FLAGSTAR BANCORP, INC. TROY, Mich., Jan. 22, 2015 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported fourth quarter 2014 net income of $11.1 million, or $0.07 per diluted share, as compared to a net loss of $27.6 million in the third quarter 2014, or $(0.61) per diluted share, and net income of $161.9 million in the fourth quarter 2013, or $2.77 per diluted share. The full year 2014 net loss was $69.5 million, or $(1.72) per diluted share, as compared to a full year 2013 net income of $267.0 million, or $4.37 per diluted share.
Alessandro P. DiNello, president and chief executive officer, said, "I am pleased that this quarter's earnings are the result of core operations. We have been working tirelessly for the last two years to de-risk the balance sheet, settle major legal matters, right size operating expenses, upgrade our management talent, build a strong risk management organization and focus our business strategies. These efforts have begun to bear fruit and we will continue to build on this foundation going forward."
Fourth Quarter 2014 Highlights:
Income Statement Highlights
Three Months Ended % Change
------------------ --------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
(Dollars in thousands)
Consolidated Statements of
Operations
Net interest income $61,302 $64,363 $62,425 $58,201 $41,203 (4.8)% 48.8%
Provision for loan losses 4,986 8,097 6,150 112,321 14,112 (38.4)% (64.7)%
Noninterest income 98,441 85,188 102,484 74,953 113,146 15.6% (13.0)%
Noninterest expense 139,253 179,389 121,353 139,252 388,693 (22.4)% (64.2)%
------- ------- ------- ------- -------
Income (loss) before income
taxes 15,504 (37,935) 37,406 (118,419) (248,456) N/M N/M
Provision (benefit) for income
taxes 4,428 (10,303) 11,892 (39,996) (410,362) N/M N/M
----- ------- ------ ------- --------
Net income (loss) $11,076 $(27,632) $25,514 $(78,423) $161,906 N/M (93.2)%
======= ======== ======= ======== ========
Earnings (Loss) Per Share (1) $0.07 (0.61) 0.33 (1.51) 2.77 N/M (97.5)%
N/M - Not meaningful
(1) Fully diluted earnings
(loss) per share, except
where securities would be
anti-dilutive. Includes
the preferred stock
dividend, including the
accretion and cumulative
deferred.
Key Ratios
Three Months Ended Change (bps)
------------------ -----------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
Net interest margin
(consolidated) 2.80% 2.91% 2.98% 2.97% 1.73% (11) 107
Efficiency ratio
(adjusted) (1) 90.6% 86.8% 71.3% 91.3% 108.1% 380 N/M
Return (loss) on
average assets 0.44% (1.08)% 1.04% (3.39)% 5.70% 152 (526)
Return (loss) on
average equity 3.18% (7.88)% 7.38% (21.85)% 50.39% N/M N/M
N/M - Not meaningful
(1) See non-GAAP reconciliation.
Balance Sheet Highlights
Three Months Ended % Change
------------------ --------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
(Dollars in thousands)
Average Balance Sheet
Average interest-earning assets $8,724,037 $8,814,714 $8,366,703 $7,829,814 $9,607,376 (1.0)% (9.2)%
Average loans held-for-investment 4,030,525 4,087,862 3,902,871 3,864,110 3,927,537 (1.4)% 2.6%
Average interest-bearing deposits 5,897,543 5,788,388 5,445,734 5,230,154 5,339,165 1.9% 10.5%
Net Interest Income
Fourth quarter 2014 net interest income fell to $61.3 million, as compared to $64.4 million for the third quarter 2014. The decrease in net interest income was attributable to lower interest income from the Company's Ginnie Mae early buy-outs, due to a reduction in the average interest rate earned in accordance with the terms of loans with government guarantees, as well as jumbo residential first mortgage loan sales. The full year 2014 net interest income was $246.3 million, as compared to $186.7 million for the full year 2013, which primarily resulted from the prepayment of long-term Federal Home Loan Bank advances at the end of 2013.
Net interest margin decreased to 2.80 percent for the fourth quarter 2014, as compared to 2.91 percent for the third quarter 2014. The decrease from the prior quarter was driven primarily by a lower yield from the loans that were included in the early buy-outs, as described above, and a 21 basis point reduction in the yield on loans held-for-sale.
Provision for Loan Losses
Provision for loan losses totaled $5.0 million for the fourth quarter 2014, as compared to $8.1 million for the third quarter 2014. The decrease from the prior quarter was primarily attributable to lower net charge-offs. Net charge offs in the fourth quarter 2014 were $9.0 million, or 0.91 percent of applicable loans, compared to $13.1 million, or 1.36 percent of applicable loans in the prior quarter. The fourth quarter 2014 amount included $3.0 million of net charge-offs associated with the sale of $24 million of lower performing loans during the quarter. The net charge-offs associated with these loan sales accounted for 31 basis points of the fourth quarter's net charge-off rate.
Noninterest Income
Fourth quarter 2014 noninterest income was $98.4 million, as compared to noninterest income of $85.2 million for the third quarter 2014. The third quarter of 2014 included a $10.4 million charge related to certain Federal Housing Administration indemnifications. Net of this adjustment, noninterest income rose $2.8 million, or 3 percent from the prior quarter.
Adjustments to Noninterest Income
Three Months Ended
------------------
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2013
2014
----
(Dollars in thousands)
Noninterest income $98,441 $85,188 $102,484 $74,953 $113,146
Adjusting items
Loan fees and charges (1) - - (10,000) - -
Representation and warranty provision (2) - 10,375 - - (24,900)
Other noninterest income (3) - - - 21,056 -
--- ---
Adjusted noninterest income (4) $98,441 $95,563 $92,484 $96,009 $88,246
======= ======= ======= ======= =======
(1) Reverse benefit for contract
renegotiation.
(2) Add back reserve increase related to
indemnifications claims on government
insured loans and reduce for the
settlement with Fannie Mae and
Freddie Mac, respectively.
(3) Adjust for a negative fair value
adjustment related to performing
loans repurchased.
(4) Non-GAAP number.
Fourth quarter 2014 deposit fees and charges increased to $6.0 million, as compared to $5.6 million for the third quarter 2014. The increase from the prior quarter reflects continued growth in demand deposit balances and seasonality.
Mortgage Metrics
Three Months Ended % Change
------------------ --------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
(Dollars in millions)
GOS margin (change in bps) (3) 0.87% 0.83% 0.82% 0.93% 0.85% 4 2
Gain on loans sales $54 $52 $55 $45 $45 3.8% 20.0%
Mortgage rate lock commitments
(fall-out adjusted) (1) 6,156 6,304 6,693 4,854 5,299 (2.3)% 16.2%
Residential loans serviced (2) 76,672 78,135 73,732 74,302 71,824 (1.9)% 6.7%
(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.
(2) Includes serviced and subserviced
loans.
(3) Gain on sale margin is based on
net gain on loan sales to fall-
out adjusted mortgage rate lock
commitments.
Loan fees and charges decreased to $16.8 million for the fourth quarter 2014, as compared to $18.7 million in the third quarter 2014. The decrease of $1.9 million, or 10 percent, was primarily related to an 8 percent decrease in mortgage originations in the fourth quarter 2014.
Fourth quarter 2014 net gain on loan sales increased to $53.5 million, as compared to $52.2 million for the third quarter 2014. The increase from the prior quarter reflects higher refinance volume driven by lower rates in October and early December, offsetting the seasonal decline in purchase origination volume. Fallout-adjusted locks were $6.2 billion for the fourth quarter 2014, as compared to $6.3 billion for the third quarter 2014. The net gain on loan sale margin increased to 0.87 percent for the fourth quarter 2014, as compared to 0.83 percent for the third quarter 2014.
Loan administration income remained relatively flat at $5.5 million for the fourth quarter 2014, as compared to the third quarter 2014.
