FLAGSTAR BANCORP, INC. 
By TROY, Mich., Jan. 22, 2014 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE:FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported fourth quarter 2013 net income applicable to common stockholders of $160.5 million, or $2.77 per share (diluted), as compared to income of $12.8 million, or $0.16 per share (diluted), in the third quarter 2013 and a loss of $(94.2) million, or a loss of $(1.75) per share (diluted), in the fourth quarter 2012. The full year 2013 net income applicable to common stockholders was $261.2 million, or $4.37 per share (diluted), as compared to a full year 2012 net income applicable to common stockholders of $62.7 million, or $0.87 per share (diluted). Book value per common share increased to $20.66 at December 31, 2013, as compared to $17.96 at September 30, 2013 and $16.12 at December 31, 2012.
"During 2013, we achieved important strategic and operational progress: improved the Company's risk profile, strengthened the balance sheet, built capital, eliminated valuation overhangs and optimized our cost structure," said Sandro DiNello, the Company's President and Chief Executive Officer. "I am pleased with all that we accomplished in 2013, and I believe the Company has turned a corner and is poised for growth and success in 2014 and beyond. Having taken the necessary steps to position our Company for sustainable growth over the long-term, and with a continued commitment to building on our culture of compliance, our focus now can shift to prudently redeploying excess capital, leveraging the balance sheet with our core businesses and increasing our share of wallet. As we execute on these objectives, we will adhere to our core commitment to serving our customers and communities with an emphasis on quality, care and pride."
Mr. DiNello continued, "Despite the near-term impact of initiatives designed to position the Company for long-term success, as well as a challenging mortgage market, we delivered net income of $261 million for the year and drove a 28 percent increase in book value per share from 2012. We also increased our Tier 1 leverage ratio, lowered our MSR concentration, reduced operating costs and improved our asset quality and allowance coverage ratios."
"While a decision to restructure the organization is never taken lightly, the cost savings from the workforce reductions, together with those already realized from our vendor management and procurement initiatives, the outsourcing of default servicing and other variable cost decreases, put us on track to achieve the high-end of our previously provided guidance for 2014 of $145 million to $190 million in annualized non-interest expense savings," added Lee Smith, the Bank's Chief Operating Officer.
Fourth Quarter 2013 Highlights:
-- Net income applicable to common stockholders increased to $160.5
million, as compared to $12.8 million in the prior quarter, primarily
attributable to several significant items:
-- Tax benefit of $410.4 million, primarily due to the full reversal of
the federal deferred tax asset ("DTA") valuation allowance and a
partial reversal of the state DTA valuation allowance.
-- Loss on extinguishment of debt of $177.6 million (included in
non-interest expense) from the prepayment of $2.9 billion in
long-term fixed-rate Federal Home Loan Bank ("FHLB") advances.
-- Incremental non-interest expense of $61.0 million related to the
estimated fair value liability associated with a lending-related
legal settlement reached in February 2012 with the Department of
Justice ("DOJ Settlement").
-- Benefit (included in non-interest income) of approximately $24.9
million associated with the previously announced settlement
agreements with Fannie Mae and Freddie Mac.
-- Net gain on loan sales decreased to $44.8 million, as compared to $75.1
million in the prior quarter:
-- Total mortgage originations decreased to $6.4 billion, as compared
to $7.7 billion in the prior quarter.
-- Gain on sale margin (based on fallout-adjusted rate locks) decreased
to 0.85 percent, as compared to 1.14 percent in the prior quarter.
-- Sold $53.4 billion in aggregate unpaid principal balance of mortgage
servicing rights ("MSR"):
-- Ratio of MSR-to-Tier 1 capital reduced to 22.6 percent, as compared
to 56.8 percent in the prior quarter (see non-GAAP reconciliation).
-- Includes the previously announced bulk sale of MSRs of $40.7
billion, in which the Company will remain the sub-servicer of the
loans.
-- Excluding the effect of the loss on extinguishment of debt and the
expense related to the DOJ settlement noted above, non-interest expense
decreased to $150.1 million, as compared to $158.4 million in the prior
quarter, consistent with the Company's ongoing cost optimization
efforts.
-- Tier 1 leverage ratio increased to 13.97 percent, as compared to 11.98
percent in the prior quarter.
-- Continued improvement in asset quality:
-- Net charge-offs decreased to $14.1 million, as compared to $40.1
million in the prior quarter.
-- Non-performing assets decreased to $182.3 million, as compared to
$205.3 million in the prior quarter.
-- Ratio of allowance for loan losses to non-performing loans
held-for-investment at 145.9 percent.
Significant Items
Reversal of Valuation Allowance on DTA
During the fourth quarter 2013, the Company reversed 100 percent of the valuation allowance on its federal DTA and a portion of its state DTA, which had been previously established as of September 30, 2009. As a result, net income was increased due to the recording of a $410.4 million benefit for income taxes. This benefit was comprised of a $355.8 DTA valuation allowance reversal, or $6.28 per diluted share, as of January 1, 2013 and the current period benefit for income taxes of $54.6 million.
DOJ Settlement Liability
In February 2012, the Bank entered into the DOJ settlement. As part of the settlement, the Bank agreed to make payments totaling $118.0 million, contingent upon the occurrence of certain future events, including the reversal of the valuation allowance on the DTA. As a result of the fourth quarter 2013 reversal of the DTA valuation allowance, the Company increased the fair value liability associated with its DOJ Settlement by $61.0 million. The total fair value of the DOJ settlement liability was increased to $93.0 million for the fourth quarter 2013, as compared to $28.5 million for the third quarter 2013, resulting in total non-interest expense of $64.5 million for the fourth quarter 2013.
Settlements with Fannie Mae and Freddie Mac
On November 6, 2013, the Company announced that the Bank had entered into a settlement agreement with Fannie Mae to resolve substantially all of the repurchase requests and obligations associated with loans originated between January 1, 2000 and December 31, 2008 and sold to Fannie Mae. The total resolution amount was $121.5 million. After paid claim credits and other adjustments, the Bank paid $93.5 million to Fannie Mae.
On December 30, 2013, the Company announced that the Bank had entered into a settlement agreement with the Federal Home Loan Mortgage Corporation ("Freddie Mac") to resolve substantially all of the repurchase requests and obligations associated with loans originated between January 1, 2000 and December 31, 2008 and sold to Freddie Mac. The total resolution amount was $10.8 million. After paid claim credits and other adjustments, the Bank paid $8.9 million to Freddie Mac.
As a result of these settlements, the Company released approximately $24.9 million of previously recognized reserves.
Organizational Restructuring
On January 16, 2014, the Company announced that it had implemented an organizational restructuring to reduce expenses in light of the current operating environment and consistent with its previously communicated strategy of optimizing its cost structure across all business lines. As part of this restructuring initiative, the Company has reduced full-time equivalents by approximately 350 during the first quarter 2014, which did not impact the 2013 financial results. Including the restructuring completed in the first quarter 2014, the Company has reduced staffing levels across the organization by approximately 600 full-time equivalents from its September 30, 2013 level.
