TROY, Mich., April 21 /PRNewswire-FirstCall/ -- Flagstar Bancorp, Inc. (NYSE:
FBC), the holding company for Flagstar Bank FSB, today reported a first
quarter 2009 net loss applicable to common stockholders of $67.4 million, or
$(0.76) per share (diluted), as compared to a net loss of $218.5 million, or
$(2.62) per share (diluted) in the fourth quarter 2008. Our net loss was
$10.6 million, or $(0.18) per share (diluted), in the first quarter 2008.
On a pre-tax, pre-credit cost basis, our earnings before preferred dividends
were $144.6 million in the first quarter 2009, as compared to a loss of $41.8
million in the fourth quarter 2008. For the first quarter 2009 as compared
to the fourth quarter 2008, our residential loan originations increased to
$9.5 billion from $5.4 billion, our loan sales increased to $7.8 billion from
$5.7 billion and the margin on our loan sales increased to 2.54% from 0.29%.
"Credit costs continued to negatively impact earnings; however, there were a
number of encouraging results and trends that developed during the quarter,"
said Mark Hammond, Chief Executive Officer. "Gain on loan sales was at an
historic high and mortgage originations increased 76%, as compared to the
fourth quarter 2008. Net interest margin improved and regulatory capital
remained high relative to previous periods, although, delinquencies continued
to rise, but at a decelerating rate."
Capital
At March 31, 2009, our wholly owned subsidiary Flagstar Bank remained
"well-capitalized" for regulatory purposes, with capital ratios of 7.22% for
Tier 1 capital and 13.58% for total risk-based capital. During the first
quarter 2009, we also completed three of four tranches in our capital raising
plan. We raised $250 million from MP Thrift Investments, we raised $266
million from the U.S. Treasury via the TARP program, and we raised a further
$50 million from MP Thrift Investments. During the second quarter 2009, we
expect to raise the final tranche of $50 million in capital from MP Thrift
Investments.
Assets
Total assets at March 31, 2009 were $16.8 billion as compared to $14.2 billion
at December 31, 2008 and $15.9 billion at March 31, 2008. The increase
reflects an increase of $1.2 billion in our trading securities, which serves
as an economic hedge for our mortgage servicing rights, and a $2.2 billion
increase in our portfolio of loans available for sale, offset in part by a
reduction in our investment securities available for sale and our loans held
for investment.
Operations
For the first quarter 2009, our net loss applicable to common stockholders of
$67.4 million reflected the following:
-- Provision for loan losses decreased to $158.2 million as compared to
$176.3 million for the fourth quarter of 2008.
-- Loan fees that we receive when originating loans increased to $32.9
million in the first quarter 2009 as compared to $0.4 million during
the
fourth quarter 2008. This reflects the increase in our production of
residential mortgage loans to $9.5 billion in first quarter 2009 from
$5.4 billion in the fourth quarter 2008. Also, we adopted the fair
value method of accounting for residential mortgage loans that we
originate for sale beginning in 2009, and therefore we may no longer
capitalize and defer recognition of loan fees associated with those
loans as had previously been our practice.
-- Non interest expense increased to $182.7 million as compared to $129.9
million in fourth quarter 2008. The increase was a result of increased
commissions of $10.4 million due to higher loan origination volume in
first quarter 2009, a newly-incurred warrant expense of $11.0 million
associated with issuing warrants to certain investors and to the U.S.
Treasury, and an $8.4 million increase in costs associated with
foreclosed property. This expense also increased another $21.6
million
because, unlike in the fourth quarter 2008, we are no longer able to
defer a portion of the expenses associated with originating
residential
mortgage loans for sale beginning in 2009 as a result of adopting the
fair value method of accounting for such loans.
-- Loan administration income reflected a loss of $31.8 million as
compared
to a loss of $46.2 million for the fourth quarter 2008. The loan
administration fee amount of $40 million received in first quarter
2009
for servicing loans was substantially the same as was received in
fourth
quarter 2008. We also experienced a smaller write down of mortgage
servicing rights, net of hedging gains, of $69.6 million for first
quarter 2009 as compared to an $87.5 million net write down during
fourth quarter 2008. Additionally, we recorded gains of approximately
$24 million on trading securities that were used for economic hedging
purposes.