Net return on the mortgage servicing asset (including off-balance sheet hedges of mortgage servicing rights) increased to $1.6 million for the fourth quarter 2014, as compared to $1.3 million for the third quarter 2014. The gross return on the mortgage servicing rights asset was 7.4 percent in the 2014 fourth quarter, a slight decrease from the third quarter 2014 as a result of higher prepayments of serviced loans. Additionally, the Company had $3.5 million of lower revenue as a result of the transaction costs and losses associated with $70 million of mortgage servicing rights sold during the quarter.
Net gain on sales of assets fell $3.2 million in the fourth quarter 2014, compared to the prior quarter. The Company sold $24 million of lower performing mortgage loans during the fourth quarter 2014, resulting in a net gain of $1.7 million. In the third quarter 2014, the Company sold $48 million of performing jumbo residential first mortgage loans and $33 million of lower performing loans, producing a net gain of $4.9 million.
Representation and warranty provision improved to income of $6.1 million for the fourth quarter 2014, as compared to an expense of $12.5 million reported for the third quarter 2014. The change from the prior quarter was primarily due to a $10.4 million charge in the prior quarter related to certain indemnifications made by the Company. Additionally, during the fourth quarter 2014, the Company received recoveries of prior expenses and recorded a downward adjustment in the anticipated level of loss rates on claims from Fannie Mae and Freddie Mac, as the overall level of the representation and warranty reserve declined to $53.0 million at December 31, 2014 from $57.0 million at September 30, 2014.
The fourth quarter 2014 other noninterest income was $7.3 million, as compared to $9.5 million for the third quarter 2014. The decrease from the prior quarter primarily resulted from lower gains on the sale of investment securities and lower fair value adjustments on mortgage loans.
Noninterest Expense
Noninterest expense was $139.3 million for the fourth quarter 2014, as compared to $179.4 million for the third quarter 2014. The third quarter 2014 included a $37.5 million litigation settlement expense with the Consumer Financial Protection Bureau ("CFPB"), as well as $1.1 million in related legal expenses. After making these adjustments, noninterest expense in the third quarter 2014 was $140.8 million.
Adjustments to Noninterest expense
Three Months Ended
------------------
December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2013
2014
----
(Dollars in thousands)
Noninterest expense $139,253 $179,389 $121,353 $139,252 $388,693
Adjusting items
Loss on extinguishment of debt
(1) - - - - (177,556)
Legal and professional expense
(2) - (1,116) (2,879) - -
Other noninterest expense (3) - (37,500) 10,000 - (61,000)
--- -------
Adjusted noninterest expense (4) $139,253 $140,773 $128,474 $139,252 $150,137
======== ======== ======== ======== ========
(1) Adjust prepayment of long-term
FHLB advances.
(2) Adjust for legal expenses
related to CFPB litigation
settlements during the
respective periods.
(3) Adjust CFPB litigation
settlement expense and an
additional accrual for the DOJ
litigation, respectively.
(4) Non-GAAP number.
Compensation and benefits increased to $59.0 million for the fourth quarter 2014, as compared to $53.5 million for the third quarter 2014. The increase from the prior quarter was primarily due to higher levels of incentive compensation and $2.6 million in severance.
Fourth quarter 2014 asset resolution expense decreased to $13.4 million, as compared to $13.7 million for the third quarter 2014. The decrease was primarily due to process improvements and lower levels of problem assets, partially offset by a $2.0 million provision for expenses related to prior loss recoveries.
Legal and professional expenses were $10.8 million for the fourth quarter 2014, as compared to $15.0 million for the third quarter 2014. The $4.2 million decrease in the fourth quarter was primarily attributable to a decrease in consulting expenses, as well as legal expenses related to the Company's CFPB settlement experienced in the prior quarter.
Other noninterest expenses for the fourth quarter 2014 totaled $10.8 million, as compared to $50.3 million for the third quarter 2014. The decrease of $39.2 million from the prior quarter, included the third quarter 2014 adjusting item of $37.5 million related to the CFPB settlement.
Income Taxes
The fourth quarter 2014 provision for income taxes totaled $4.4 million, as compared to a tax benefit of $10.3 million in the third quarter 2014. The effective tax rate in the fourth quarter 2014 was 28.6 percent, as compared to 27.2 percent in the third quarter 2014.
The full year 2014 income tax benefit was $34.0 million, as compared to a benefit of $416.3 million for the full year 2013, primarily due to the reversal of the deferred tax asset valuation allowance during the fourth quarter 2013. The Company reversed 100 percent of the valuation allowance on its federal deferred tax asset ("DTA") and a portion of its state DTA, which had been previously established as of September 30, 2009, which resulted in a $355.8 million DTA valuation allowance reversal, or $6.29 per diluted share.
Asset Quality
Credit Quality Ratios
Three Months Ended Change (bps)
------------------ -----------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
(Dollars in thousands)
Charge-offs, net of recoveries $8,986 $13,097 $7,150 $12,321 $14,110 (31.4)% (36.3)%
Total nonperforming loans held-for-investment $120,491 $106,944 $120,162 $110,749 $145,685 12.7% (17.3)%
Net charge-off ratio (annualized) 0.91% 1.36% 0.78% 1.36% 1.53% (45) (62)
Nonperforming loans ratio to LHFI 2.71% 2.56% 2.76% 2.76% 3.59% 15 (88)
Allowance for loan loss to LHFI 7.01% 7.60% 7.41% 8.11% 5.42% (59) 159
Fourth quarter 2014 net charge-offs were $9.0 million, representing 0.91 percent of associated loans, excluding loans carried under a fair value option. This represented a decrease of $4.1 million from the third quarter 2014 net charge-offs of $13.1 million, or 1.36 percent, of associated loans. Excluding loan sales in both quarters, net charge-offs in the fourth quarter were $6.0 million or 0.60 percent, compared to $6.8 million or 0.70 percent in the prior quarter.
Nonperforming loans increased to $120.5 million at December 31, 2014 from $106.9 million at September 30, 2014. The increase was driven by higher non-accrual TDRs, which increased to $28.7 million from $17.5 million in the third quarter 2014. The ratio of nonperforming loans to loans held-for-investment increased to 2.71 percent at December 31, 2014 from 2.56 percent at September 30, 2014.
The allowance for loan losses was $297.0 million at December 31, 2014, covering 7.01 percent of total loans held-for-investment, excluding loans carried under a fair value option. The allowance for loan losses was $301.0 million at September 30, 2014, covering 7.60 percent of total loans held-for-investment. The decrease in the coverage ratio during the fourth quarter of 2014 was primarily due to an increase in higher quality commercial warehouse loans at quarter end.
Capital
Capital Ratios (Bancorp) Three Months Ended Change (bps)
------------------ -----------
December 31, September 30, June 30, March 31, December 31, Seq Yr/Yr
2014 2014 2014 2013
2014
----
Total capital 24.1% 24.4% 25.2% 25.3% 28.6% (23) (443)
Tier 1 capital 22.8% 23.0% 23.9% 24.0% 27.3% (22) (444)
Tier 1 leverage 12.6% 12.5% 12.6% 12.6% 14.2% 9 (162)
Mortgage servicing rights to Tier 1 capital
(1) 21.8% 24.9% 24.2% 27.6% 22.2% (312) (45)
Book value per common share (change in
percent) $19.64 $19.28 $19.90 $19.29 $20.66 1.9% (4.9)%
(1) See non-GAAP reconciliation.
The Company's regulatory capital ratios remain well above current regulatory quantitative guidelines for "well-capitalized" institutions. At December 31, 2014, the Company had a Tier 1 leverage ratio of 12.6 percent, as compared to 12.5 percent at September 30, 2014. At December 31, 2014, the Company had a common equity-to-assets ratio of 11.24 percent.
As of January 2015, the Company and the Bank are subject, on a phased-in basis, to the Basel III regulatory capital requirements that replace the current capital requirements. Assuming that the Basel III requirements were fully applicable at December 31, 2014, the Company's pro forma Basel III Tier 1 leverage ratio would have been 10.2 percent at December 31, 2014 (see Non-GAAP reconciliation).
Earnings Conference Call
As previously announced, the Company's fourth quarter 2014 earnings call will be held on Thursday, January 22, 2015 at 11 a.m. (Eastern).
