 
2.14
%

Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
 
 
For the Three Months Ended
 
For the Year Ended
 
December 31, 2012
September 30, 2012
December 31, 2011
 
December 31, 2012
December 31, 2011
 
(Dollars in thousands)
 Balance, beginning of period
$
202,000

$
161,000

$
85,000

 
$
120,000

$
79,400

 Provision
 
 
 
 
 
 
 
Charged to gain on sale for current loan sales
7,285

6,432

3,481

 
24,410

8,993

 
Charged to representation and warranty reserve - change in estimate
25,231

124,492

69,280

 
256,289

150,055

 
Total
32,516

130,924

72,761

 
280,699

159,048

 Charge-offs, net
(41,516
)
(89,924
)
(37,761
)
 
(207,699
)
(118,448
)
 Balance, end of period
$
193,000

$
202,000

$
120,000

 
$
193,000

$
120,000




13

Composition of Allowance for Loan Losses
(In thousands)
(Unaudited)
December 31, 2012
Collectively Evaluated Reserves (1)
 
Individually Evaluated Reserves (2)
 
Total
Consumer loans
 
 
 
 
 
   Residential first mortgage
$
68,685

 
$
150,545

 
$
219,230

   Second mortgage
13,173

 
7,028

 
20,201

   Warehouse lending 
899

 
—

 
899

   HELOC
15,274

 
3,074

 
18,348

   Other
2,040

 
—

 
2,040

Total consumer loans
100,071

 
160,647

 
260,718

Commercial loans
 
 
 
 
 
   Commercial real estate
38,772

 
2,538

 
41,310

   Commercial and industrial
2,868

 
10

 
2,878

   Commercial lease financing 
94

 
—

 
94

Total commercial loans
41,734

 
2,548

 
44,282

Total allowance for loan losses
$
141,805

 
$
163,195

 
$
305,000

September 30, 2012
 
 
 
 
 
Consumer loans
 
 
 
 
 
   Residential first mortgage
$
74,950

 
$
129,902

 
$
204,852

   Second mortgage
12,478

 
6,410

 
18,888

   Warehouse lending 
1,038

 
—

 
1,038

   HELOC
15,216

 
2,340

 
17,556

   Other
2,229

 
—

 
2,229

Total consumer loans
105,911

 
138,652

 
244,563

Commercial loans
 
 
 
 
 
   Commercial real estate
47,113

 
1,722

 
48,835

   Commercial and industrial
8,857

 
20

 
8,877

   Commercial lease financing 
2,725

 
—

 
2,725

Total commercial loans
58,695

 
1,742

 
60,437

Total allowance for loan losses
$
164,606

 
$
140,394

 
$
305,000


(1)
Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.
(2)
Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Non-performing loans held-for-investment
$
399,825

 
$
398,948

 
$
488,367

Real estate and other non-performing assets, net
120,732

 
119,468

 
114,715

Non‑performing assets held-for-investment, net
520,557

 
518,416

 
603,082

Non-performing loans held-for-sale
1,835

 
2,086

 
4,573

Total non-performing assets including loans held-for-sale
$
522,392

 
$
520,502

 
$
607,655

Ratio of non-performing assets to total assets (Bank only)
3.70
%
 
3.48
%
 
4.43
%
Ratio of non-performing loans held-for-investment to loans held-for-investment
7.16
%
 
6.09
%
 
6.94
%
Ratio of non-performing assets to loans held for investment and repossessed assets
9.12
%
 
7.77
%
 
8.43
%



14

Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
 
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 days
Total Past Due
Total Investment Loans
December 31, 2012
 
 
 
 
 
Consumer loans (1)
$
66,687

$
18,578

$
313,418

$
398,683

$
4,700,921

Commercial loans (1)
6,979

6,990

86,408

100,377

885,712

     Total loans
$
73,666

$
25,568

$
399,826

$
499,060

$
5,586,633

September 30, 2012
 
 
 
 
 
Consumer loans (1)
$
53,919

$
26,697

$
276,319

$
356,935

$
4,760,979

Commercial loans (1)
9,563

432

122,629

132,624

1,791,420

     Total loans
$
63,482

$
27,129

$
398,948

$
489,559

$
6,552,399

December 31, 2011
 
 
 
 
 
Consumer loans (1)
$
83,670

$
41,602

$
387,362

$
512,634

$
5,352,230

Commercial loans (1)
7,464

12,385

101,005

120,854

1,686,357

     Total loans
$
91,134

$
53,987

$
488,367

$
633,488

$
7,038,587


(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.

Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
 
TDRs
 
Performing
 
Non-performing
 
Total
December 31, 2012
(Dollars in thousands)
Consumer loans
$
588,475

 
$
143,188

 
$
731,663

Commercial loans
1,287

 
2,056

 
3,343

Total TDRs
$
589,762

 
$
145,244

 
$
735,006

 
 
 
 
 
 
September 30, 2012
 
 
 
 
 
Consumer loans
$
612,956

 
$
106,250

 
$
719,206

Commercial loans
1,329

 
3,230

 
4,559

Total TDRs
$
614,285

 
$
109,480

 
$
723,765

 
 
 
 
 
 
December 31, 2011
 
 
 
 
 
Consumer loans
$
499,438

 
$
167,076

 
$
666,514

Commercial loans
17,737

 
29,509

 
47,246

Total TDRs
$
517,175

 
$
196,585

 
$
713,760




15

Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Description
(000's)
bps
 
(000's)
bps
 
(000's)
bps
Valuation gain (loss)
 
 
 
 
 
 
 
 
Value of interest rate locks
$
(143,364
)
(94
)
 
$
97,176

73

 
$
(19,033
)
(18
)
Value of forward sales
123,602

82

 
(91,329
)
(68
)
 
17,793

17

Fair value of loans held-for-sale
213,512

138

 
273,270

198

 
96,911

92

LOCOM adjustments on loans held-for-investment
(1,103
)
(1
)
 
—

—

 
—

—

Total valuation gains
192,647

125

 
279,117

203

 
95,671

91

 
 
 
 
 
 
 
 
 
Sales gains (losses)
 
 
 
 
 
 
 
 
Marketing gains, net of adjustments
161,163

103

 
218,262

157

 
73,560

70

Pair-off (losses) gains
(107,572
)
(70
)
 
(156,520
)
(113
)
 
(58,831
)
(56
)
Provision for representation and warranty reserve
(7,285
)
(5
)
 
(6,432
)
(5
)
 
(3,481
)
(3
)
Total sales gains
46,306

28

 
55,310

39

 
11,248

11

Total gain on loan sales and securitizations
$
238,953

153

 
$
334,427

242

 
$
106,919

102

Total mortgage rate lock commitments volume
$
16,242,000

 
 
$
18,089,000

 
 
$
11,230,000

 
Total loan sales and securitizations
$
15,610,590

 
 
$
13,876,626

 
 
$
10,476,542

 

 
For the Year Ended
 
December 31, 2012
 
December 31, 2011
Description
(000's)
bps
 
(000's)
bps
Valuation gain (loss)
 
 
 
 
 
Value of interest rate locks
$
15,235

3

 
$
56,569

21

Value of forward sales
28,957

5

 
(78,798
)
(29
)
Fair value of loans held-for-sale
784,587

148

 
356,278

130

LOCOM adjustments on loans held-for-investment
(1,124
)
—

 
16

—

Total valuation gains
827,655

156

 
334,065

122

 
 
 
 
 
 
Sales gains (losses)
 
 
 
 
 
Marketing gains, net of adjustments
731,648

138

 
191,118

69

Pair-off (losses) gains
(543,995
)
(102
)
 
(215,402
)
(78
)
Provision for representation and warranty reserve
(24,410
)
(5
)
 
(8,993
)
(3
)
Total sales gains
163,243

31

 
(33,277
)
(12
)
Total gain on loan sales and securitizations
$
990,898

187

 
$
300,788

110

Total mortgage rate lock commitments volume
$
66,732,000

 
 
$
36,281,000

 
Total loan sales and securitizations
$
53,094,326

 
 
$
27,451,362

 



16

Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
Average Balance
Annualized
Yield/Rate
 
Average Balance
Annualized
Yield/Rate
 
Average Balance
Annualized
Yield/Rate
Interest-Earning Assets
 
Loans held-for-sale
$
3,631,780

3.47
%
 
$
3,301,860

3.70
%
 
$
2,468,813

3.94
%
Loans repurchased with government guarantees
1,912,722

3.13
%
 
2,070,813

2.98
%
 
1,849,827

3.44
%
Loans held-for-investment
 
 
 
 
 
 
 