-- Gain on loan sales increased to $195.7 million as compared to $16.7
million for fourth quarter 2008, reflecting the increase in both our
loan sales volume and our margin on loan sales during first quarter
2009. The gain on loan sales was also positively impacted by the
adoption of the fair value method of accounting for the
available-for-sale portfolio of residential mortgage loans that we
originate after 2008. Our application of the fair value method will
require us to recognize gains or losses on available-for-sale loans
while they are in our portfolio as well as at the time of sale. The
adoption of the fair value method effective January 1, 2009 resulted
in
a one time increase as the gains on loans closed in the first quarter
were realized, as well as loans that were closed in the fourth quarter
but sold in the first quarter.
Funding Sources
Flagstar Bank's primary sources of funds are deposits, loan repayments and
sales, advances from the Federal Home Loan Bank of Indianapolis (FHLB), cash
generated from operations, customer escrow accounts and security repurchase
agreements. Retail deposits were $6.2 billion at March 31, 2009, as compared
to $5.4 billion at December 31, 2008 and $5.2 billion at March 31, 2008. At
March 31, 2009, we had a $7.0 billion line of credit with the FHLB, which was
collateralized to $5.8 billion, and a $654 million undrawn line of credit at
the Federal Reserve discount window.
Net Interest Margin
Flagstar Bank increased its net interest margin to 1.67% for first quarter
2009 as compared to 1.61% for fourth quarter 2008 and 1.66% for first quarter
2008.
Retail Banking Operations
Flagstar Bank had 177 retail banking branches at March 31, 2009 as compared to
175 branches at December 31, 2008 and 167 branches at March 31, 2008.
Mortgage Banking Operations
Loan production, substantially all of which is comprised of agency residential
first mortgage loans, increased to $9.5 billion for first quarter 2009, as
compared to $5.4 billion in fourth quarter 2008 and $8.0 billion in first
quarter 2008.
Gain on loan sales margins increased to 2.54% for first quarter 2009, as
compared to 0.29% for fourth quarter 2008 and 0.89% for first quarter 2008.
The margin for the first quarter was positively impacted by the adoption of
fair value method of accounting for the available-for-sale portfolio of
residential mortgage loans that we originate after 2008.
At March 31, 2009, the unpaid principal balances of loans associated with our
mortgage servicing rights portfolio totaled $58.9 billion and had a weighted
average service fee of 33.4 basis points. This was an increase from $55.9
billion at December 31, 2008 with a weighted average servicing fee of 33.3
basis points and $38.4 billion at March 31, 2008 with an average weighted
servicing fee of 35.0 basis points.
Asset Quality
Our non-performing assets, which include non-performing loans (i.e., loans 90
days or more past due, and matured loans), real estate owned and repurchased
assets, but which exclude any FHA-insured assets, increased to $915.1 million
at March 31, 2009, from $755.2 million at December 31, 2008 and $399.5 million
at March 31, 2008.
Our non-performing loans, which exclude any FHA-insured loans, increased to
$793.7 million (8.87% of loans held for investment) at March 31, 2009 as
compared to $629.5 million (6.93% of loans held for investment) at December
31, 2008 and $253.4 million (2.96% of loans held for investment) at March 31,
2008.
Of the non-performing loans, residential first mortgage loans increased to
$561.5 million at March 31, 2009, as compared to $432.6 million at December
31, 2008 and $172.6 million at March 31, 2008. Our portfolio of single-family
residential first mortgage loans held for investment at March 31, 2009 had an
average original FICO credit score of 718 and an average original
loan-to-value ratio of 74.1%.
Non-performing commercial real estate mortgages increased to $198.3 million at
March 31, 2009 as compared to $164.4 million at December 31, 2008 and $72.7
million at March 31, 2008. These loans are individually evaluated for
impairment and may not require a specific loan loss reserve depending upon the
sufficiency of collateral or cash flows.
The balance of our real estate owned, net of any FHA-insured assets, decreased
to $106.5 million at March 31, 2009 from $109.3 million at December 31, 2008
and $136.5 million at March 31, 2008. Our repurchased assets were $14.8
million at March 31, 2009 as compared to $16.5 million at December 31, 2008
and $9.6 million at March 31, 2008.
Our net loan charge-offs were $68.2 million for first quarter 2009 as compared
to $24.3 million for fourth quarter 2008 and $16.9 million for first quarter
2008. The provision for loan losses was $158.2 million for first quarter 2009
as compared to $176.3 million for fourth quarter 2008 and $34.3 million for
first quarter 2008. The allowance for loan losses was $466.0 million (5.21%
of loans held for investment) at March 31, 2009 as compared to $376.0 million
(4.14% of loans held for investment) at December 31, 2008 and $121.4 million
(1.42% of loans held for investment) at March 31, 2008.
