EXHIBIT 99.1
NEWS RELEASE
For more information, contact:
James K. Ciroli
Chief Financial Officer
(248) 312-2000
Flagstar Reports Third Quarter 2014 Results
Net loss of $27.6 million, or $0.61 per diluted share
Interest Earning Assets grew 5 percent
Net Interest Income increased 3 percent
Modest Core Operating Profit in a Tough Mortgage Market
TROY, Mich. October 21, 2014 - Flagstar Bancorp, Inc. (NYSE:FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported a third quarter 2014 net loss applicable to common stockholders of $27.6 million, or $0.61 per diluted share, as compared to net income applicable to common stockholders of $25.5 million in the second quarter 2014, or $0.33 per diluted share, and net income applicable to common stockholders of $12.8 million in the third quarter 2013, or $0.16 per diluted share.
Alessandro P. DiNello, president and chief executive officer, commented, "We remain intensely focused on improving the operations of the Bank. At the same time, we continue to improve our compliance and risk management, while also prudently managing expenses and continuing to grow in a measured fashion."
Mr. DiNello continued, "We took significant action during the quarter to reduce risk. First, we settled with the Consumer Financial Protection Bureau ("CFPB") for claims arising out of loss mitigation practices and default servicing operations dating back to 2011. We also recognized additional expense related to certain government insured loans. Adjusting for these items, we would have achieved a modest profit in a difficult mortgage market, reflecting our sustained commitment to both growing operations and controlling noninterest expenses."
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Both the third and second quarters of 2014 included various significant items which are as follows:
| Third Quarter 2014 | Increase (decrease) to Pre-tax earnings | ||||
| (Dollars in millions) | |||||
| Ÿ | CFPB settlement and CID-related expenses | $ | (38.6) | ||
| Ÿ | Government loan indemnification expenses | (10.4) | |||
| Second Quarter 2014 | Increase (decrease) to Pre-tax earnings | ||||
| (Dollars in millions) | |||||
| Ÿ | CFPB CID-related expenses | $ | (2.9) | ||
| Ÿ | Contract renegotiation benefit | 10.0 | |||
| Ÿ | DOJ fair value adjustment | 10.0 | |||
Excluding these significant items, core operating net income for the third quarter 2014 was $7.7 million, or $0.01 per diluted share (after a deduction for preferred dividends), as compared to core operating net income for the second quarter 2014 of $14.4 million, or $0.13 per diluted share.
Net Interest Income
Third quarter 2014 net interest income increased to $64.4 million, as compared to $62.4 million for the second quarter 2014. The increase in net interest income was attributable to growth in earning assets of 5% to $8.8 billion from $8.4 billion in the second quarter 2014, partially offset by a 7 basis point contraction of the net interest margin to 2.91% in the current quarter. The higher level of average earning assets in the third quarter 2014 was attributable to balanced growth in both commercial and consumer loans, coupled with growth in investment securities. The growth in consumer loans was primarily attributable to higher levels of warehouse loans. Commercial loan growth of 10%, resulting from our core Michigan franchise, continued to be well-balanced among industries, products, and collateral types. Funding for this growth came from a 6% increase in average interest-bearing deposits, driven by an increase in government and retail savings deposits.
Provision for Loan Losses
Provision for loan losses totaled $8.1 million for the third quarter 2014, as compared to $6.2 million for the second quarter 2014. The $1.9 million increase from the prior quarter was primarily attributable to higher levels of charge-offs in the current quarter as a result of the sales of $48.9 million of performing jumbo residential mortgage loans and $25.2 million of underperforming residential mortgage loans during the third quarter 2014.