To join the call, please dial (888) 206-4916 toll free or (913) 312-0722, and use passcode: 1627539. Please call at least 10 minutes before the conference 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: 1627539.
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 accompanying the conference call will also be posted on the site.
About Flagstar
Flagstar Bancorp, Inc. (NYSE: FBC) is a $9.8 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, the largest bank headquartered in Michigan, provides commercial, small business, and consumer banking services through 107 branches in the state. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as through 26 retail centers in 15 states. Flagstar is the ninth largest national originator of mortgage loans and a top 20 mortgage servicer, handling payments and recordkeeping for over $75 billion of home loans for nearly 400,000 borrowers. For more information, please visit flagstar.com.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release includes non-GAAP financial measures such as an adjusted efficiency ratio, adjusted earnings, the ratio of total nonperforming assets to Tier 1 capital (to adjusted total assets) and estimated Basel III ratios. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying performance and trends of Flagstar.
Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied and are not audited. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To mitigate these limitations, there are practices in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that the Company's performance is properly reflected to facilitate consistent period-to-period comparisons. Although the Company believes the non-GAAP financial measures disclosed in this report enhance investors' understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for those financial measures prepared in accordance with GAAP.
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 earnings release, conference call slides, or the Form 8-K related to this press release. Additional discussion of the use of non-GAAP measures can also be found in Flagstar Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013, and Quarterly Report on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014. All of which can be found on the Company's website at flagstar.com.
Forward Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.'s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements can be found in Flagstar Bancorp Annual Report on Form 10-K for the year ended December 31, 2013, and Quarterly Report on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014, which have been filed with the Securities and Exchange Commission and are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands)
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
(Unaudited) (Unaudited)
Assets
Cash and cash equivalents $136,014 $106,840 $280,505
Investment securities available-for-sale or trading 1,672,179 1,378,093 1,045,548
Loans held-for-sale 1,243,792 1,468,668 1,480,418
Loans with repurchased government guarantees 1,128,359 1,191,826 1,273,690
Loans held-for-investment, net
Loans held-for-investment 4,447,554 4,184,624 4,055,756
Less: allowance for loan losses (297,000) (301,000) (207,000)
-------- -------- --------
Total loans held-for-investment, net 4,150,554 3,883,624 3,848,756
Mortgage servicing rights 257,827 285,386 284,678
Federal Home Loan Bank stock 155,443 209,737 209,737
Premises and equipment, net 237,942 238,261 231,350
Net deferred tax asset 442,349 449,575 414,681
Other assets 415,392 413,400 337,938
Total assets $9,839,851 $9,625,410 $9,407,301
========== ========== ==========
Liabilities and Stockholders' Equity
Deposits
Noninterest bearing $1,209,275 $1,299,405 $930,060
Interest bearing 5,859,331 5,934,991 5,210,266
--------- --------- ---------
Total deposits 7,068,606 7,234,396 6,140,326
Federal Home Loan Bank advances 514,000 150,000 988,000
Long-term debt 331,194 339,575 353,248
Representation and warranty reserve 53,000 57,000 54,000
Other liabilities 500,230 492,834 445,853
------- ------- -------
Total liabilities 8,467,030 8,273,805 7,981,427
--------- --------- ---------
Stockholders' Equity
Preferred stock 266,657 266,657 266,174
Common stock 563 563 561
Additional paid in capital 1,482,465 1,480,955 1,479,265
Accumulated other comprehensive income (loss) 8,380 (250) (4,831)
Accumulated deficit (385,244) (396,320) (315,295)
-------- -------- --------
Total stockholders' equity 1,372,821 1,351,605 1,425,874
Total liabilities and stockholders' equity $9,839,851 $9,625,410 $9,407,301
========== ========== ==========
Flagstar Bancorp, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Total interest income $72,203 $75,094 $71,833 $285,561 $330,687
Total interest expense 10,901 10,731 30,630 39,271 144,036
------ ------ ------ ------ -------
Net interest income 61,302 64,363 41,203 246,290 186,651
Provision for loan losses 4,986 8,097 14,112 131,553 70,142
----- ----- ------ ------
Net interest income after provision for loan
losses 56,316 56,266 27,091 114,737 116,509
------ ------ ------ ------- -------
Noninterest Income
Loan fees and charges 16,760 18,661 19,349 73,033 103,501
Deposit fees and charges 5,964 5,618 5,193 21,625 20,942
Net gain on loan sales 53,528 52,175 44,790 205,803 402,193
Loan administration income 5,478 5,599 3,284 24,304 6,035
Net return on the mortgage servicing asset 1,607 1,346 16,659 24,082 90,609
Net gain on sale of assets 1,735 4,874 51 12,361 2,172
Net impairment losses - - - - (8,789)
Representation and warranty provision 6,080 (12,538) 15,424 (10,011) (36,116)
Other noninterest income 7,289 9,453 8,396 9,868 71,796
Total noninterest income 98,441 85,188 113,146 361,065 652,343
------ ------ ------- -------
Noninterest Expense
Compensation and benefits 58,967 53,503 69,572 233,185 279,268
Commissions 9,309 10,346 9,444 35,480 54,407
Occupancy and equipment 20,122 20,471 19,824 80,386 80,042
Asset resolution 13,378 13,666 3,372 56,486 52,033
Federal insurance premiums 5,314 5,633 7,932 22,716 34,873
Loss on extinguishment of debt - - 177,556 - 177,556
Loan processing expense 10,590 10,472 8,833 36,996 52,223
Legal and professional expense 10,777 15,044 14,600 50,603 77,742
Other noninterest expense 10,796 50,254 77,560 63,394 109,971
------ ------ ------ ------ -------
Total noninterest expense 139,253 179,389 388,693 579,246 918,115
------- ------- ------- ------- -------
(Loss) income before income taxes 15,504 (37,935) (248,456) (103,444) (149,263)
(Benefit) provision for income taxes 4,428 (10,303) (410,362) (33,979) (416,250)
----- ------- -------- ------- --------
Net (loss) income 11,076 (27,632) 161,906 (69,465) 266,987
Preferred stock dividend/accretion - - (1,449) (483) (5,784)
--- --- ------ ---- ------
Net (loss) income applicable to common
stockholders $11,076 $(27,632) $160,457 $(69,948) $261,203
======= ======== ======== ======== ========
(Loss) earnings per share
Basic $0.07 $(0.61) $2.79 $(1.72) $4.40
===== ====== ===== ====== =====
Diluted $0.07 $(0.61) $2.77 $(1.72) $4.37
===== ====== ===== ====== =====
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,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Mortgage loans originated (1) $6,603,413 $7,186,856 $6,439,242 $24,607,550 $37,481,877
Other loans originated 102,858 84,084 64,973 490,849 300,823
Mortgage loans sold and securitized 6,830,552 7,072,398 6,783,212 24,407,054 39,074,649
Interest rate spread - consolidated (2) 2.67% 2.79% 1.54% 2.80% 1.50%
Net interest margin - consolidated (3) 2.80% 2.91% 1.73% 2.91% 1.72%
Average common shares outstanding 56,310,858 56,249,300 56,126,895 56,246,528 56,063,282
Average fully diluted shares outstanding 56,792,751 56,249,300 56,694,096 56,246,528 56,518,181
Average interest-earning assets $8,724,037 $8,814,714 $9,607,376 $8,440,413 $10,881,618
Average interest paying liabilities 6,917,685 7,034,094 8,341,976 6,780,341 9,337,936
Average stockholders' equity 1,395,347 1,402,165 1,273,763 1,406,038 1,238,550
(Loss) return on average assets 0.44% (1.08)% 5.70% (0.71)% 2.08%
(Loss) return on average equity 3.18% (7.88)% 50.39% (4.97)% 21.09%
Efficiency ratio 87.2% 120.0% 251.8% 95.4% 109.4%
Efficiency ratio (adjusted) (4) 90.6% 86.8% 108.1% 87.1% 81.4%
Equity-to-assets ratio (average for the period) 13.74% 13.68% 11.32% 14.22% 9.87%
Charge-offs to average LHFI (5) 0.91% 1.36% 1.53% 1.07% 4.00%
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Book value per common share $19.64 $19.28 $20.66
Number of common shares outstanding 56,332,307 56,261,652 56,138,074
Mortgage loans subserviced for others $46,723,713 $46,695,465 $40,431,865
Mortgage loans serviced for others 25,426,768 26,377,572 25,743,396
Weighted average service fee (basis points) 27.2 26.8 28.7
Capitalized value of mortgage servicing
rights 1.01% 1.08% 1.11%
Mortgage servicing rights to Tier 1 capital
(4) 22.1% 25.2% 22.6%
Ratio of allowance for loan losses to non-
performing LHFI (5) 255.7% 295.4% 145.9%
Ratio of allowance for loan losses to LHFI
(5) 7.01% 7.60% 5.42%
Ratio of non-performing assets to total
assets (bank only) 1.42% 1.40% 1.95%
Equity-to-assets ratio 13.95% 14.04% 15.16%
Common equity-to-assets ratio 11.24% 11.27% 12.33%
Number of bank branches 107 106 111
Number of loan origination centers 26 32 39
Number of FTE employees (excluding loan
officers and account executives) 2,530 2,492 2,894
Number of loan officers and account
executives 209 233 359
(1) Includes residential first
mortgage and second mortgage
loans.