The Company estimates this restructuring initiative will generate annualized cost savings of approximately $40 million, the majority of which was not reflected in the 2013 financial results. The Company also estimates it will incur a total pre-tax charge of $5.2 million related to this restructuring initiative, of which $1.4 million was expensed in the fourth quarter 2013.
Sale of Mortgage Servicing Rights
On December 18, 2013, the Bank entered into a definitive agreement to sell $40.7 billion unpaid principal balance of its MSR portfolio to Matrix Financial Services Corporation, a wholly owned subsidiary of Two Harbors Investment Corp. Covered under the agreement are certain mortgage loans serviced for both Fannie Mae and Ginnie Mae, originated primarily after 2010. Simultaneously, the Bank entered into an agreement with Matrix to sub-service the residential mortgage loans covered under the agreement to sell.
Prepayment of FHLB advances
During the fourth quarter 2013, the Company prepaid $2.9 billion in long-term FHLB advances with an average coupon of 3.29 percent, which resulted in a $177.6 million loss on extinguishment of debt (included in non-interest expense).
Net Interest Income
Fourth quarter 2013 net interest income decreased to $41.2 million, as compared to $42.7 million for the third quarter 2013 and $73.9 million for the fourth quarter 2012. The decrease from the prior quarter is primarily due to lower average balances in the mortgage loans available-for-sale and warehouse loans held-for-investment portfolios, and a lower yield on loans repurchased with government guarantees.
Net interest margin for the Bank increased to 1.80 percent for fourth quarter 2013, as compared to 1.68 percent for the third quarter 2013 and decreased from 2.26 percent for the fourth quarter 2012. The decrease from the prior quarter was driven primarily by a decrease in the average cost of deposits.
The average cost of funds for the fourth quarter 2013 was 1.44 percent, as compared 1.58 percent for the third quarter 2013 and 1.60 percent for the fourth quarter 2012. The decrease from the prior quarter was primarily due to the run-off of retail certificates of deposits and wholesale deposits, both of which carry higher rates, and a lower average rate paid on savings accounts. The average cost of total deposits decreased to 0.50 percent for the fourth quarter 2013, as compared to 0.67 percent for the third quarter 2013 and 0.86 percent for the fourth quarter 2012.
Non-interest Income
Fourth quarter 2013 non-interest income decreased to $113.1 million, as compared to $134.3 million for the third quarter 2013 and $285.8 million for the fourth quarter 2012. The decrease from the prior quarter was driven by a decrease in net gain on loan sales and an increase in net transaction costs on sales of MSRs, partially offset by a decrease in representation and warranty provision - change in estimate (discussed in Credit-Related Costs and Asset Quality).
Fourth quarter 2013 net gain on loan sales decreased to $44.8 million, as compared to $75.1 million for the third quarter 2013 and $239.0 million for the fourth quarter 2012. The decrease from the prior quarter reflects both a lower level of mortgage rate lock commitments and a decrease in gain on loan sale margin.
Mortgage originations decreased to $6.4 billion for the fourth quarter 2013, as compared to $7.7 billion for third quarter 2013 and $15.4 billion for the fourth quarter 2012. The 16.8 percent decrease from the prior quarter was driven primarily by a decline in refinance originations, reflecting the rising mortgage interest rate environment during the fourth quarter. Purchase originations increased to 57.1 percent of overall residential first mortgage originations in the fourth quarter 2013, from 47.6 percent in the prior quarter.
Gain on loan sale income is driven by rate lock commitments net of estimated cancellations, or "fallout-adjusted locks", as the Company uses fair value accounting to account for the majority of its mortgage business. Fallout-adjusted locks were $5.3 billion for the fourth quarter 2013, a 19.8 percent decrease from the third quarter 2013.
Gain on loan sale margin (based on the amount of fallout-adjusted locks) decreased to 0.85 percent for the fourth quarter 2013, as compared to 1.14 percent for the third quarter 2013 and 1.90 percent for the fourth quarter 2012. The decrease from the prior quarter was driven primarily by mortgage interest rate volatility during the fourth quarter.
Net servicing revenue, which is the combination of loan administration income (including the off-balance sheet hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), was $28.9 million for the fourth quarter 2013, as compared to $30.4 million for the third quarter 2013 and $25.0 million for the fourth quarter 2012. As discussed above, the Company sold $53.4 billion in aggregate unpaid principal balance of MSRs during the fourth quarter 2013, which improved its ratio of MSR-to-Tier 1 capital to 22.6 percent, as compared to 56.8 percent in the third quarter. As a result, net transaction costs on sales of mortgage servicing rights increased to $9.0 million for the fourth quarter 2013, as compared to $1.8 million for the third quarter 2013.
Non-interest Expense
Non-interest expense was $388.7 million for the fourth quarter 2013, as compared to $158.4 million for the third quarter 2013 and $398.0 million for the fourth quarter 2012. Excluding the loss on extinguishment of debt and the incremental expense related to the DOJ litigation liability (discussed in Significant Items), non-interest expense was $150.1 million, a decrease as compared to $158.4 million for the third quarter 2013, driven primarily by a decrease in asset resolution expense (discussed in Credit Related Costs and Asset Quality).
Compensation and benefits increased to $69.6 million for the fourth quarter 2013, as compared to $61.6 million for the third quarter 2013, but decreased from $72.1 million for the fourth quarter 2012. The increase from the prior quarter was primarily due to expense associated with annual incentive compensation.
Commission expense decreased to $9.4 million for the fourth quarter 2013, as compared to $12.1 million for the third quarter 2013 and $22.2 million for the fourth quarter 2012. Loan processing expense also decreased to $8.8 million for the fourth quarter 2013, as compared to $10.9 million for the third quarter 2013 and $18.6 million for the fourth quarter 2012. Commissions and loan processing expense are both driven by mortgage originations, and the decreases were consistent with the decrease in mortgage originations during the fourth quarter 2013.
Fourth quarter 2013 legal and professional expenses increased to $79.2 million, as compared to $19.6 million for the third quarter 2013, but decreased from $213.4 million for the fourth quarter 2012. The increase from the prior quarter was primarily driven by the $61.0 million in expense related to the fair value liability associated with the DOJ Settlement.
Credit-Related Costs and Asset Quality
For the fourth quarter 2013, total credit-related costs (see non-GAAP reconciliation) decreased to $2.1 million, as compared to $25.6 million for the third quarter 2013 and $97.6 million for the fourth quarter 2012. The decrease from the prior quarter was primarily driven by a decrease in representation and warranty - change in estimate, reflecting the release of reserves of approximately $24.9 million associated with the settlements with Fannie Mae and Freddie Mac.
At December 31, 2013, the Company's allowance for loan losses was $207.0 million, unchanged from September 30, 2013 but decreased from $305.0 million at December 31, 2012. At December 31, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment was 145.9 percent, as compared to 152.6 percent at September 30, 2013 and 76.3 percent at December 31, 2012.