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Noninterest Income
Third quarter 2014 core operating noninterest income was $95.6 million, as compared to core operating noninterest income of $92.5 million for the second quarter 2014.
| Significant Noninterest Income Items | ||||||||||||
| (in thousands) | ||||||||||||
| Financial Statement Line Item | Third quarter 2014 | Second quarter 2014 | Change Amount | Change Percent | ||||||||
| Reported noninterest income | $ | 85,188 | $ | 102,484 | $ | (17,296 | ) | (17 | )% | |||
| Adjustments for significant items: | ||||||||||||
| Government loan indemnification provision | Representation and Warranty | 10,375 | ||||||||||
| Contract renegotiation benefit | Loan Fees and Charges | (10,000 | ) | |||||||||
| Core operating noninterest income | $ | 95,563 | $ | 92,484 | $ | 3,079 | 3 | % | ||||
Core operating loan fees and charges increased to $18.7 million for the third quarter 2014, as compared to $15.3 million reported for the second quarter 2014. The increase of $3.4 million, or 22%, primarily related to an increase in loan originations of 20% for the third quarter 2014, as compared to the second quarter 2014.
Third quarter 2014 net gain on loan sales decreased to $52.2 million, as compared to $54.8 million for the second quarter 2014. The decrease from the prior quarter reflects the impact of a 6% decline in fallout-adjusted mortgage rate lock commitments. Fallout-adjusted locks were $6.3 billion for the third quarter 2014, as compared to $6.7 billion for the second quarter 2014. The net gain on loan sale margin increased to 83 basis points for the third quarter 2014, as compared to 82 basis points for the second quarter 2014.
Net return on the mortgage servicing asset (including off-balance sheet hedges of mortgage servicing rights) decreased to $1.3 million for the third quarter 2014, as compared to $5.0 million for the second quarter 2014. The decrease from the prior quarter resulted from a negative fair value adjustment which was driven by increased prepayments and from reduced hedge performance.
Third quarter 2014 net gain on sales of assets was $4.9 million, as compared to $3.5 million for the second quarter 2014. The increase from the prior quarter resulted from the net gain recorded on the sales of performing jumbo residential mortgage loans and underperforming residential mortgage loans.
Core operating representation and warranty provision, which is a contra noninterest income item, decreased to $2.2 million for the third quarter 2014, as compared to $5.2 million reported for the second quarter 2014. The decline was the result of a lower open pipeline of repurchase demands which declined 43% from the second quarter 2014 to $30.8 million, the lowest level since the first quarter of 2008. This does not include the $10.4 million representation and warranty provision related to indemnifications on government loans.
The third quarter 2014 other noninterest income was $9.5 million, as compared to $7.6 million for the second quarter 2014. The increase from the prior quarter resulted from the gain on sale of securities, in the normal course of business, of $1.9 million.
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Noninterest Expense
Core operating noninterest expense was $140.8 million for the third quarter 2014, as compared core operating noninterest expense of $128.5 million for the second quarter 2014.
| Significant Noninterest Expense Items | ||||||||||||
| (in thousands) | ||||||||||||
| Financial Statement Line Item | Third quarter 2014 | Second quarter 2014 | Change Amount | Change Percent | ||||||||
| Reported noninterest expense | $ | 179,389 | $ | 121,353 | $ | 58,036 | 48 | % | ||||
| Adjustments for significant items: | ||||||||||||
| CFPB settlement | Other noninterest expense | (37,500 | ) | |||||||||
| CFPB CID-related costs | Legal and professional expense | (1,116 | ) | (2,879 | ) | |||||||
| DOJ fair value adjustment | Other noninterest expense | 10,000 | ||||||||||
| Core operating noninterest expense | $ | 140,773 | $ | 128,474 | $ | 12,299 | 10 | % | ||||
Third quarter 2014 asset resolution expense decreased to $13.7 million, as compared to $17.9 million for the second quarter 2014.
Core operating legal and professional expenses were $13.9 million for the third quarter 2014, as compared to $10.6 million reported for the second quarter 2014. The $3.3 million increase was attributable to higher consulting expenses.
Core operating other noninterest expenses for the third quarter 2014 totaled $12.8 million, as compared to $1.8 million reported for the second quarter 2014. The increase of $11.0 million from the prior quarter, represented increases in the fair value of the DOJ liability, litigation reserves and the establishment of a reserve for unfunded loan commitments.
Income Taxes
The third quarter 2014 benefit for income taxes totaled $10.3 million, as compared to a tax provision of $11.9 million in the second quarter 2014. The effective tax rate in the third quarter 2014 was 27.2%, as compared to 31.8% in the second quarter 2014.