 
Consumer loans (1)
4,608,093

4.28
%
 
4,717,672

4.32
%
 
5,288,088

4.37
%
Commercial loans (1)
1,724,223

3.78
%
 
1,815,897

3.67
%
 
1,620,132

4.53
%
Loans held-for-investment
6,332,316

4.14
%
 
6,533,569

4.14
%
 
6,908,220

4.40
%
Securities classified as available-for-sale or trading
362,819

2.51
%
 
505,361

3.89
%
 
813,865

4.39
%
Interest-earning deposits and other
1,110,354

0.24
%
 
1,065,314

0.25
%
 
712,242

0.24
%
Total interest-earning assets
13,349,991

3.44
%
 
13,476,917

3.54
%
 
12,752,967

3.94
%
Other assets
1,670,359

 
 
1,680,208

 
 
1,401,566

 
Total assets
$
15,020,350

 
 
$
15,157,125

 
 
$
14,154,533

 
Interest-Bearing Liabilities
 
 
 
 
 
 
 
 
Retail deposits
 
 
 
 
 
 
 
 
Demand deposits
$
379,721

0.28
%
 
$
364,612

0.27
%
 
$
382,419

0.29
%
Savings deposits
1,891,901

0.68
%
 
1,768,897

0.65
%
 
1,432,094

0.81
%
Money market deposits
427,792

0.43
%
 
457,425

0.46
%
 
531,981

0.61
%
Certificate of deposits
3,253,647

1.02
%
 
3,227,201

1.21
%
 
3,010,919

1.52
%
Total retail deposits
5,953,061

0.82
%
 
5,818,135

0.92
%
 
5,357,413

1.15
%
Government deposits
 
 
 
 
 
 
 
 
Demand deposits
81,555

0.44
%
 
107,944

0.48
%
 
82,278

0.52
%
Savings deposits
287,289

0.51
%
 
291,046

0.55
%
 
379,959

0.60
%
Certificate of deposits
444,668

0.62
%
 
375,922

0.64
%
 
407,386

0.60
%
Total government deposits
813,512

0.56
%
 
774,912

0.58
%
 
869,623

0.60
%
Wholesale deposits
157,960

4.04
%
 
334,595

3.77
%
 
464,104

3.47
%
Total deposits
6,924,533

0.86
%
 
6,927,642

1.02
%
 
6,691,140

1.24
%
FHLB advances
3,145,341

3.13
%
 
3,561,532

3.03
%
 
4,078,476

2.69
%
Other
248,511

2.72
%
 
248,560

2.81
%
 
248,585

2.70
%
Total interest-bearing liabilities
10,318,385

1.60
%
 
10,737,734

1.73
%
 
11,018,201

1.81
%
Other liabilities (2)
3,411,883

 
 
3,182,980

 
 
2,001,616

 
Stockholder's equity
1,290,082

 
 
1,236,411

 
 
1,134,716

 
Total liabilities and stockholder's equity
$
15,020,350

 
 
$
15,157,125

 
 
$
14,154,533

 

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



17

Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
 
For the Year Ended
 
December 31, 2012
 
December 31, 2011
 
Average Balance
Annualized
Yield/Rate
 
Average Balance
Annualized
Yield/Rate
Interest-Earning Assets
 
Loans held-for-sale
$
3,078,284

3.75
%
 
$
1,928,339

4.31
%
Loans repurchased with government guarantees
2,018,079

3.22
%
 
1,784,927

3.19
%
Loans held-for-investment
 
 
 
 
 
Consumer loans (1)
4,737,553

4.33
%
 
4,830,127

4.58
%
Commercial loans (1)
1,782,913

3.91
%
 
1,373,566

4.74
%
Loans held-for-investment
6,520,466

4.21
%
 
6,203,693

4.61
%
Securities classified as available-for-sale or trading
573,445

3.94
%
 
752,871

4.73
%
Interest-earning deposits and other
914,127

0.24
%
 
1,133,840

0.25
%
Total interest-earning assets
13,104,401

3.66
%
 
11,803,670

3.94
%
Other assets
1,622,369

 
 
1,544,924

 
Total assets
$
14,726,770

 
 
$
13,348,594

 
Interest-Bearing Liabilities
 
 
 
 
 
Retail deposits
 
 
 
 
 