Net charge-offs for the fourth quarter decreased to $14.1 million, as compared to $40.1 million for the third quarter 2013, and from $50.4 million for the fourth quarter 2012, driven primarily by a decrease in residential first mortgage loan charge-offs. Provision for loan losses increased to $14.1 million for the fourth quarter 2013, as compared to $4.1 million for the prior quarter and $50.4 million for the fourth quarter 2012. The increase from the prior quarter reflects an increased level of residential first mortgage reserves as the Company continues to refine some of the primary data inputs to its allowance methodology.
Total non-performing loans held-for-investment was $145.7 million at December 31, 2013, an increase as compared to $138.8 million at September 30, 2013 and a decrease from $399.8 million at December 31, 2012. The increase from the prior quarter was driven primarily by an increase in residential first mortgage non-performing loans, partially offset by a decrease in commercial non-performing loans. The ratio of non-performing loans held-for-investment to loans held-for-investment increased to 3.59 percent at December 31, 2013, from 3.46 percent at September 30, 2013 and 7.35 percent at December 31, 2012.
Real estate-owned and other non-performing assets decreased to $36.6 million at December 31, 2013, as compared to $66.5 million at September 30, 2013 and $120.7 million at December 31, 2012. The decrease from the prior quarter was primarily due to payoffs resulting from liquidations and transfers of real estate-owned properties.
The Company maintains a representation and warranty reserve on the balance sheet, which reflects an estimate of losses that may occur on both loans that have been sold or securitized into the secondary market and those currently in the repurchase pipeline, primarily with the GSEs. At December 31, 2013, the representation and warranty reserve was $54.0 million, as compared to $174.0 million at September 30, 2013 and $193.0 million at December 31, 2012. The decrease from the prior quarter was primarily driven by $24.9 million in releases of reserves associated with the settlements with Fannie Mae and Freddie Mac (discussed in Significant Items).
Asset resolution expense, which includes expenses associated with foreclosed properties (including the foreclosure claims in process with respect to government insured loans for which the Bank files claims with HUD) was $3.4 million for the fourth quarter 2013, as compared to $16.3 million for the third quarter 2013 and from $21.2 million for the fourth quarter 2012. The decrease from the prior quarter was primarily driven by gains on the sale of commercial real-estate owned properties and a decrease in foreclosure costs associated with loans the Company services for others.
Balance Sheet and Funding
Total assets decreased to $9.4 billion at December 31, 2013, as compared to $11.8 billion at September 30, 2013. The decrease from the prior quarter was primarily due to a decrease in interest-earning deposits, as the Company used excess cash for the prepayment of FHLB advances, and a decrease in MSRs resulting from the bulk sales completed during the quarter.
Loans repurchased with government guarantees totaled $1.3 billion at December 31, 2013, as compared to $1.2 billion at September 30, 2013 and $1.8 billion at December 31, 2012. This portfolio represents delinquent loans which have been repurchased from Ginnie Mae pools that are insured or guaranteed by the Federal Housing Administration.
Total deposits decreased to $6.1 billion at December 31, 2013, as compared to $6.6 billion at September 30, 2013, due to lower funding needs resulting from a reduction in mortgage originations. This decrease was primarily driven by decreases in retail certificates of deposits.
At December 31, 2013, the Company had $0.3 billion of cash on hand and interest-earning deposits, as compared to $2.6 billion at September 30, 2013. The decrease from the prior quarter was driven by the prepayment of FHLB advances, as well as the Company's investment of a portion of its excess cash into higher-yielding liquid securities. The Bank maintains a line of credit with the FHLB under which borrowings are collateralized by residential first mortgage loans and other assets of the Bank. At December 31, 2013, the Bank had outstanding borrowings from the FHLB of $1.0 billion and an additional $1.7 billion of collateralized borrowing capacity available at the FHLB.
Capital
The Bank's regulatory capital ratios remain above current regulatory quantitative guidelines for "well-capitalized" institutions. At December 31, 2013, the Bank had a Tier 1 leverage ratio of 13.97 percent, as compared to 11.98 percent at September 30, 2013. At December 31, 2013, the Company had an equity-to-assets ratio of 15.16 percent.
Earnings Conference Call
As previously announced, the Company's quarterly earnings conference call will be held on Thursday, January 23, 2014 from 11 a.m. until Noon (Eastern).
It is preferred that questions are emailed in advance to investors@flagstar.com, or they may be asked during the conference call.
To join the call, please dial (888) 715-1387 toll free or (913) 312-1521, and use passcode: 2979193. 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: 2979193.
The conference call will also be available as a live audio cast on the Investor Relations section of flagstar.com. It will be archived on that site and will be available for replay and download. A slide presentation to accompany the conference call will also be posted on the site.
About Flagstar
Flagstar Bancorp, Inc. ("Flagstar") is the holding company for Flagstar Bank, FSB, a full-service financial institution offering a range of products and services to consumers, businesses, and homeowners. With $9.4 billion in total assets at December 31, 2013, Flagstar is the largest bank headquartered in Michigan. Flagstar operates 111 banking centers, all of which are located in Michigan and 39 home lending centers located in 19 states, which primarily originate one-to-four family residential first mortgage loans. Originating loans nationwide, Flagstar is one of the leading originators of residential first mortgage loans. For more information, please visit flagstar.com.
Non-GAAP
This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position. Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.
Forward Looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that are difficult to predict and could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement. Forward-looking statements contained in this press release and any information related to expectations about future events or results are based upon information available to the Company as of the date hereof. Forward-looking statements can be identified by such words as "anticipates," "intends," "plans," "seeks," "believes," "expects", "estimates," and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements made regarding the Company's current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the suspension of dividend payments on preferred stock, the deferral of interest payment on trust preferred securities, the result of improvements to the Company's servicing processes, the Company's strategy for its servicing business and other similar matters. Although we believe that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies, and other factors. Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements. We caution you not to place undue reliance on any forward-looking statement and to consider all of the following uncertainties and risks, as well as those more fully discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, our Form 10-K and Forms 10-Q: volatile interest rates that impact, among other things, the mortgage banking business, our ability to originate loans and sell assets at a profit, prepayment speeds and our cost of funds; changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios; actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures; uncertainty regarding pending and threatened litigation; our ability to control credit related costs and forecast the adequacy of reserves; the imposition of regulatory enforcement actions against us; our compliance with the Supervisory Agreement with the Board of Governors of the Federal Reserve System and the Consent Order with the Office of the Comptroller of the Currency. Except to the extent required under the federal securities laws and the rules and regulations promulgated by the SEC, the Company undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made.