Asset Quality
Nonperforming loans decreased by $13.2 million to $106.9 million at September 30, 2014, the lowest level of nonperforming loans since the third quarter of 2006. The decrease was driven by sales of nonperforming loans during the quarter. The ratio of nonperforming loans to loans held for investment decreased to 2.56% at September 30, 2014 from 2.76% at June 30, 2014.
Third quarter 2014 net charge-offs were $13.1 million, representing 1.36% of associated loans, excluding loans carried under a fair value option. This increased $5.9 million from the second quarter 2014 net charge-offs of $7.2
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million, or 0.78%, of associated loans. The increase in the current quarter was the result of $6.3 million of charge-offs related to loans sold.
The allowance for loan losses was $301.0 million at September 30, 2014, covering 7.6% of total loans held for investment, excluding loans carried under a fair value option. The allowance for loan losses was $306.0 million at June 30, 2014, covering 7.4% of total loans held for investment. The increase in the coverage ratio during the third quarter 2014 was primarily due to a slight increase in the average loss rate as a result of loan sales during the quarter.
Earnings Conference Call
As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, October 22, 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 (866) 454-4209 toll free or (913) 312-0643, and use passcode: 7089877. 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: 7089877.
The conference call will also be available as a live audio cast on the Investor Relations section of www.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.
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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 $9.6 billion in total assets and $7.2 billion in total deposits, at September 30, 2014, Flagstar is the largest bank headquartered in Michigan. Flagstar operates 106 banking centers, all of which are located in Michigan and 32 home lending centers in 18 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 www.flagstar.com.
Use of Non-GAAP Financial Measures
The Company prepares its Consolidated Financial Statements using accounting principles generally accepted in the U.S. (“U.S. GAAP”). That presentation, which is referred to as “reported” basis, provides the reader with an understanding of the Company’s results that can be tracked consistently from period-to-period and enables a comparison of the Company’s performance with other companies’ U.S. GAAP financial statements.
This press release contains U.S. GAAP financial measures as well as non-GAAP financial measures where management believes it to be helpful in understanding the Company’s results of operations or financial position.
In addition to analyzing the Company’s results on a reported basis, management reviews the Company’s results and the results of its lines of business on a "core operating” basis. These non-GAAP measures reflect the adjustment of the reported U.S. GAAP results for significant items. The Company believes the use of these non-GAAP financial measures provides additional clarity in assessing the Company's results on a run-rate basis. These and other non-GAAP financial measures used by the Company may not be comparable to similarly named non-GAAP financial measures used by other companies.
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 and June 30, 2014. All of which can be found on the Company’s website at www.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 Flagstar Bancorp, Inc.’s actual results to differ materially from those described in the forward-looking statements can 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 and June 30, 2014, which have been filed with the Securities and Exchange Commission and are available on Flagstar Bancorp, Inc.’s website (www.flagstar.com) and on the Securities and Exchange Commission's website (www.sec.gov). Flagstar Bancorp, Inc. 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.