As Previously Announced
The Company's quarterly earnings conference call will be held on Wednesday,
April 22, 2009 from 11 a.m. until 12 noon (Eastern).
Questions for discussion at the conference call may only be submitted in
advance by e-mail to investors@flagstar.com.
The conference call and accompanying slide presentation will be webcast live
on the Investor Relations section of the Company's Web site, www.flagstar.com,
with replays available at that site for at least 10 days.
To listen by telephone, please call at least 10 minutes prior to the start of
the conference call at (702)696-4911 or toll free at (866) 294-1212, passcode:
92429300.
Flagstar Bancorp, with $16.8 billion in total assets, is the largest publicly
held savings bank headquartered in the Midwest. At March 31, 2009, Flagstar
operated 177 banking centers in Michigan, Indiana and Georgia and 61 home loan
centers in 18 states. Flagstar Bank originates loans nationwide and is one of
the leading originators of residential mortgage loans.
The information contained in this release is not intended as a solicitation to
buy Flagstar Bancorp, Inc. stock and is provided for general information.
This release contains certain statements that may constitute "forward-looking
statements" within the meaning of federal securities laws. These
forward-looking statements include statements about the Company's beliefs,
plans, objectives, goals, expectations, anticipations, estimates, and
intentions, that are subject to significant risks and uncertainties, and are
subject o change based upon various factors (some of which may be beyond the
Company's control). The words "may," "could," "should," "would," "believe,"
and similar expressions are intended to identify forward-looking statements.
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
For the Three Months Ended
Summary of Consolidated
Statements of March 31, December 31, March 31,
Operations 2009 2008 2008
Interest income $184,978 $178,043 $210,853
Interest expense (128,248) (131,556) (156,055)
Net interest income 56,730 46,487 54,798
Provision for loan
losses (158,214) (176,256) (34,262)
Net interest (loss)
income after
provision (101,484) (129,769) 20,536
Non-interest income
Loan fees and
charges, net 32,922 410 884
Deposit fees and
charges 7,233 7,395 6,031
Loan administration (31,801) (46,230) (17,046)
Net gain on loan
sales 195,694 16,657 63,425
Impairment -
securities
available for sale (17,242) (62,370) -
(Loss) gain on MSR
sales, net (82) 1,448 287
Gain (loss) on
trading securities 11,212 16,302 (9,482)
Other (loss) income (6,977) (9,828) 8,575
Total non-interest
income (loss) 190,959 (76,216) 52,674
Non-interest
expenses
Compensation and
benefits (58,654) (53,726) (56,626)
Commissions (33,415) (23,063) (29,316)
Occupancy and
equipment (18,879) (19,437) (19,853)
General and
administrative (37,669) (26,150) (5,086)
Other (34,335) (29,502) (10,591)
Total non-interest
expense (182,952) (151,878) (121,472)
Capitalized direct
cost of loan
closing 283 21,894 32,304
Total non-interest
expense after
capitalized direct
cost of loan
closing (182,669) (129,984) (89,168)
Loss before federal
income tax (93,194) (335,969) (15,958)
Benefit for federal
income taxes and
preferred stock
dividends 28,696 117,506 5,359
Net loss (64,498) (218,463) (10,599)
Preferred stock
dividends (2,920) - -
Net loss available
to common
stockholders $(67,418) $(218,463) $(10,599)
Basic loss per share $(0.76) $(2.62) $(0.18)
Diluted loss per
share $(0.76) $(2.62) $(0.18)
Net interest spread
- Consolidated 1.59% 1.74% 1.48%
Net interest margin
- Consolidated 1.59% 1.49% 1.55%
Interest rate spread
- Bank only 1.63% 1.79% 1.61%
Net interest margin
- Bank only 1.67% 1.61% 1.66%
Return on average