(2) Interest rate spread is the
difference between the annualized
yield earned on average interest-
earning assets for the period and
the annualized 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) See Non-GAAP reconciliation.
(5) Excludes loans carried under the
fair value option.
Flagstar Bancorp, Inc.
Earnings Per Share
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net (loss) income $11,076 $(27,632) $161,906 $(69,465) $266,987
Less: preferred stock dividend/accretion - - (1,449) (483) (5,784)
--- --- ------ ---- ------
Net (loss) income from continuing operations 11,076 (27,632) 160,457 (69,948) 261,203
Deferred cumulative preferred stock dividends (7,104) (6,948) (3,659) (26,539) (14,366)
Net (loss) income applicable to Common Stockholders $3,972 $(34,580) $156,798 $(96,487) $246,837
====== ======== ======== ======== ========
Weighted Average Shares
Weighted average common shares outstanding 56,311 56,249 56,127 56,247 56,063
Effect of dilutive securities
Warrants 248 - 279 - 237
Stock-based awards 234 - 288 - 218
Weighted average diluted common shares 56,793 56,249 56,694 56,247 56,518
====== ====== ====== ====== ======
(Loss) earnings per common share
Net (loss) income applicable to Common Stockholders $0.07 $(0.61) $2.79 $(1.72) $4.40
Effect of dilutive securities
Warrants - - (0.01) - (0.02)
Stock-based awards - - (0.01) - (0.01)
Diluted (loss) earnings per share $0.07 $(0.61) $2.77 $(1.72) $4.37
===== ====== ===== ====== =====
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Average Balance Interest Annualized Average Balance Interest Annualized Average Balance Interest Annualized
Yield/Rate Yield/Rate Yield/Rate
--- --- --- ----------
Interest-Earning Assets
Loans held-for-sale $1,686,534 $17,702 4.20% $1,628,874 $17,949 4.41% $1,617,817 $17,309 4.28%
Loans with repurchased government guarantees 1,140,851 5,596 1.96% 1,215,357 7,589 2.50% 1,234,383 7,599 2.46%
Loans held-for-investment
Consumer loans (1) 2,509,506 23,889 3.81% 2,634,498 24,830 3.77% 2,950,887 29,189 3.96%
Commercial loans (1) 1,521,019 14,081 3.62% 1,453,364 13,692 3.69% 976,650 10,068 4.03%
--------- ------ --------- ------ ------- ------
Total loans held-for-investment 4,030,525 37,970 3.74% 4,087,862 38,522 3.74% 3,927,537 39,257 3.97%
Investment securities available-for-sale or
trading 1,621,242 10,794 2.66% 1,642,071 10,880 2.65% 1,006,801 6,515 2.59%
Interest-earning deposits and other 244,885 141 0.23% 240,550 154 0.25% 1,820,838 1,153 0.25%
------- --- ------- --- --------- -----
Total interest-earning assets 8,724,037 $72,203 3.30% 8,814,714 $75,094 3.39% 9,607,376 $71,833 2.98%
Other assets 1,429,919 1,437,898 1,648,399
--------- --------- ---------
Total assets $10,153,956 $10,252,612 $11,255,775
=========== =========== ===========
Interest-Bearing Liabilities
Retail deposits
Demand deposits $420,869 $148 0.14% $421,062 $147 0.14% $410,147 $142 0.14%
Savings deposits 3,393,950 5,837 0.68% 3,274,268 5,482 0.66% 2,906,271 3,623 0.49%
Money market deposits 256,505 142 0.22% 261,740 134 0.20% 293,192 127 0.17%
Certificate of deposits 837,039 1,442 0.68% 891,308 1,682 0.75% 1,168,992 2,335 0.79%
------- ----- ------- ----- --------- -----
Total retail deposits 4,908,363 7,569 0.61% 4,848,378 7,445 0.61% 4,778,602 6,227 0.52%
Government deposits
Demand deposits 229,658 227 0.39% 217,862 213 0.39% 115,980 83 0.28%
Savings deposits 386,062 510 0.52% 378,013 504 0.53% 172,886 116 0.27%
Certificate of deposits 373,460 340 0.36% 344,135 299 0.35% 256,274 116 0.18%
------- --- ------- --- ------- ---
Total government deposits 989,180 1,077 0.43% 940,010 1,016 0.43% 545,140 315 0.23%
Wholesale deposits - - - % - - - % 15,423 171 4.40%
--- --- --- --- ------ ---
Total deposits 5,897,543 8,646 0.58% 5,788,388 8,461 0.58% 5,339,165 6,713 0.50%
Federal Home Loan Bank advances 772,707 481 0.24% 998,272 591 0.23% 2,755,375 22,257 3.16%
Other 247,435 1,774 2.84% 247,435 1,679 2.69% 247,435 1,660 2.66%
------- ----- ------- ----- ------- -----
Total interest-bearing liabilities 6,917,685 10,901 0.62% 7,034,095 10,731 0.60% 8,341,975 30,630 1.44%
Noninterest-bearing deposits 1,247,461 1,258,864 1,064,660
Other liabilities (2) 593,463 557,488 575,377
Stockholders' equity 1,395,347 1,402,165 1,273,763
--------- --------- ---------
Total liabilities and stockholder's equity $10,153,956 $10,252,612 $11,255,775
=========== =========== ===========
Net interest-earning assets $1,806,352 $1,780,619 $1,265,401
========== ========== ==========
Net interest income $61,302 $64,363 $41,203
======= ======= =======
Interest rate spread (3) 2.67% 2.79% 1.54%
==== ==== ====
Net interest margin (4) 2.80% 2.91% 1.73%
==== ==== ====
Ratio of average interest-earning assets to interest-bearing
liabilities 126.1% 125.3% 115.2%
===== ===== =====
Total average deposits $7,145,004 $7,047,252 $6,403,825
========== ========== ==========
(1) Consumer loans include: residential
first mortgage, second mortgage,
HELOC and other consumer loans.
Commercial loans include: commercial
real estate, commercial and
industrial, commercial lease
financing and warehouse lending
loans.
(2) Includes company controlled deposits
that arise due to the servicing of
loans for others, which do not bear
interest.
(3) Interest rate spread is the
difference between rate of interest
earned on interest-earning assets
and rate of interest paid on
interest-bearing liabilities.
(4) Net interest margin is net interest
income divided by average interest-
earning assets.