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Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
| Assets | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||
| Cash and cash equivalents | |||||||||||||||
| Cash and cash items | $ | 44,374 | $ | 67,924 | $ | 55,913 | $ | 68,228 | |||||||
| Interest-earning deposits | 62,466 | 134,611 | 224,592 | 2,482,882 | |||||||||||
| Total cash and cash equivalents | 106,840 | 202,535 | 280,505 | 2,551,110 | |||||||||||
| Investment securities available-for-sale or trading | 1,378,093 | 1,605,805 | 1,045,548 | 545,476 | |||||||||||
| Loans held-for-sale | 1,468,668 | 1,342,611 | 1,480,418 | 1,879,290 | |||||||||||
| Loans repurchased with government guarantees | 1,191,826 | 1,217,721 | 1,273,690 | 1,231,765 | |||||||||||
| Loans held-for-investment, net | |||||||||||||||
| Loans held-for-investment | 4,184,624 | 4,359,293 | 4,055,756 | 4,013,507 | |||||||||||
| Less: allowance for loan losses | (301,000 | ) | (306,000 | ) | (207,000 | ) | (207,000 | ) | |||||||
| Total loans held-for-investment, net | 3,883,624 | 4,053,293 | 3,848,756 | 3,806,507 | |||||||||||
| Mortgage servicing rights | 285,386 | 289,185 | 284,678 | 797,029 | |||||||||||
| Repossessed assets, net | 27,149 | 31,579 | 36,636 | 66,530 | |||||||||||
| Federal Home Loan Bank stock | 209,737 | 209,737 | 209,737 | 301,737 | |||||||||||
| Premises and equipment, net | 238,261 | 235,202 | 231,350 | 229,117 | |||||||||||
| Net deferred tax asset | 449,575 | 435,217 | 414,681 | — | |||||||||||
| Other assets | 386,251 | 310,229 | 301,302 | 399,254 | |||||||||||
| Total assets | $ | 9,625,410 | $ | 9,933,114 | $ | 9,407,301 | $ | 11,807,815 | |||||||
| Liabilities and Stockholders' Equity | |||||||||||||||
| Deposits | |||||||||||||||
| Noninterest bearing | $ | 1,299,405 | $ | 1,081,026 | $ | 930,060 | $ | 1,002,472 | |||||||
| Interest bearing | 5,934,991 | 5,562,883 | 5,210,266 | 5,646,813 | |||||||||||
| Total deposits | 7,234,396 | 6,643,909 | 6,140,326 | 6,649,285 | |||||||||||
| Federal Home Loan Bank advances | 150,000 | 1,031,705 | 988,000 | 2,907,598 | |||||||||||
| Long-term debt | 339,575 | 345,157 | 353,248 | 360,389 | |||||||||||
| Representation and warranty reserve | 57,000 | 50,000 | 54,000 | 174,000 | |||||||||||
| Other liabilities | 492,834 | 476,669 | 445,853 | 444,188 | |||||||||||
| Total liabilities | 8,273,805 | 8,547,440 | 7,981,427 | 10,535,460 | |||||||||||
| Stockholders' Equity | |||||||||||||||
| Preferred stock | 266,657 | 266,657 | 266,174 | 264,726 | |||||||||||
| Common stock | 563 | 562 | 561 | 561 | |||||||||||
| Additional paid in capital | 1,480,955 | 1,480,321 | 1,479,265 | 1,478,391 | |||||||||||
| Accumulated other comprehensive income (loss) | (250 | ) | 6,821 | (4,831 | ) | 4,429 | |||||||||
| Accumulated deficit | (396,320 | ) | (368,687 | ) | (315,295 | ) | (475,752 | ) | |||||||
| Total stockholders' equity | 1,351,605 | 1,385,674 | 1,425,874 | 1,272,355 | |||||||||||
| Total liabilities and stockholders' equity | $ | 9,625,410 | $ | 9,933,114 | $ | 9,407,301 | $ | 11,807,815 | |||||||
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Flagstar Bancorp, Inc. Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
| Total interest income | $ | 75,094 | $ | 71,913 | $ | 78,807 | $ | 213,358 | $ | 258,854 | |||||||||
| Total interest expense | 10,731 | 9,488 | 36,122 | 28,370 | 113,406 | ||||||||||||||
| Net interest income | 64,363 | 62,425 | 42,685 | 184,988 | 145,448 | ||||||||||||||
| Provision for loan losses | 8,097 | 6,150 | 4,053 | 126,567 | 56,030 | ||||||||||||||