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands)
December 31, September 30,
2013 2013 December 31,
2012
----
Assets (Unaudited) (Unaudited)
Cash and cash equivalents
Cash and cash
items $55,913 $68,228 $38,070
Interest-earning
deposits 224,592 2,482,882 914,723
------- --------- -------
Total cash and
cash equivalents 280,505 2,551,110 952,793
Trading
securities - 50,053 170,086
Investment
securities
available-for-
sale 1,045,548 495,423 184,445
Loans held-for-
sale 1,480,418 1,879,290 3,939,720
Loans repurchased
with government
guarantees 1,273,690 1,231,765 1,841,342
Loans held-for-investment, net
Loans held-for-
investment 4,055,756 4,013,507 5,438,101
Less: allowance
for loan losses (207,000) (207,000) (305,000)
-------- -------- --------
Total loans held-
for-investment,
net 3,848,756 3,806,507 5,133,101
Mortgage
servicing rights 284,678 797,029 710,791
Repossessed
assets, net 36,636 66,530 120,732
Federal Home Loan
Bank stock 209,737 301,737 301,737
Premises and
equipment, net 231,350 229,117 219,059
Net deferred tax
asset 414,681 - -
Other assets 301,302 399,254 508,206
Total assets $9,407,301 $11,807,815 $14,082,012
========== =========== ===========
Liabilities and Stockholders'
Equity
Deposits
Non-interest
bearing $930,060 $1,002,472 $1,309,649
Interest bearing 5,210,266 5,646,813 6,984,646
--------- --------- ---------
Total deposits 6,140,326 6,649,285 8,294,295
Federal Home Loan
Bank advances 988,000 2,907,598 3,180,000
Long-term debt 353,248 360,389 247,435
Representation
and warranty
reserve 54,000 174,000 193,000
Other liabilities 445,853 444,188 1,007,920
------- ------- ---------
Total liabilities 7,981,427 10,535,460 12,922,650
--------- ---------- ----------
Stockholders' Equity
Preferred stock 266,174 264,726 260,390
Common stock 561 561 559
Additional paid
in capital 1,479,265 1,478,391 1,476,569
Accumulated other
comprehensive
(loss) income (4,831) 4,429 (1,658)
Accumulated
deficit (315,295) (475,752) (576,498)
-------- -------- --------
Total
stockholders'
equity 1,425,874 1,272,355 1,159,362
Total liabilities
and
stockholders'
equity $9,407,301 $11,807,815 $14,082,012
========== =========== ===========
Flagstar Bancorp, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest Income
Loans $64,165 $75,633 $112,464 $313,477 $456,141
Investment securities
available-for-sale
or trading 6,515 1,465 2,277 11,912 22,609
Interest-earning
deposits and other 1,153 1,709 674 5,298 2,220
----- ----- --- ----- -----
Total interest income 71,833 78,807 115,415 330,687 480,970
------ ------ ------- ------- -------
Interest Expense
Deposits 6,713 10,023 15,017 42,392 70,143
Federal Home Loan
Bank advances 22,257 24,434 24,756 95,024 106,625
Other 1,660 1,665 1,701 6,620 6,971
----- ----- ----- ----- -----
Total interest
expense 30,630 36,122 41,474 144,036 183,739
------ ------ ------ ------- -------
Net interest income 41,203 42,685 73,941 186,651 297,231
Provision for loan
losses 14,112 4,053 50,351 70,142 276,047
------ ----- ------ -------
Net interest income
after provision for
loan losses 27,091 38,632 23,590 116,509 21,184
------ ------ ------ ------- ------
Non-Interest Income
Loan fees and charges 19,349 20,876 40,793 103,501 142,908
Deposit fees and
charges 5,193 5,410 5,154 20,942 20,370
Loan administration 28,924 30,434 25,010 115,872 100,007
(Loss) gain on
trading securities (20) 13 12 65 (2,011)
Net gain on loan
sales 44,790 75,073 238,953 402,193 990,898
Net transactions
costs on sales of
mortgage servicing
rights (8,981) (1,763) (7,687) (19,228) (12,319)
Net gain (loss) on
investment
securities
available-for-sale 1,023 - (310) 1,023 2,636
Total other-than-
temporary impairment
(loss) gain - - - (8,789) 2,810
Loss recognized in
other comprehensive
income before taxes - - - - (5,002)
--- --- --- --- ------
Net impairment losses
recognized in
earnings - - - (8,789) (2,192)
Representation and
warranty reserve -
change in estimate 15,424 (5,205) (25,231) (36,116) (256,289)
Other non-interest
income 7,444 9,458 9,101 72,880 37,234
Total non-interest
income 113,146 134,296 285,795 652,343 1,021,242
------- ------- ------- ---------
Non-Interest Expense
Compensation and
benefits 69,572 61,552 72,081 279,268 270,859
Commissions 9,444 12,099 22,154 54,407 75,345
Occupancy and
equipment 19,824 18,644 19,184 80,042 73,674
Asset resolution 3,372 16,295 21,241 52,033 91,349
Federal deposit
insurance premiums 7,932 7,910 12,202 34,873 49,273
Loss on
extinguishment of
debt 177,556 - - 177,556 15,246
Loan processing
expense 8,833 10,890 18,590 52,223 56,070
Legal and
professional expense 79,232 19,593 213,413 144,054 300,523
Other non-interest
expense 12,928 11,453 19,097 43,659 57,356
------ ------ ------ ------ ------
Total non-interest
expense 388,693 158,436 397,962 918,115 989,695
------- ------- ------- ------- -------
(Loss) income before
income taxes (248,456) 14,492 (88,577) (149,263) 52,731
(Benefit) provision
for income taxes (410,362) 220 4,235 (416,250) (15,645)
-------- --- ----- -------- -------
Net income (loss) 161,906 14,272 (92,812) 266,987 68,376
Preferred stock
dividend/accretion (1,449) (1,449) (1,417) (5,784) (5,658)
------ ------ ------ ------ ------
Net income (loss)
applicable to common
stockholders $160,457 $12,823 $(94,229) $261,203 $62,718
======== ======= ======== ======== =======
Income (loss) per share
Basic $2.79 $0.16 $(1.75) $4.40 $0.88
===== ===== ====== ===== =====
Diluted $2.77 $0.16 $(1.75) $4.37 $0.87
===== ===== ====== ===== =====
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Mortgage
loans
originated
(1) $6,439,242 $7,737,143 $15,356,795 $37,481,877 $53,586,856
Other
loans
originated $64,973 $93,347 $113,458 $300,823 $754,155
Mortgage
loans
sold and
securitized $6,783,212 $8,344,737 $15,610,590 $39,074,649 $53,094,326
Interest
rate
spread -
bank only
(2) 1.58% 1.42% 1.87% 1.53% 1.98%
Net
interest
margin -
bank only
(3) 1.80% 1.68% 2.26% 1.78% 2.31%
Interest
rate
spread -
consolidated
(2) 1.54% 1.39% 1.84% 1.50% 1.96%
Net
interest
margin -
consolidated
(3) 1.73% 1.62% 2.21% 1.72% 2.26%
Average
common
shares
outstanding 56,126,895 56,096,376 55,842,910 56,063,282 55,762,196
Average
fully
diluted
shares
outstanding 56,694,096 56,541,089 55,842,910 56,518,181 56,193,515
Average
interest-
earning
assets $9,607,376 $10,564,417 $13,349,991 $10,881,618 $13,104,401
Average
interest
paying
liabilities $8,341,976 $9,054,952 $10,318,385 $9,337,936 $10,786,252
Average
stockholders'
equity $1,273,763 $1,266,267 $1,288,332 $1,238,550 $1,192,281
Return on
average
assets 5.70% 0.42% (2.51)% 2.08% 0.43%
Return on
average
equity 50.39% 4.05% (29.26)% 21.09% 5.26%
Efficiency
ratio (4) 251.8% 89.5% 110.6% 109.4% 75.1%
Efficiency
ratio
(credit-
adjusted)
(4) (5) 277.4% 78.0% 97.9% 99.0% 57.0%
Equity-
to-
assets
ratio
(average
for the
period) 11.32% 10.26% 8.58% 9.87% 8.10%
Charge-
offs to
average
LHFI (6) 1.53% 3.96% 3.18% 4.00% 4.43%
Charge-
offs, to
average
LHFI
adjusted
(6)(7) 1.53% 1.30% 3.18% 2.45% 4.43%
December 31, September 30,
2013 December 31,
2013 2012
---- ----
Book
value
per
common
share $20.66 $17.96 $16.12
Number
of
common
shares
outstanding 56,138,074 56,114,572 55,863,053
Mortgage
loans
subserviced
for
others $40,431,865 $ - $ -
Mortgage
loans
serviced
for
others $25,743,396 $74,200,317 $76,821,222
Weighted
average
service
fee
(basis
points) 28.7 29.3 29.2
Capitalized
value
of
mortgage
servicing
rights 1.11% 1.07% 0.93%
Mortgage
servicing
rights
to
Tier 1
capital
(5) 22.6% 56.8% 54.9%
Ratio
of
allowance
for
loan
losses
to
non-
performing
LHFI
(8) 145.9% 152.6% 76.3%
Ratio
of
allowance
for
loan
losses
to
LHFI
(6)
(8) 5.42% 5.50% 5.61%
Ratio
of
non-
performing
assets
to
total
assets
(bank
only)
(8) 1.95% 1.74% 3.70%
Equity-
to-
assets
ratio 15.16% 10.78% 8.23%
Number
of
bank
branches 111 111 111
Number
of
loan
origination
centers 39 45 31
Number
of FTE
employees
(excluding
loan
officers
and
account
executives) 2,894 3,069 3,328
Number
of
loan
officers
and
account
executives 359 359 334
(1) Includes residential
first mortgage and second
mortgage loans.