Demand deposits
$
363,247

0.26
%
 
$
397,988

0.33
%
Savings deposits
1,775,449

0.72
%
 
1,236,105

0.81
%
Money market deposits
463,490

0.48
%
 
561,943

0.69
%
Certificate of deposits
3,170,103

1.21
%
 
3,001,586

1.75
%
Total retail deposits
5,772,289

0.94
%
 
5,197,622

1.30
%
Government deposits
 
 
 
 
 
Demand deposits
96,000

0.48
%
 
77,702

0.54
%
Savings deposits
280,313

0.55
%
 
414,394

0.64
%
Certificate of deposits
393,731

0.64
%
 
296,830

0.62
%
Total government deposits
770,044

0.59
%
 
788,926

0.62
%
Wholesale deposits
296,997

3.80
%
 
674,856

3.41
%
Total deposits
6,839,330

1.03
%
 
6,661,404

1.43
%
FHLB advances
3,698,362

2.88
%
 
3,620,368

3.26
%
Other
248,561

2.80
%
 
248,597

2.63
%
Total interest-bearing liabilities
10,786,253

1.70
%
 
10,530,369

2.09
%
Other liabilities (2)
2,747,796

 
 
1,632,494

 
Stockholder's equity
1,192,721

 
 
1,185,731

 
Total liabilities and stockholder's equity
$
14,726,770

 
 
$
13,348,594

 

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


18



Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
 
For the Three Months Ended
 
For the Year Ended
 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
 
December 31, 2012
 
December 31, 2011
Pre-tax, pre-credit-cost revenue
 
 
 
 
 
 
 
 
 
Income (loss) before tax provision
$
72,423

 
$
60,730

 
$
(74,901
)
 
$
213,731

 
$
(180,722
)
Add back
 
 
 
 
 
 
 
 
 
Provision for loan losses
50,351

 
52,595

 
63,548

 
276,047

 
176,931

Asset resolution
21,241

 
12,487

 
32,408

 
91,349

 
128,313

Other than temporary impairment on AFS investments
—

 
—

 
7,132

 
2,192

 
24,039

Representation and warranty reserve - change in estimate
25,231

 
124,492

 
69,279

 
256,289

 
150,055

Write down of residual interest
780

 
118

 
847

 
2,552

 
5,673

Total credit-related costs
97,603

 
189,692

 
173,214

 
628,429

 
485,011

Pre-tax, pre-credit-cost net revenue
$
170,026

 
$
250,422

 
$
98,313

 
$
842,160

 
$
304,289

 
 
 
 
 
 
 
 
 
 
Efficiency ratio (credit-adjusted)
 
 
 
 
 
 
 
 
 
Net interest income (a)
$
73,941

 
$
73,079

 
$
75,863

 
$
297,231

 
$
245,373

Non-interest income (b)
285,795

 
273,737

 
118,621

 
1,021,242

 
385,516

Add: Representation and warranty reserve - change in estimate (d)
25,231

 
124,492

 
69,279

 
256,289

 
150,055

Adjusted income
384,967

 
471,308

 
263,763

 
1,574,762

 
780,944

Non-interest expense (c)
236,962

 
233,491

 
205,837

 
828,695

 
634,680

Less: Asset resolution expense (e)
(21,241
)
 
(12,487
)
 
(32,408
)
 
(91,349
)
 
(128,313
)
Adjusted non-interest expense
$
215,721

 
$
221,004

 
$
173,429

 
$
737,346

 
$
506,367

Efficiency ratio (c/(a+b))
65.9
%
 
67.3
%
 
105.8
%
 
62.9
%
 
100.6
%
Efficiency ratio (credit-adjusted) ((c-e)/((a+b)+d)))
56.0
%
 
46.9
%
 
65.8
%
 
46.8
%
 
64.8
%

 
December 31, 2012
 
September 30, 2012
 
December 31, 2011
Non-performing assets / Tier 1 capital + allowance for loan losses
 
 
 
 
 
Non-performing assets
$
520,557

 
$
518,416

 
$
603,082

 
 
 
 
 
 
Tier 1 capital (1)
$
1,456,841

 
$
1,379,701

 
$
1,215,220

Allowance for loan losses
305,000

 
305,000

 
318,000

Tier 1 capital + allowance for loan losses
$
1,761,841

 
$
1,684,701

 
$
1,533,220

Non-performing assets / Tier 1 capital + allowance for loan losses
29.5
%
 
30.8
%
 
39.3
%

(1)    Represents Tier 1 capital for Bank.


19