assets (1.68)% (5.94)% (0.27)%
Return on average
equity (33.64)% (122.85)% (5.93)%
Efficiency ratio 73.8% (437.2) % 82.97%
Average interest
earning assets $14,026,946 $12,435,053 $14,183,297
Average interest
paying liabilities $14,057,366 $13,158,369 $14,007,106
Average
stockholders'
equity $801,534 $710,658 $715,262
Equity/assets ratio
(average for the
period) 5.00% 4.83% 4.48%
Ratio of charge-offs
to average loans
held for investment 3.00% 1.08% 0.80%
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
Summary of the Consolidated
Statements of Financial March 31, December 31, March 31,
Condition: 2009 2008 2008
Total assets $16,809,817 $14,203,657 $15,923,312
Securities - trading 1,693,140 542,539 36,308
Investment securities
available for sale 775,812 1,118,453 2,364,007
Loans held for sale 3,660,259 1,484,680 3,137,410
Loans held for investment,
net 8,480,195 8,706,121 8,452,624
Allowance for loan losses (466,000) (376,000) (121,400)
Mortgage servicing rights 522,771 511,294 497,875
Deposits 9,785,701 7,841,005 8,427,804
FHLB advances 5,200,000 5,200,000 6,207,000
Repurchase agreements 108,000 108,000 108,000
Stockholders' equity 930,734 472,293 703,654
Other Financial and
Statistical Data:
Equity/assets ratio 5.54% 3.33% 4.42%
Core capital ratio 7.22% 4.95% 5.64%
Total risk-based capital
ratio 13.58% 9.10% 10.47%
Book value per common share $4.03 $5.65 $11.66
Shares outstanding at
quarter-end 90,379 83,627 60,325
Average shares outstanding
during the quarter 88,210 72,153 60,312
Average diluted shares
outstanding during the
quarter 88,210 72,153 60,753
Loans serviced for others $58,856,128 $55,870,207 $38,378,056
Weighted average service fee
(bps) 33.4 33.3 35.0
Value of mortgage servicing
rights 0.88% 0.93% 1.30%
Allowance for loan losses to
non performing loans 58.7% 59.7% 47.9%
Allowance for loan losses to
loans held for investment 5.21% 4.14% 1.42%
Non performing assets to
total assets 5.46% 5.33% 2.51%
Number of bank branches 177 175 167
Number of loan origination
centers 61 104 138
Number of employees
(excluding loan officers &
account executives) 3,285 3,246 3,170
Number of loan officers and
account executives 519 674 839
Loan Originations
(Dollars in millions)
(Unaudited)
For the Three Months Ended
March 31, December 31, March 31,
Loan type 2009 2008 2008
Residential
mortgage
loans $9,500 99.8% $5,390 100.0% $7,860 98.1%
Consumer
loans 3 - 4 - 49 0.6
Commercial
loans 17 0.2 11 - 101 1.3
Total
loan
production $9,520 100.0% $5,405 100.0% $8,010 100.0%
Loans Held for Investment
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2009 2008 2008
First
mortgage loans $5,754,604 64.3% $5,958,748 65.6% $6,103,777 71.2%
Second
mortgage loans 266,198 3.0 287,350 3.2 60,917 0.7
Commercial
real estate
loans 1,758,612 19.7 1,779,363 19.6 1,641,686 19.1
Construction
loans 45,187 0.5 54,749 0.6 77,035 0.9
Warehouse
lending 569,120 6.4 434,140 4.8 347,908 4.1
Consumer
loans 527,221 5.9 543,102 6.0 318,694 3.7
Non-real
estate
commercial 25,253 0.2 24,669 0.2 24,007 0.3
Total loans
held for
investment $8,946,195 100.0% $9,082,121 100.0% $8,574,024 100.0%
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
March, 31 December 31, March 31,
2009 2008 2008
Description (000's) (000's) (000's)
Beginning Balance $(376,000) $(224,000) $(104,000)
Provision for losses (158,214) (176,256) (34,262)
Charge offs, net of
recoveries
First mortgage loans 24,941 16,600 5,896
Second mortgage loans 12,603 1,676 235
Commercial loans 22,633 2,451 8,222
Construction loans 756 1,703 27
Warehouse - 169 619
Consumer
HELOC 6,127 790 973
Other consumer loans 678 420 559
Other 476 447 331
Charge-offs, net of
recoveries 68,214 24,256 16,862
Ending Balance $(466,000) $(376,000) $(121,400)