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Year Ended
----------
December 31, 2014 December 31, 2013
----------------- -----------------
Average Balance Interest Annualized Average Balance Interest Annualized
Yield/Rate Yield/Rate
--- --- ----------
Interest-Earning Assets
Loans held-for-sale $1,533,666 $65,087 4.24% $2,498,893 $88,666 3.55%
Loans with repurchased government guarantees 1,215,516 29,099 2.39% 1,476,801 48,131 3.26%
Loans held-for-investment
Consumer loans (1) 2,681,456 103,129 3.85% 3,113,183 122,899 3.95%
Commercial loans (1) 1,293,775 48,592 3.70% 1,214,994 53,781 4.37%
--------- ------ --------- ------
Total loans held-for-investment 3,975,231 151,721 3.80% 4,328,177 176,680 4.07%
Investment securities available-for-sale or
trading 1,496,090 39,097 2.61% 474,205 11,912 2.51%
Interest-earning deposits and other 219,911 557 0.25% 2,103,542 5,298 0.25%
------- --- --------- -----
Total interest-earning assets 8,440,414 $285,561 3.38% 10,881,618 $330,687 3.03%
Other assets 1,445,973 1,673,298
--------- ---------
Total assets $9,886,387 $12,554,916
========== ===========
Interest-Bearing Liabilities
Retail deposits
Demand deposits $421,839 $586 0.14% $397,094 $769 0.19%
Savings deposits 3,139,106 19,047 0.61% 2,668,571 16,924 0.63%
Money market deposits 265,819 525 0.20% 334,945 824 0.25%
Certificate of deposits 914,823 6,682 0.73% 2,054,834 18,249 0.89%
------- ----- --------- ------
Total retail deposits 4,741,587 26,840 0.57% 5,455,444 36,766 0.67%
Government deposits
Demand deposits 181,779 695 0.38% 96,112 409 0.43%
Savings deposits 319,887 1,621 0.51% 203,191 707 0.35%
Certificate of deposits 349,265 1,147 0.33% 360,406 1,489 0.41%
------- ----- ------- -----
Total government deposits 850,931 3,463 0.41% 659,709 2,605 0.39%
Wholesale deposits 831 31 3.76% 60,711 3,021 4.98%
--- --- ------ -----
Total deposits 5,593,349 30,334 0.54% 6,175,864 42,392 0.69%
FHLB advances 939,173 2,206 0.23% 2,914,637 95,024 3.22%
Other 247,819 6,731 2.72% 247,435 6,620 2.68%
------- ----- ------- -----
Total interest-bearing liabilities 6,780,341 39,271 0.58% 9,337,936 144,036 1.53%
Noninterest-bearing deposits 1,140,758 1,197,000
Other liabilities (2) 559,250 781,430
Stockholders' equity 1,406,038 1,238,550
Total liabilities and stockholder's equity $9,886,387 $12,554,916
========== ===========
Net interest-earning assets $1,660,073 $1,543,682
========== ==========
Net interest income $246,290 $186,651
======== ========
Interest rate spread (3) 2.80% 1.50%
==== ====
Net interest margin (4) 2.91% 1.72%
==== ====
Ratio of average interest-earning assets to interest-
bearing liabilities 124.5% 116.5%
===== =====
Total average deposits $6,734,107 $7,372,864
========== ==========
(1) Consumer loans include: residential first
mortgage, second mortgage, HELOC and
other consumer loans. Commercial loans
include: commercial real estate,
commercial and industrial, commercial
lease financing and warehouse lending
loans.
(2) Includes company controlled deposits that
arise due to the servicing of loans for
others, which do not bear interest.
(3) Interest rate spread is the difference
between rate of interest earned on
interest-earning assets and rate of
interest paid on interest-bearing
liabilities.
(4) Net interest margin is net interest income
divided by average interest-earning
assets.
Gain on Loan Sales
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Description
Valuation gain (loss)
Value of interest rate locks $4,037 0.06% $(24,294) (0.34)% $(53,542) (0.79)%
Value of forward sales (7,668) (0.11)% 23,145 0.33% 89,330 1.31%
Fair value of loans held-for-sale 132,044 1.93% 79,867 1.13% 68,938 1.02%
------- ---- ------ ---- ------ ----
Total valuation gains 128,413 1.88% 78,718 1.12% 104,726 1.54%
Sales losses
Marketing losses, net of adjustments (10,891) (0.16)% (2,392) (0.04)% (3,313) (0.05)%
Pair-off losses (62,065) (0.91)% (22,190) (0.31)% (53,605) (0.79)%
Provision for representation and warranty
reserve (1,929) (0.03)% (1,961) (0.03)% (3,018) (0.04)%
------ ------ ------ ------ ------ ------
Total sales losses (74,885) (1.10)% (26,543) (0.38)% (59,936) (0.88)%
------- ------ ------- ------ ------- ------
Total gain on loan sales $53,528 $52,175 $44,790
======= ======= =======
Total mortgage rate lock commitments
(gross) $7,604,879 $7,713,074 $6,481,782
========== ========== ==========
Total loan sales and securitizations $6,830,552 0.78% $7,072,398 0.74% $6,783,212 0.66%
========== ========== ==========
Total mortgage rate lock commitments
(fallout-adjusted) (1) $6,155,532 0.87% $6,304,425 0.83% $5,298,728 0.85%
========== ========== ==========
Year Ended
----------
December 31, 2014 December 31, 2013
----------------- -----------------
Description
Valuation gain (loss)
Value of interest rate locks $20,465 0.08% $(75,948) (0.19)%
Value of forward sales (32,683) (0.13)% 33,945 0.09%
Fair value of loans held-for-sale 401,313 1.64% 200,639 0.50%
------- ---- ------- ----
Total valuation gains 389,095 1.59% 156,839 0.40%
Sales (losses) gains
Marketing gains, net of adjustments (7,009) (0.03)% (822) - %
Pair-off gains (losses) (169,429) (0.69)% 263,782 0.68%
Provision for representation and warranty reserve (6,854) (0.03)% (17,606) (0.05)%
------ ------ ------- ------
Total sales (losses) gains (183,292) (0.75)% 245,354 0.63%
-------- ------ ------- ----
Total gain on loan sales $205,803 $402,193
======== ========
Total mortgage rate lock commitments (gross) $29,545,705 $39,316,782
=========== ===========
Total loan sales and securitizations $24,407,054 0.84% $39,074,649 1.03%
=========== ===========
Total mortgage rate lock commitments (fallout-adjusted) (1) $24,006,960 0.86% $31,590,150 1.27%
=========== ===========
(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.
Regulatory Capital - Bank
(Dollars in thousands)
(Unaudited)
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted tangible
assets) (1) $1,167,422 12.43% $1,134,429 12.38% $1,257,608 13.97%
Total adjusted tangible asset base $9,392,178 $9,162,342 $9,004,904
========== ========== ==========
Tier 1 capital (to risk weighted assets)
(1) $1,167,422 22.54% $1,134,429 22.84% $1,257,608 26.82%
Total capital (to risk weighted assets) (1) 1,234,958 23.85% 1,199,410 24.14% 1,317,964 28.11%
Risk weighted asset base $5,178,781 $4,967,755 $4,688,545
========== ========== ==========
(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.
Regulatory Capital - Bancorp
(Dollars in thousands)
(Unaudited)
December 31, 2014 September 30, 2014 June 30, 2014 March 31, 2014 December 31, 2013
----------------- ------------------ ------------- -------------- -----------------
Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Tier 1 leverage (to adjusted tangible
assets) (1) $1,183,625 12.59% $1,146,187 12.50% $1,195,494 12.59% $1,158,532 12.63% $1,280,532 14.21%
Total adjusted tangible asset base $9,403,219 $9,172,557 $9,495,500 $9,171,170 $9,014,524
========== ========== ========== ========== ==========
Tier 1 capital (to risk weighted assets)
(1) $1,183,625 22.81% $1,146,187 23.03% $1,195,494 23.87% $1,158,532 23.96% $1,280,532 27.25%
Total capital (to risk weighted assets) (1) 1,251,916 24.12% 1,211,976 24.35% 1,261,799 25.19% 1,222,581 25.28% 1,341,616 28.55%
Risk weighted asset base $5,189,822 $4,977,969 $5,008,866 $4,836,270 $4,698,580
========== ========== ========== ========== ==========
(1) Based on adjusted total
assets for purposes of
core capital and risk-
weighted assets for
purposes of total risk-
based capital.