(2) 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.
(3) Net interest margin is
the annualized effect of
the net interest income
divided by that period's
average interest-earning
assets.
(4) Ratios include $177.6
million and $61.0 million
related to the prepayment
of FHLB advances and the
DOJ litigation,
respectively, during the
three months and year
ended December 31, 2013,
excluding these expenses
the efficiency ratio would
have been 97.3 percent and
81.0 percent for the three
months and year ended
December 31, 2013,
respectively.
(5) See Non-GAAP
reconciliation.
(6) Excludes loans carried
under the fair value
option.
(7) Excludes charge-offs
of $26.8 million related
to the sale of non-
performing loans and TDRs,
during the three months
ended September 30, 2013,
and $65.1 million during
the year ended December
31, 2013.
(8) Only includes non-
performing loans held-
for-investment.
Regulatory Capital
(Dollars in thousands)
(Unaudited)
December 31, September 30, December 31,
2013 2013 2012
------------- -------------- -------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Tier 1 leverage
(to adjusted
tangible assets)
(1) $1,257,608 13.97% $1,402,423 11.98% $1,295,841 9.26%
Total adjusted
tangible asset
base $9,004,904 $11,708,635 $13,999,636
======== ========= =========
Tier 1 capital (to
risk weighted
assets) (1) $1,257,608 26.82% $1,402,423 26.57% $1,295,841 15.90%
Total capital (to
risk weighted
assets) (1) 1,317,970 28.11% 1,470,060 27.85% 1,400,126 17.18%
Risk weighted
asset base $4,688,961 $5,278,254 $8,148,771
======== ========== ==========
(1) Based on adjusted total assets for purposes of core capital and risk-weighted assets for purposes of total risk-based
capital. These ratios are applicable to the Bank only.
Loan Originations
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, September 30, December 31,
2013 2013 2012
------------- -------------- -------------
Consumer
loans
Mortgage
(1) $6,439,242 99.0% $7,737,142 98.8% $15,356,795 99.3%
Other
consumer
(2) 16,295 0.3% 24,811 0.3% 7,589 - %
------ --- ------ --- ----- --- ---
Total
consumer
loans 6,455,537 99.3% 7,761,953 99.1% 15,364,384 99.3%
Commercial
loans
(3) 48,678 0.7% 68,537 0.9% 105,869 0.7%
Total
loan
originations $6,504,215 100.0% $7,830,490 100.0% $15,470,253 100.0%
======== ==== ========== ==== ========= ====
Year Ended
December 31, December 31,
2013 2012
------------- -------------
Consumer
loans
Mortgage
(1) $37,481,877 99.2% $53,586,856 98.6%
Other
consumer
(2) 61,318 0.2% 27,058 0.1%
------ ------ ---
Total
consumer
loans 37,543,195 99.4% 53,613,914 98.7%
Commercial
loans (3) 239,505 0.6% 727,097 1.3%
Total loan
originations $37,782,700 100.0% $54,341,011 100.0%
========= ==== ========= ====
(1) Includes residential first mortgage and second mortgage loans.
(2) Other consumer loans include: 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, 2013 September 30,
2013 December 31, 2012
----------------- -------------- -----------------
Consumer loans
Residential
first
mortgage $2,508,968 61.9% $2,478,599 61.8% $3,009,251 55.3%
Second
mortgage 169,525 4.2% 174,383 4.3% 114,885 2.1%
Warehouse
lending 423,517 10.4% 390,348 9.7% 1,347,727 24.8%
HELOC 289,880 7.1% 307,552 7.7% 179,447 3.3%
Other 37,468 0.9% 39,043 1.0% 49,611 0.9%
------ --- ------ --- ------ ---
Total
consumer
loans 3,429,358 84.5% 3,389,925 84.5% 4,700,921 86.4%
--------- ---- --------- ---- --------- ----
Commercial loans
Commercial
real estate 408,870 10.1% 420,879 10.4% 640,315 11.8%
Commercial
and
industrial 207,187 5.1% 187,639 4.7% 90,565 1.7%
Commercial
lease
financing 10,341 0.3% 15,064 0.4% 6,300 0.1%
------ --- ------ --- ----- ---
Total
commercial
loans 626,398 15.5% 623,582 15.5% 737,180 13.6%
Total loans
held-for-
investment $4,055,756 100.0% $4,013,507 100.0% $5,438,101 100.0%
========== ===== ========== ===== ========== =====
Residential Loans Serviced
(Dollars in thousands)
(Unaudited)
December 31, 2013 September 30,
2013 December 31, 2012
----------------- -------------- -----------------
Unpaid Number Unpaid Number Unpaid Number
Principal of Principal of Principal of
Balance accounts Balance accounts Balance accounts
Serviced for
own loan
portfolio
(1) $4,375,009 28,069 $4,727,135 30,971 $6,078,758 32,597
Serviced for
others 25,743,396 131,413 74,200,317 369,368 76,821,222 377,210
Sub-
serviced
for others
(2) 40,431,867 198,256 - - - -
---------- ------- --- --- --- ---
Total
residential
loans
serviced
(2) $70,550,272 357,738 $78,927,452 400,339 $82,899,980 409,807
========= ======= ========= ======= ========= =======
(1) Includes both loans held-for-investment (residential first mortgage, second mortgage and HELOC) and loans-held-for-sale (residential first mortgage).