Composition of Allowance for Loan Losses
As of March 31, 2009
(In thousands)
Description General Specific Total
Reserves Reserves
First mortgage loans $199,250 $25,086 $224,336
Second mortgage loans 27,998 - 27,998
Commercial real estate loans 64,099 109,740 173,839
Construction loans 3,265 1,362 4,627
Warehouse lending 4,463 - 4,463
Consumer loans 20,633 905 21,538
Non-real estate commercial 614 1,336 1,950
Other and unallocated 7,249 - 7,249
Total allowance for loan losses $327,571 $138,429 $466,000
Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
For the Three Months Ended
March 31, December 31, March 31,
2009 2008 2008
Description (000's) bps (000's) bps (000's) Bps
Gain on loan
sales and
securitiz-
ations $211,903 274 $72,823 129 $94,073 131
Fair value
adjustment
for loans
held for
sale 21,955 (1) 29 - - - -
Hedging
costs (14,030) (18) (23,795) (42) 9,099 13
LOCOM
adjustments (257) - 551 1 (225) -
Provision
for SMR (3,802) (5) (2,193) (4) (2,999) (4)
Credit
losses 5 - 4 - (4,438) (6)
Loan
level
pricing
adjust-
ments (19,433) (25) (30,314) (54) (31,519) (44)
Other
transaction
costs (647) (1) (419) (1) (566) (1)
Net gain on
loan sales and
securitiz-
ations $195,694 254 $16,657 29 $63,425 89
Total loan
sales and
securitiz-
ations $7,699,063 $5,711,405 $7,160,328
(1) On January 1, 2009, the Company adopted fair value accounting for its
residential first mortgage loans held for sale and originated on or after
that date.
Asset Quality
(Dollars in thousands)
(Unaudited)
March 31, 2009 December 31, 2008 March 31, 2008
Days % of % of % of
delinquent Balance Total Balance Total Balance Total
30 $192,142 2.1% $157,683 1.7% $81,343 1.0%
60 142,521 1.6 134,685 1.5 48,823 0.5
90 126,022 1.4 137,683 1.5 40,768 0.5
120 + and
Matured
Delinquent 667,691 7.5 491,774 5.4 212,655 2.5
Total $1,128,376 12.6% 921,825 10.1% 383,589 4.5%
Total loans
held for
investment $8,946,195 $9,082,121 $8,574,024
Non-Performing Loans and Assets at
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2009 2008 2008
Non-performing loans $793,713 $629,457 $253,423
Real estate owned 106,546 109,297 136,490
Repurchased assets/non-performing assets 14,830 16,454 9,633
Non-performing assets $915,089 $755,208 $399,546
Non-performing loans as a percentage
of investment loans 8.87% 6.93% 2.96%
Non-performing assets as a percentage
of total assets 5.46% 5.33% 2.51%
Deposit Portfolio
(Dollars in thousands)
(Unaudited)
March 31, December 31, March 31,
2009 2008 2008
Description Balance Rate Balance Rate Balance Rate
Demand
deposits $427,167 0.30% $416,920 0.47% $415,411 0.76%
Savings
deposits 446,440 1.79 407,501 2.24 329,983 2.32
Money
market
deposits 662,273 2.10 561,909 2.61 541.374 2.57
Certificates of
deposits 4,647,038 3.66 3,967,985 3.93 3,925,567 4.77
Total
retail
deposits 6,182,918 3.13 5,354,315 3.40 5,212,335 4.06
Company
controlled
custodial deposits 749,102 - 535,494 - 698,344 -
Municipal
Deposits / CDARS 616,318 1.80 597,638 2.84 1,491,475 3.75
Wholesale
deposits 2,237,363 3.23 1,353,558 4.41 1,025,650 4.76
Total
deposits $9,785,701 2.83% $7,841,005 3.30% $8,427,804 3.75%
Pre-tax, pre-credit-cost Income
(Non GAAP measure)
(Dollars in millions)
(Unaudited)
For the Three Months Ended
March 31, December 31,
2009 2008
Loss before tax provision $(93.2) $(336.0)
Add back:
Provision for loan losses 158.2 176.3
Asset resolution 24.9 16.4
Other than temporary impairment (OTTI)
on AFS securities 17.2 62.4
Secondary marketing reserve provision 14.6 19.8
Write down of residual interests 12.5 9.5
Reserve increase for reinsurance 10.4 9.8
Total credit-related-costs: 237.8 294.2
Pre-tax, pre-credit-cost income $144.6 $(41.8)
SOURCE Flagstar Bank, Inc.
Paul D. Borja, Executive Vice President, CFO, +1-248-312-2000