Loan Originations
(Dollars in thousands)
(Unaudited)
Three Months Ended
------------------
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Consumer loans
Mortgage (1) $6,603,413 98.5% $7,186,856 98.8% $6,439,242 99.0%
Other consumer (2) 26,506 0.4% 28,678 0.4% 16,295 0.3%
------ --- ------ --- ------ ---
Total consumer loans 6,629,919 98.9% 7,215,534 99.2% 6,455,537 99.3%
Commercial loans (3) 76,352 1.1% 55,406 0.8% 48,678 0.7%
Total loan originations $6,706,271 100.0% $7,270,940 100.0% $6,504,215 100.0%
========== ===== ========== ===== ========== =====
Year Ended
December 31, 2014 December 31, 2013
----------------- -----------------
Consumer loans
Mortgage (1) $24,607,550 98.0% $37,481,877 99.2%
Other consumer (2) 93,046 0.4% 61,318 0.2%
------ ------ ---
Total consumer loans 24,700,596 98.4% 37,543,195 99.4%
Commercial loans (3) 397,803 1.6% 239,505 0.6%
Total loan
originations $25,098,399 100.0% $37,782,700 100.0%
=========== ===== =========== =====
(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, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Consumer loans
Residential first mortgage $2,193,252 49.3% $2,224,734 53.2% $2,508,968 61.9%
Second mortgage 149,032 3.4% 153,891 3.7% 169,525 4.2%
HELOC 256,318 5.8% 261,826 6.3% 289,880 7.1%
Other 31,108 0.7% 31,612 0.8% 37,468 0.9%
------ --- ------ --- ------ ---
Total consumer loans 2,629,710 59.1% 2,672,063 63.9% 3,005,841 74.1%
--------- ---- --------- ---- --------- ----
Commercial loans
Commercial real estate 620,014 13.9% 566,870 13.5% 408,870 10.1%
Commercial and industrial 419,499 9.4% 341,312 8.2% 207,187 5.1%
Commercial lease financing 9,687 0.2% 9,853 0.2% 10,341 0.3%
Warehouse lending 768,644 17.3% 594,526 14.2% 423,517 10.4%
Total commercial loans 1,817,844 40.9% 1,512,561 36.1% 1,049,915 25.9%
--------- ---- --------- ---- --------- ----
Total loans held-for-investment $4,447,554 100.0% $4,184,624 100.0% $4,055,756 100.0%
========== ===== ========== ===== ========== =====
Residential Loans Serviced
(Dollars in thousands)
(Unaudited)
December 31, 2014 September 30, 2014 December 31, 2013
----------------- ------------------ -----------------
Unpaid Number of Unpaid Number of Unpaid Number of
Principal accounts Principal accounts Principal accounts
Balance Balance Balance
Serviced for own loan portfolio (1) $4,521,125 26,268 $5,061,943 26,671 $5,648,699 $34,099
Serviced for others 25,426,768 117,881 26,377,572 122,788 25,743,396 131,413
Subserviced for others (2) 46,723,713 238,498 46,695,465 238,425 40,431,867 198,256
---------- ------- ---------- ------- ---------- -------
Total residential loans serviced $76,671,606 382,647 $78,134,980 387,884 $71,823,962 363,768
=========== ======= =========== ======= =========== =======
(1) Includes loans held-for-
investment (residential first
mortgage, second mortgage and
HELOC), loans-held-for-sale
(residential first mortgage),
loans with repurchased
government guarantees
(residential first mortgage) and
repossessed assets.
(2) Does not include temporary short-
term subservicing performed as a
result of sales of servicing-
released mortgage servicing
rights. Includes repossessed
assets.
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Beginning balance $301,000 $306,000 $207,000 $207,000 $305,000
Provision for loan losses 4,986 8,097 14,110 131,553 70,142
Charge-offs
Consumer loans
Residential first mortgage (8,799) (12,320) (9,868) (37,584) (133,326)
Second mortgage (353) (645) (730) (3,211) (6,252)
HELOC (758) (1,355) (1,728) (5,857) (5,473)
Other (418) (565) (995) (1,923) (3,622)
---- ---- ---- ------ ------
Total consumer loans (10,328) (14,885) (13,321) (48,575) (148,673)
Commercial loans
Commercial real estate (2) (672) (5,051) (2,463) (47,982)
Commercial and industrial - - (48) - (350)
Commercial lease financing - - (1,299) - (1,299)
Warehouse lending - (74) - (74) (45)
Total commercial loans (2) (746) (6,398) (2,537) (49,676)
--- ---- ------ ------ -------
Total charge-offs (10,330) (15,631) (19,719) (51,112) (198,349)
Recoveries
Consumer loans
Residential first mortgage 208 1,267 1,033 3,049 15,329
Second mortgage 94 204 353 477 1,178
HELOC 27 45 315 183 1,020
Other 853 768 1,235 2,311 2,079
--- --- ----- ----- -----
Total consumer loans 1,182 2,284 2,936 6,020 19,606
Commercial loans
Commercial real estate 125 183 2,300 3,319 10,162
Commercial and industrial 33 9 85 111 151
Commercial lease financing - - 288 47 288
Warehouse lending 4 58 - 62 -
Total commercial loans 162 250 2,673 3,539 10,601
--- --- ----- ----- ------
Total recoveries 1,344 2,534 5,609 9,559 30,207
----- ----- ----- ----- ------
Charge-offs, net of recoveries (8,986) (13,097) (14,110) (41,553) (168,142)
Ending balance $297,000 $301,000 $207,000 $297,000 $207,000
======== ======== ======== ======== ========
Net charge-off ratio (annualized) (1) 0.91% 1.36% 1.53% 1.07% 4.00%
Net charge-off ratio, adjusted (annualized) (1)(2) 0.60% 0.70% 1.53% 0.77% 2.45%
Net charge-off ratio (annualized) also by loan type (1)
Residential first mortgage 1.58% 1.92% 1.37% 1.47% 4.29%
Second mortgage 1.07 1.78 1.42 2.73 4.66
HELOC and consumer 0.78 47.03 2.62 3.39 3.03
Commercial real estate 0.08 0.36 2.66 0.16 7.53
Commercial and industrial and lease financing 0.03 (0.01) 1.80 0.05 3.09
Warehouse - 0.01 - - 0.01
(1) Excludes loans carried under the
fair value option.
(2) Excludes charge-offs of $3.0
million and $6.3 million
related to the sale loans
during the three months ended
December 31, 2014 and September
30, 2014, respectively.
Excludes charge-offs of $11.4
million and $65.1 million
related to loan sales during
the years ended December 31,
2014 and
2013 respectively.
Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, December 31, December 31, December 31,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Balance, beginning of period $57,000 $50,000 $174,000 $54,000 $193,000
Provision
Charged to gain on sale for current loan sales 1,929 1,981 3,018 6,854 17,606
Charged to representation and warranty provision (6,080) 12,538 (15,425) 10,011 36,116
-------------
Total (4,151) 14,519 (12,407) 16,865 53,722
Charge-offs, net 151 (7,519) (107,593) (17,865) (192,722)
--- ------ -------- ------- --------
Balance, end of period $53,000 $57,000 $54,000 $53,000 $54,000
======= ======= ======= ======= =======
Composition of Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
December 31, 2014 Collectively Individually
Evaluated Evaluated Total
Reserves
Reserves
--- --------
Consumer loans
Residential first
mortgage $152,446 $81,842 $234,288
Second mortgage 6,791 5,633 12,424
HELOC 17,674 1,049 18,723
Other 645 121 766
--- --- ---
Total consumer
loans 177,556 88,645 266,201
Commercial loans
Commercial real
estate 17,359 - 17,359
Commercial and
industrial 10,581 - 10,581
Commercial lease
financing 131 - 131
Warehouse lending 2,728 - 2,728
Total commercial
loans 30,799 - 30,799
------ --- ------
Total allowance for
loan losses $208,355 $88,645 $297,000
======== ======= ========
September 30, 2014 Collectively Individually
Evaluated Evaluated Total
Reserves Reserves
--- -------- --------
Consumer loans
Residential first
mortgage $157,198 $82,858 $240,056
Second mortgage 7,089 5,514 12,603
HELOC 17,453 1,179 18,632
Other 1,545 - 1,545
----- --- -----
Total consumer
loans 183,285 89,551 272,836
Commercial loans
Commercial real
estate 20,584 - 20,584
Commercial and
industrial 5,202 - 5,202
Commercial lease
financing 144 - 144
Warehouse lending 2,234 - 2,234
----- --- -----
Total commercial
loans 28,164 - 28,164
------ --- ------
Total allowance for
loan losses $211,449 $89,551 $301,000
======== ======= ========
Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
December 31, September 30, December 31,
2014 2014 2013
---- ---- ----
Non-performing
loans $74,839 $72,361 $98,976
Non-performing
TDRs 28,687 17,507 25,808
Non-performing
TDRs at inception
but performing
for less than six
months 16,965 17,076 20,901
------ ------ ------
Total non-
performing loans
held-for-
investment 120,491 106,944 145,685
Real estate and
other non-
performing
assets, net 18,693 27,149 36,636
Non-performing
assets held-for-
investment, net
(1) $139,184 $134,093 $182,321
======== ======== ========
Ratio of non-
performing assets
to total assets
(Bank only) 1.42% 1.40% 1.95%
Ratio of non-
performing loans
held-for-
investment to
loans held-for-
investment 2.71% 2.56% 3.59%
Ratio of non-
performing assets
to loans held-
for-investment
and repossessed
assets 3.12% 3.18% 4.46%
(1) Does not include non-performing
loans held-for-sale of $14.8
million, $18.0 million and $0.8
million at December 31, 2014,
September 30, 2014 and December
31, 2013, respectively.
Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
30-59 Days Past 60-89 Days Past Greater than 90
Due Due days Total Past Due Total Investment
Loans
--- -----
December 31, 2014
Consumer loans $34,005 $9,894 $120,491 $164,390 $2,629,710
Commercial loans - - - - 1,817,844
--- --- --- --- ---------
Total loans $34,005 $9,894 $120,491 $164,390 $4,447,554
======= ====== ======== ======== ==========
September 30, 2014
Consumer loans $40,188 $12,139 $106,944 $159,271 $2,672,063
Commercial loans 5,489 - - 5,489 1,512,561
Total loans $45,677 $12,139 $106,944 $164,760 $4,184,624
======= ======= ======== ======== ==========
December 31, 2013
Consumer loans $41,013 $20,732 $144,185 $205,930 $3,005,841
Commercial loans - - 1,500 1,500 1,049,915
--- --- ----- ----- ---------
Total loans $41,013 $20,732 $145,685 $207,430 $4,055,756
======= ======= ======== ======== ==========
Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
TDRs
----
Performing Non-performing Non-performing Total
TDRs at inception
but performing for
less than six
months
---
December 31, 2014
Consumer loans $361,450 $28,687 $16,965 $407,102
Commercial loans 403 - - 403
Total TDRs $361,853 $28,687 $16,965 $407,505
======== ======= ======= ========
September 30, 2014
Consumer loans $365,553 $17,507 $17,076 $400,136
Commercial loans 418 - - 418
Total TDRs $365,971 $17,507 $17,076 $400,554
======== ======= ======= ========
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
======== ======= ======= ========
Efficiency ratio and efficiency ratio (adjusted). The efficiency ratio, which generally measures the productivity of a bank, is calculated as non-interest expense divided by total operating income. Total operating income includes net-interest income and total non-interest income. Management utilizes the efficiency ratio to monitor its own productivity and believes the ratio provides investors with a meaningful tool to monitor period-to-period productivity trends. The efficiency ratio (adjusted), excludes from non-interest expense and non-interest income (GAAP) certain adjusting items, that have been described in the table below. As the provision for loan losses is already excluded by the ratio's own definition, we believe that the exclusion of representation and warranty provision provides investors with a more complete picture of our productivity and ability to generate operating income. The efficiency ratio (adjusted) provides investors with a meaningful base for period to period comparisons, which management believes will assist investors in analyzing our operating results and predicting future performance. These non-GAAP financial measures are also utilized internally by management to assess the performance of our own business.
Our calculations of the efficiency ratio may differ from the calculation of similar measures used by other bank and thrift holding companies, and should be used to determine and evaluate period to period trends in our performance, rather than in comparison to other similar non-GAAP measurements utilized by other companies. In addition, investors should keep in mind that certain items excluded from income and expenses in the efficiency ratio (adjusted) are recurring and integral expenses to our operations, and that these expenses will still accrue under similar GAAP measures.
Adjusted income and adjusted earnings per share. In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. These non-GAAP measures reflect the adjustment of the reported U.S. GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations.
The following table provides a reconciliation of non-GAAP financial measures utilized in the adjusted efficiency ratio and adjusted earnings per share.
Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
Three Months Ended Year Ended
------------------ ----------
December 31, September 30, June 30, March 31, December 31, December 31, December 31,
2014 2014 2014 2014 2013 2014 2013
---- ---- ---- ---- ---- ---- ----
Net interest income (a) $61,302 $64,363 $62,425 $58,201 $41,203 $246,291 $186,651
Noninterest income (b) 98,441 85,188 102,484 74,953 113,146 361,065 652,343
Less provisions:
Representation and warranty provision (6,080) 2,163 5,226 (1,672) 9,476 364 61,016
Adjusting items:
Loan fees and charges (1) - - (10,000) - - (10,000) -
Net impairment loss (2) - - - - - - 8,789
Representation and warranty provision (3) - 10,375 - - (24,900) 10,375 (24,900)
Other noninterest income (4) - - - 21,056 - 21,056 (36,854)
Adjusted noninterest income $98,441 $95,563 $92,484 $96,009 $88,246 $382,496 $599,378
------- ------- ------- ------- ------- -------- --------
Adjusted income (c) $153,663 $162,089 $160,135 $152,538 $138,925 $629,151 $847,045
Noninterest expense (d) $139,253 $179,389 $121,353 $139,252 $388,693 $579,246 $918,115
Adjusting items:
Loss on extinguishment of debt (5) - - - - (177,556) - (177,556)
Legal and professional expense (6) - (1,116) (2,879) - - (3,995) -
Other noninterest expense (7) - (37,500) 10,000 - (61,000) (27,500) (51,000)
--- ------- ------ --- ------- ------- -------
Adjusted noninterest expense (e) $139,253 $140,773 $128,474 $139,252 $150,137 $547,751 $689,559
-------- -------- -------- -------- -------- -------- --------
Efficiency ratio (d/(a+b)) 87.2% 120.0% 73.6% 104.6% 251.8% 95.4% 109.4%
==== ===== ==== ===== ===== ==== =====
Efficiency ratio (adjusted) (e/c) 90.6% 86.8% 80.2% 91.3% 108.1% 87.1% 81.4%
==== ==== ==== ==== ===== ==== ====
Net (loss) income applicable to common
stockholders $11,076 $(27,632) $25,514 $(78,906) $160,457 $(69,948) $261,203
Adjustment to remove adjusting items (1-7
above), net of tax - 48,991 (17,121) 21,056 213,656 52,926 175,591
Tax impact of adjusting items - (13,646) 5,992 (7,370) (54,471) - (60,579)
Adjusting tax item - - - - (355,769) - (355,769)
Adjusted net (loss) income applicable to common
stockholders $11,076 $7,713 $14,385 $(65,220) $(36,127) $(17,022) $20,446
======= ====== ======= ======== ======== ======== =======
Diluted (loss) earnings per share $0.07 $(0.61) $0.33 $(1.51) $2.77 $(1.72) $4.37
Adjustment to remove adjusting items - 0.86 (0.31) 0.38 3.77 0.94 3.11
Tax impact of adjusting items - (0.24) 0.11 (0.13) (0.96) - (1.07)
Adjusting tax item - - - - (6.28) - (6.30)
--- --- --- --- ----- --- -----
Diluted adjusted (loss) earnings per share $0.07 $0.01 $0.13 $(1.26) $(0.70) $(0.78) $0.11
===== ===== ===== ====== ====== ====== =====
Weighted average shares outstanding
Basic 56,310,858 56,249,300 56,230,458 56,194,184 56,126,895 56,246,528 56,063,282
========== ========== ========== ========== ========== ========== ==========
Diluted 56,792,751 56,249,300 56,822,102 56,194,184 56,694,096 56,246,528 56,518,181
========== ========== ========== ========== ========== ========== ==========
(1) Reverse benefit for contract
renegotiation.