(2) Does not include temporary short-term sub-servicing performed as a result of sales of servicing-released mortgage servicing rights.
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Beginning
balance $207,000 $243,000 $305,000 $305,000 $318,000
Provision
for loan
losses 14,110 4,053 50,351 70,142 276,047
Charge-offs
Consumer loans
Residential
first
mortgage (9,868) (34,666) (33,802) (133,326) (175,803)
Second
mortgage (730) (1,534) (5,423) (6,252) (18,753)
Warehouse
lending - (45) - (45) -
HELOC (1,728) (872) (5,000) (5,473) (17,159)
Other (995) (1,341) (1,613) (3,622) (4,423)
---- ------ ------ ------ ------
Total
consumer
loans (13,321) (38,458) (45,838) (148,718) (216,138)
Commercial loans
Commercial
real
estate (5,051) (8,419) (13,443) (47,982) (105,285)
Commercial
and
industrial (48) (302) (3,011) (350) (4,627)
Commercial
lease
financing (1,299) - (1,191) (1,299) (1,191)
------ --- ------ ------ ------
Total
commercial
loans (6,398) (8,721) (17,645) (49,631) (111,103)
------ ------ ------- ------- --------
Total
charge-
offs (19,719) (47,179) (63,483) (198,349) (327,241)
Recoveries
Consumer loans
Residential
first
mortgage 1,033 2,256 5,530 15,329 18,561
Second
mortgage 353 348 196 1,178 1,912
HELOC 315 143 67 1,020 461
Other 1,235 470 731 2,079 1,786
----- --- --- ----- -----
Total
consumer
loans 2,936 3,217 6,524 19,606 22,720
Commercial loans
Commercial
real
estate 2,300 3,860 6,600 10,162 15,397
Commercial
and
industrial 85 49 8 151 77
Commercial
lease
financing 288 - - 288 -
--- --- --- --- ---
Total
commercial
loans 2,673 3,909 6,608 10,601 15,474
----- ----- ----- ------ ------
Total
recoveries 5,609 7,126 13,132 30,207 38,194
----- ----- ------ ------ ------
Charge-
offs, net
of
recoveries (14,110) (40,053) (50,351) (168,142) (289,047)
Ending
balance $207,000 $207,000 $305,000 $207,000 $305,000
======== ======== ======== ======== ========
Net charge-
off ratio
(annualized)
(1) 1.53% 3.96% 3.18% 4.00% 4.43%
==== ==== ==== ==== ====
Net charge-
off ratio,
adjusted
(annualized)
(1)(2) 1.53% 1.30% 3.18% 2.45% 4.43%
==== ==== ==== ==== ====
(1) Excludes loans carried under the fair value option.
(2) Excludes charge-offs of $26.8 million related to the sale of non-performing loans and TDRs during the three months ended September 30, 2013 and $65.1 million during the
year ended December 31, 2013.
Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
------------- ------------- ------------- ------------- -------------
Balance, beginning of period $174,000 $185,000 $202,000 $193,000 $120,000
Provision
Charged to gain on sale for
current loan sales 3,018 3,719 7,285 17,606 24,410
Charged to representation and
warranty reserve -change in
estimate (15,425) 5,205 25,231 36,116 256,289
------- ----- ------ ------ -------
Total (12,407) 8,924 32,516 53,722 280,699
Charge-offs, net (107,593) (19,924) (41,516) (192,722) (207,699)
-------- ------- ------- -------- --------
Balance, end of period $54,000 $174,000 $193,000 $54,000 $193,000
======= ======== ======== ======= ========
Composition of Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
December Collectively Individually
31, Evaluated Evaluated
2013 Total
Reserves Reserves
--- -------- --------
Consumer
loans
Residential
first
mortgage $79,377 $81,765 $161,142
Second
mortgage 7,575 4,566 12,141
Warehouse
lending 1,392 - 1,392
HELOC 7,488 405 7,893
Other 2,412 - 2,412
----- --- -----
Total
consumer
loans 98,244 86,736 184,980
Commercial
loans
Commercial
real
estate 18,540 - 18,540
Commercial
and
industrial 3,332 - 3,332
Commercial
lease
financing 148 - 148
--- --- ---
Total
commercial
loans 22,020 - 22,020
------ --- ------
Total
allowance
for
loan
losses $120,264 $86,736 $207,000
======== ======= ======
September Collectively Individually
30, Evaluated Evaluated
2013 Total
Reserves Reserves
--- -------- --------
Consumer
loans
Residential
first
mortgage $65,490 $81,087 $146,577
Second
mortgage 10,124 8,571 18,695
Warehouse
lending 408 - 408
HELOC 8,567 540 9,107
Other 2,130 - 2,130
----- --- -----
Total
consumer
loans 86,719 90,198 176,917
Commercial
loans
Commercial
real
estate 25,331 1,161 26,492
Commercial
and
industrial 3,407 88 3,495
Commercial
lease
financing 96 - 96
--- --- ---
Total
commercial
loans 28,834 1,249 30,083
------ ----- ------
Total
allowance
for
loan
losses $115,553 $91,447 $207,000
======== ======= ======
Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
December 31, September 30, December 31,
2013 2013 2012
------------- ------------- -------------
Non-
performing
loans $98,976 $94,062 $254,582
Non-
performing
TDRs 25,808 21,104 60,516
Non-
performing months
TDRs
at
inception
but
performing
for
less
than
six 20,901 23,638 84,728
------ ------ ------
Total
non-
performing
loans
held-
for-
investment 145,685 138,804 399,826
Real
estate
and
other
non-
performing
assets,
net 36,636 66,530 120,732
------ ------ -------
Non-
performing
assets
held-
for-
investment,
net 182,321 205,334 520,558
Non-
performing
loans
held-
for-
sale 771 3,099 1,835
--- ----- -----
Total
non-
performing
assets
including
loans
held-
for-
sale $183,092 $208,433 $522,393
======== ======== ========
Ratio
of
non-
performing
assets
to
total
assets
(Bank
only) 1.95% 1.74% 3.70%
Ratio
of for-
non- investment
performing
loans
held-
for-
investment
to
loans
held- 3.59% 3.46% 7.35%
Ratio
of repossessed
non- assets
performing
assets
to
loans
held-
for-
investment
and 4.46% 5.03% 9.36%
Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
30-59 60-89 Greater Total Total
Days Days than 90 Past Investment
Past Past days Due Loans
Due Due
----- ----- ------- ----- ----------
December 31, 2013
Consumer loans $41,013 $20,732 $144,185 $205,930 $3,429,358
Commercial loans - - 1,500 1,500 626,398
--- --- ----- ----- -------
Total loans $41,013 $20,732 $145,685 $207,430 $4,055,756
===== ===== ====== ====== ==========
September 30, 2013
Consumer loans $51,176 $18,244 $123,289 $192,709 $3,389,925
Commercial loans - 208 15,515 15,723 623,582
Total loans $51,176 $18,452 $138,804 $208,432 $4,013,507
===== ===== ====== ====== ==========
December 31, 2012
Consumer loans $66,687 $18,578 $313,418 $398,683 $4,700,921
Commercial loans 6,979 6,990 86,408 100,377 737,180
----- ----- ------ ------- -------
Total loans $73,666 $25,568 $399,826 $499,060 $5,438,101
===== ===== ====== ====== ==========
Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
TDRs
----
Performing Non- Non-
performing performing
TDRs Total
at
inception
but
performing
for less
than six
months
---
December 31, 2013
Consumer
loans $382,529 $25,808 $20,901 $429,238
Commercial
loans 456 - - 456
Total
TDRs $382,985 $25,808 $20,901 $429,694
======== ======= ======= ======
September
30, 2013
Consumer
loans $387,671 $21,104 $21,353 $430,128
Commercial
loans 268 - 2,284 2,552
Total
TDRs $387,939 $21,104 $23,637 $432,680
======== ======= ======= ======
December 31,
2012
Consumer
loans $588,475 $60,493 $82,695 $731,663
Commercial
loans 1,287 23 2,033 3,343
Total
TDRs $589,762 $60,516 $84,728 $735,006
======== ======= ======= ======
Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, September 30,
2013 2013 December 31, 2012
------------- -------------- -----------------
Description
Valuation gain (loss)
Value of
interest rate
locks $(53,542) (0.79)% $87,961 1.05% $(143,364) (0.94)%
Value of
forward sales 89,330 1.31% (217,987) (2.61)% 123,602 0.82%
Fair value of
loans held-
for-sale 68,938 1.02% 63,394 0.76% 213,512 1.38%
LOCOM
adjustments
on loans
held-for-
investment - - % - - % (1,103) (0.01)%
--- --- --- --- --- --- ------ ------
Total
valuation
gains
(losses) 104,726 1.54% (66,632) (0.80)% 192,647 1.25%
Sales (losses) gains
Marketing
(losses)
gains, net of
adjustments (3,313) (0.05)% (52,120) (0.63)% 161,163 1.03%
Pair-off
(losses)
gains (53,605) (0.79)% 197,544 2.37% (107,572) (0.70)%
Provision for
representation
and warranty
reserve (3,018) (0.04)% (3,719) (0.04)% (7,285) (0.05)%
------ ------ ------ ------ ------ ------
Total sales
(losses)
gains (59,936) (0.88)% 141,705 1.70% 46,306 0.28%
------- ------ ------- ---- ------ ----
Total gain on
loan sales
and
securitizations $44,790 $75,073 $238,953
======= ======= ========
Total mortgage
rate lock
commitments
(gross) $6,481,782 $8,340,000 $16,242,000
======== ========== =========
Total loan
sales and
securitizations $6,783,212 0.66% $8,344,737 0.90% $15,610,590 1.53%
======== ========== =========
Total mortgage
rate lock
commitments
(fallout
adjusted) (1) $5,298,728 0.85% $6,605,432 1.14% $12,587,980 1.90%
======== ========== =========
Year Ended
----------
December 31, 2013 December 31, 2012
----------------- -----------------
Description
Valuation gain
(loss)
Value of interest
rate locks $(75,948) (0.19)% $15,235 0.03%
Value of forward
sales 33,945 0.09% 28,957 0.05%
Fair value of
loans held-for-
sale 200,639 0.5% 784,587 1.48%
LOCOM adjustments
on loans held-
for-investment (1,797) - % (1,124) - %
------ --- --- ------ --- ---
Total valuation
gains 156,839 0.4% 827,655 1.56%
Sales (losses)
gains
Marketing
(losses) gains,
net of
adjustments (822) - % 731,648 1.38%
Pair-off gains
(losses) 263,782 0.68% (543,995) (1.02)%
Provision for
representation
and warranty
reserve (17,606) (0.05)% (24,410) (0.05)%
------- ------ ------- ------
Total sales gains 245,354 0.63% 163,243 0.31%
------- ---- ------- ----
Total gain on
loan sales and
securitizations $402,193 $990,898
======== ========
Total mortgage
rate lock
commitments
volume $39,316,782 $66,732,000
========= =========
Total loan sales
and
securitizations $39,074,649 1.03% $53,094,326 1.87%
========= =========
Total mortgage
rate lock
commitments
(fallout
adjusted) (1) $31,590,150 1.27% $50,633,088 1.96%
========= =========
(1) Fallout adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based
on previous historical experience and the level of interest rates. The net margin is based on net gain on loan sales to fallout adjusted mortgage rate
lock commitments.
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, 2013 September 30,
2013 December 31, 2012
----------------- -------------- -----------------
Average Annualized Average Annualized Average
Balance Balance Balance Annualized
Yield/Rate Yield/Rate Yield/Rate
--- --- ----------
Interest-Earning Assets
Loans held-
for-sale $1,617,817 4.28% $2,156,966 4.14% $3,633,394 3.47%
Loans
repurchased
with
government
guarantees 1,234,383 2.46% 1,364,949 3.61% 1,912,722 3.13%
Loans held-for-
investment
Consumer
loans (1)
(2) 3,296,584 4.01% 3,412,909 4.06% 4,608,093 4.28%
Commercial
loans (1) 630,953 3.84% 637,711 3.85% 1,722,609 3.78%
------- ------- ---------
Total loans
held-for-
investment 3,927,537 3.97% 4,050,620 4.03% 6,330,702 4.14%
Investment
securities
available-
for-sale
or trading 1,006,801 2.59% 295,923 1.98% 362,819 2.51%
Interest-
earning
deposits
and other 1,820,838 0.25% 2,695,959 0.25% 1,110,354 0.24%
--------- --------- ---------
Total
interest-
earning
assets 9,607,376 2.98% 10,564,417 2.98% 13,349,991 3.44%
Other
assets 1,648,399 1,775,102 1,670,359
--------- --------- ---------
Total
assets $11,255,775 $12,339,519 $15,020,350
========= ========= =========
Interest-Bearing
Liabilities
Retail deposits
Demand
deposits $410,147 0.14% $394,418 0.18% $379,721 0.28%
Savings
deposits 2,906,271 0.49% 2,815,893 0.60% 1,891,901 0.68%
Money
market
deposits 293,192 0.17% 314,459 0.18% 427,792 0.43%
Certificate
of deposits 1,168,992 0.79% 1,787,318 0.90% 3,253,647 1.02%
--------- --------- ---------
Total
retail
deposits 4,778,602 0.52% 5,312,088 0.65% 5,953,061 0.82%
Government deposits
Demand
deposits 115,980 0.28% 55,571 0.76% 81,555 0.44%
Savings
deposits 172,886 0.27% 163,869 0.27% 287,289 0.51%
Certificate
of deposits 256,274 0.18% 303,329 0.29% 444,668 0.62%
------- ------- -------
Total
government
deposits 545,140 0.23% 522,769 0.33% 813,512 0.56%
Wholesale
deposits 15,423 4.40% 72,141 5.06% 157,960 4.04%
------ ------ -------
Total
deposits 5,339,165 0.50% 5,906,998 0.67% 6,924,533 0.86%
Federal
Home Loan
Bank
advances 2,755,375 3.16% 2,900,519 3.34% 3,145,341 3.13%
Other 247,435 2.66% 247,435 2.67% 248,511 2.72%
------- ------- -------
Total
interest-
bearing
liabilities 8,341,975 1.44% 9,054,952 1.58% 10,318,385 1.60%
Other
liabilities
(3) 1,640,037 2,018,300 3,413,633
Stockholders'
equity 1,273,763 1,266,267 1,288,332
--------- --------- ---------
Total
liabilities
and
stockholder's
equity $11,255,775 $12,339,519 $15,020,350
========= ========= =========
(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real
estate, commercial and industrial, and commercial lease financing loans.