(2) Add back impairment charge related to
the litigation settlement with MBIA.
(3) Add back reserve increase related to
indemnifications claims on government
insured loans.
(4) In 2014, negative fair value
adjustment on repurchased performing
loans and a benefit for contract
renegotiation. In 2013, reversal of
contingent liability reserve
resulting from terms of settlement
reached on a litigation settlement
related to the HELOC securitization
trusts.
(5) Loss on extinguishment of debt as a
result of the prepayment of the
higher cost long-term Federal Home
Loan Bank advances.
(6) Adjust for legal expenses related to
the litigation settlements during the
respective periods.
(7) Adjust for CFPB litigation settlement
expense.
Nonperforming assets / Tier 1 + allowance for Loan Losses. The ratio of nonperforming assets to Tier 1 and allowance for loan losses divides the total level of nonperforming assets held for investment by Tier 1 capital (to adjusted total assets), as defined by bank regulations, plus allowance for loan losses. We believe these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of capital in comparison to other companies within the industry.
December 31, September 30, December 31,
2014 2014 2013
---- ---- ----
Non-performing
assets /Tier 1
capital +
allowance for
loan losses (Dollars in thousands)
Non-performing
assets $139,184 $134,093 $182,321
Tier 1 capital
(1) 1,167,422 1,134,429 1,257,608
Allowance for
loan losses 297,000 301,000 207,000
------- ------- -------
Tier 1 capital +
allowance for
loan losses $1,464,422 $1,435,429 $1,464,608
---------- ---------- ----------
Non-performing
assets /Tier 1
capital +
allowance for
loan losses 9.5% 9.3% 12.4%
=== === ====
(1) Represents Tier 1 capital for
the Bank.
Mortgage servicing rights to Tier 1 capital ratio. The ratio of mortgage servicing rights to Tier 1 capital divides the total mortgage servicing rights by Tier 1 capital, as defined by bank regulations. We believe these measurements are meaningful measures of capital adequacy, especially in relation to the level of our mortgage servicing rights. This ratio allows our investors, regulators, management and other parties to measure the adequacy and quality of our mortgage servicing rights and capital, in comparison to other companies within our industry.
Mortgage servicing rights to Tier 1
capital ratio December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
---- ---- ---- ---- ----
(Dollars in thousands)
Mortgage servicing rights $257,827 $285,386 $289,185 $320,231 $284,678
Tier 1 capital (to adjusted total assets)
(1) 1,167,422 1,134,429 1,188,936 1,139,810 1,257,608
Mortgage servicing rights to Tier 1
capital ratio 22.1% 25.2% 24.3% 28.1% 22.6%
==== ==== ==== ==== ====
(1) Represents Tier 1 capital for
the Bank.
Mortgage servicing rights to Tier 1
capital ratio December 31, September 30, June 30, March 31, December 31,
2014 2014 2014 2014 2013
---- ---- ---- ---- ----
(Dollars in thousands)
Mortgage servicing rights $257,827 $285,386 $289,185 $320,231 $284,678
Tier 1 capital (to adjusted total assets)
(1) 1,183,625 1,146,187 1,195,494 1,158,532 1,280,532
--------- --------- ---------
Mortgage servicing rights to Tier 1
capital ratio 21.8% 24.9% 24.2% 27.6% 22.2%
==== ==== ==== ==== ====
(1) Represents Tier 1 capital for
the Company.
Basel I to Basel III (fully phased-in) reconciliation. We currently calculate our risk-based capital ratios under guidelines adopted by the OCC based on the 1988 Capital Accord ("Basel I") of the Basel Committee on Banking Supervision (the "Basel Committee"). In December 2010, the Basel Committee released its final framework for Basel III, which will strengthen international capital and liquidity regulations. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the final Basel III rules place greater emphasis on common equity. In October 2013, the OCC and Federal Reserve released final rules detailing the U.S. implementation of Basel III and the application of the risk-based and leverage capital rules to top-tier savings and loan holding companies. We have transitioned to the Basel III framework beginning in January 2015 and are subject to a phase-in period extending through January 2019. We are currently evaluating the impact of the final Basel III rules. Accordingly, the calculations provided below are estimates. These measures are considered to be non-GAAP financial measures because they are not formally defined by GAAP and the Basel III implementation regulations will not be fully phased-in until 2019. The regulations are subject to change as clarifying guidance becomes available and the calculations currently include our interpretations of the requirements including informal feedback received through the regulatory process. Other entities may calculate the Basel III ratios differently from ours based on their interpretation of the guidelines. Since analysts and banking regulators may assess our capital adequacy using the Basel III framework, we believe that it is useful to provide investors information enabling them to assess our capital adequacy on the same basis.
December 31,
2014 Common Equity Tier Tier 1 Leverage (to
1 (to Risk Weighted Adjusted Tangible
Assets) Assets) (1)
------ ----------
Flagstar Bank
(the Bank)
Regulatory
capital - Basel
I to Basel III
(fully phased-
in) (2)
Basel I capital $1,167,422 $1,167,422
Increased
deductions
related to
deferred tax
assets,
mortgage
servicing
assets, and
other capital
components (117,406) (117,406)
-------- --------
Basel III (fully
phased-in)
capital (2) $1,050,016 $1,050,016
---------- ----------
Risk-weighted
assets - Basel
I to Basel III
(fully phased-
in) (2)
Basel I assets $5,178,781 $9,392,178
Net change in
assets 124,516 192,481
------- -------
Basel III (fully
phased-in)
assets (2) $5,303,297 $9,584,659
---------- ----------
Capital ratios
Basel I (3) 22.54% 12.43%
Basel III (fully
phased-in) (2) 19.80% 10.96%
(1) The definition of total assets
used in the calculation of the
Tier 1 Leverage ratio changed
from ending total assets under
Basel I to quarterly average
total assets under Basel III.
(2) Basel III information is
considered estimated and not
final at this time as the Basel
III rules continue to be
subject to interpretation by
U.S. Banking Regulators.
(3) As of December 31, 2014, the
Bank was subject to the
requirements of Basel I.
December 31,
2014 Common Equity Tier Tier 1 Leverage (to
1 (to Risk Weighted Adjusted Tangible
Assets) Assets) (1)
------ ----------
Flagstar Bank
(the Company)
Regulatory
capital - Basel
I to Basel III
(fully phased-
in) (2)
Basel I capital $669,533 $1,183,624
Increased
deductions
related to
deferred tax
assets,
mortgage
servicing
assets, and
other capital
components (205,243) (209,028)
-------- --------
Basel III (fully
phased-in)
capital (2) $464,290 $974,596
-------- --------
Risk-weighted
assets - Basel
I to Basel III
(fully phased-
in) (2)
Basel I assets $5,189,822 $9,403,220
Net change in
assets (97,735) 108,862
------- -------
Basel III (fully
phased-in)
assets (2) $5,092,087 $9,512,082
---------- ----------
Capital ratios
Basel I (3) 12.90% 12.59%
Basel III (fully
phased-in) (2) 9.12% 10.25%
(1) The definition of total assets
used in the calculation of the
Tier 1 Leverage ratio changed
from ending total assets under
Basel I to quarterly average
total assets under Basel III.
(2) Basel III information is
considered estimated and not
final at this time as the Basel
III rules continue to be
subject to interpretation by
U.S. Banking Regulators.
(3) As of December 31, 2014, the
Bank was subject to the
requirements of Basel I.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/flagstar-reports-fourth-quarter-2014-net-income-of-111-million-or-007-per-diluted-share-300024175.html
SOURCE Flagstar Bancorp, Inc.