(2) Includes loans that are consolidated variable interest entities and carried at fair value.
(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Year Ended
----------
December 31, 2013 December 31, 2012
----------------- -----------------
Average Annualized Average
Balance Balance Annualized
Yield/Rate Yield/Rate
--- ----------
Interest-Earning
Assets
Loans held-
for-sale $2,498,893 3.55% $3,078,690 3.75%
Loans
repurchased
with
government
guarantees 1,476,801 3.26% 2,018,079 3.22%
Loans held-for-
investment
Consumer
loans (1)
(2) 3,669,373 4.07% 4,737,553 4.33%
Commercial
loans (1) 658,804 4.04% 1,782,507 3.91%
------- ---------
Total loans
held-for-
investment 4,328,177 4.07% 6,520,060 4.21%
Investment
securities
available-
for-sale
or trading 474,205 2.51% 573,445 3.94%
Interest-
earning
deposits
and other 2,103,542 0.25% 914,127 0.24%
--------- -------
Total
interest-
earning
assets 10,881,618 3.03% 13,104,401 3.66%
Other
assets 1,673,298 1,622,369
--------- ---------
Total
assets $12,554,916 $14,726,770
========= =========
Interest-Bearing
Liabilities
Retail deposits
Demand
deposits $397,094 0.19% $363,247 0.26%
Savings
deposits 2,668,571 0.63% 1,775,449 0.72%
Money
market
deposits 334,945 0.25% 463,490 0.48%
Certificate
of deposits 2,054,834 0.89% 3,170,103 1.21%
--------- ---------
Total
retail
deposits 5,455,444 0.67% 5,772,289 0.94%
Government deposits
Demand
deposits 96,112 0.43% 96,000 0.48%
Savings
deposits 203,191 0.35% 280,313 0.55%
Certificate
of deposits 360,406 0.41% 393,731 0.64%
------- -------
Total
government
deposits 659,709 0.39% 770,044 0.59%
Wholesale
deposits 60,711 4.98% 296,997 3.80%
------ -------
Total
deposits 6,175,864 0.69% 6,839,330 1.03%
FHLB
advances 2,914,637 3.22% 3,698,362 2.88%
Other 247,435 2.68% 248,561 2.80%
------- -------
Total
interest-
bearing
liabilities 9,337,936 1.53% 10,786,253 1.70%
Other
liabilities
(3) 1,978,430 2,748,236
Stockholders'
equity 1,238,550 1,192,281
--------- ---------
Total
liabilities
and
stockholder's
equity $12,554,916 $14,726,770
========= =========
(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other
consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease
financing loans.
(2) Excludes loans that are consolidated variable interest entities and carried at fair value.
(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear
interest.
Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2013 2013 2012 2013 2012
---- ---- ---- ---- ----
Pre-tax, pre-credit-cost
(loss) income
Income before
tax provision $(248,456) $14,492 $(88,577) $(149,263) $52,731
Add back
Provision for
loan losses 14,112 4,053 50,351 70,142 276,047
Asset
resolution 3,372 16,295 21,241 52,033 91,349
Other than
temporary
impairment on
AFS
investments - - - 8,789 2,192
Representation
and warranty
reserve -
change in
estimate (15,424) 5,205 25,231 36,116 256,289
Write down of
transferor
interest - - 780 174 2,552
--- --- --- --- -----
Total credit-
related costs 2,060 25,553 97,603 167,254 628,429
----- ------ ------ ------- -------
Pre-tax, pre-
credit-cost
net income $(246,396) $40,045 $9,026 $17,991 $681,160
========= ======= ====== ======= ========
Efficiency ratio (credit-
adjusted)
Net interest
income (a) $41,203 $42,685 $73,941 $186,651 $297,231
Non-interest
income (b) 113,146 134,296 285,795 652,343 1,021,242
Add:
Representation
and warranty
reserve -
change in
estimate (d) (15,424) 5,205 25,231 36,116 256,289
------- ----- ------ ------ -------
Adjusted income 138,925 182,186 384,967 875,110 1,574,762
------- ------- ------- ------- ---------
Non-interest
expense (c) 388,693 158,436 397,962 918,115 989,695
Less: Asset
resolution
expense (e) (3,372) (16,295) (21,241) (52,033) (91,349)
------ ------- ------- ------- -------
Adjusted non-
interest
expense $385,321 $142,141 $376,721 $866,082 $898,346
-------- -------- -------- -------- --------
Efficiency
ratio (c/
(a+b)) (1) 251.8% 89.5% 110.6% 109.4% 75.1%
===== ==== ===== ===== ====
Efficiency
ratio (credit-
adjusted) ((c-
e)/((a+b)+d)))
(1) 277.4% 78.0% 97.9% 99.0% 57.0%
===== ==== ==== ==== ====
December 31, September 30, December 31,
2013 2013 2012
---- ---- ----
Non-performing
assets /Tier 1
capital +
allowance for
loan losses
Non-performing
assets $182,321 $205,334 $520,558
Tier 1 capital (2) 1,257,608 1,402,423 1,295,841
Allowance for loan
losses 207,000 207,000 305,000
------- ------- -------
Tier 1 capital +
allowance for
loan losses $1,464,608 $1,609,423 $1,600,841
---------- ---------- ----------
Non-performing
assets /Tier 1
capital +
allowance for
loan losses 12.4% 12.8% 32.5%
==== ==== ====
Mortgage servicing
rights to Tier 1
capital ratio December 31, September 30, December 31,
2013 2013 2012
---- ---- ----
Mortgage servicing
rights $284,678 $797,029 $710,791
Tier 1 capital (to
adjusted total
assets) (2) 1,257,608 1,402,423 1,295,841
Mortgage servicing
rights to Tier 1
capital ratio 22.6% 56.8% 54.9%
==== ==== ====
(1) Ratios include $177.6 million and $61.0 million related to the prepayment of FHLB advances and the DOJ litigation, respectively, during the three months and year ended December
31, 2013, excluding these expenses the efficiency ratio would have been 97.3 percent and 81.0 percent for the three months and year ended December 31, 2013, respectively.
(2) Represents Tier 1 capital for Bank.
SOURCE Flagstar Bancorp