| Net interest income after provision for loan losses | 56,266 | 56,275 | 38,632 | 58,421 | 89,418 | ||||||||||||||
| Noninterest Income | |||||||||||||||||||
| Loan fees and charges | 18,661 | 25,301 | 20,876 | 56,272 | 84,152 | ||||||||||||||
| Deposit fees and charges | 5,618 | 5,279 | 5,410 | 15,660 | 15,749 | ||||||||||||||
| Net gain on loan sales | 52,175 | 54,756 | 75,073 | 152,275 | 357,404 | ||||||||||||||
| Loan administration income | 5,599 | 6,195 | 1,454 | 18,826 | 2,752 | ||||||||||||||
| Net return on the mortgage servicing asset | 1,346 | 4,994 | 27,217 | 22,475 | 73,949 | ||||||||||||||
| Net gain on sale of assets | 4,874 | 3,537 | 98 | 10,626 | 2,120 | ||||||||||||||
| Total other-than-temporary impairment (loss) gain | — | — | — | — | (8,789 | ) | |||||||||||||
| Loss recognized in other comprehensive income before taxes | — | — | — | — | — | ||||||||||||||
| Net impairment losses recognized in earnings | — | — | — | — | (8,789 | ) | |||||||||||||
| Representation and warranty reserve - change in estimate | (12,538 | ) | (5,226 | ) | (5,205 | ) | (16,092 | ) | (51,541 | ) | |||||||||
| Other noninterest income | 9,453 | 7,648 | 9,373 | 2,583 | 63,402 | ||||||||||||||
| Total noninterest income | 85,188 | 102,484 | 134,296 | 262,625 | 539,198 | ||||||||||||||
| Noninterest Expense | |||||||||||||||||||
| Compensation and benefits | 53,503 | 55,218 | 61,552 | 174,291 | 209,696 | ||||||||||||||
| Commissions | 10,346 | 8,532 | 12,099 | 26,098 | 44,962 | ||||||||||||||
| Occupancy and equipment | 20,471 | 19,383 | 18,644 | 60,265 | 60,218 | ||||||||||||||
| Asset resolution | 13,666 | 17,934 | 16,295 | 43,108 | 48,661 | ||||||||||||||
| Federal insurance premiums | 5,633 | 6,758 | 7,910 | 17,402 | 26,941 | ||||||||||||||
| Other taxes | — | — | — | — | — | ||||||||||||||
| Warrant expense (income) | — | — | — | — | — | ||||||||||||||
| Loss on extinguishment of debt | — | — | — | — | |||||||||||||||
| Loan processing expense | 10,472 | 8,199 | 10,890 | 26,406 | 43,390 | ||||||||||||||
| Legal and professional expense | 15,044 | 13,524 | 19,593 | 39,826 | 64,822 | ||||||||||||||
| Other noninterest expense | 50,254 | (8,195 | ) | 11,453 | 52,598 | 30,732 | |||||||||||||
| Total noninterest expense | 179,389 | 121,353 | 158,436 | 439,994 | 529,422 | ||||||||||||||
| (Loss) income before income taxes | (37,935 | ) | 37,406 | 14,492 | (118,948 | ) | 99,194 | ||||||||||||
| (Benefit) provision for income taxes | (10,303 | ) | 11,892 | 220 | (38,407 | ) | (5,888 | ) | |||||||||||
| Net (loss) income | (27,632 | ) | 25,514 | 14,272 | (80,541 | ) | 105,082 | ||||||||||||
| Preferred stock dividend/accretion | — | — | (1,449 | ) | (483 | ) | (4,336 | ) | |||||||||||
| Net (loss) income applicable to common stockholders | $ | (27,632 | ) | $ | 25,514 | $ | 12,823 | $ | (81,024 | ) | $ | 100,746 | |||||||
| (Loss) income per share | |||||||||||||||||||
| Basic | $ | (0.61 | ) | $ | 0.33 | $ | 0.16 | $ | (1.79 | ) | $ | 1.61 | |||||||
| Diluted | $ | (0.61 | ) | $ | 0.33 | $ | 0.16 | $ | (1.79 | ) | $ | 1.59 | |||||||
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Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
Mortgage loans originated (1) | $ | 7,186,856 | $ | 5,950,650 | $ | 7,737,143 | $ | 18,004,136 | $ | 31,042,635 | |||||||||
| Other loans originated | 84,084 | 131,602 | 93,347 | 387,992 | 235,850 | ||||||||||||||
| Mortgage loans sold and securitized | 7,072,398 | 6,029,817 | 8,344,737 | 17,576,502 | 32,291,437 | ||||||||||||||
Interest rate spread - consolidated (2) | 2.79 | % | 2.87 | % | 1.39 | % | 2.84 | % | 1.48 | % | |||||||||
Net interest margin - consolidated (3) | 2.91 | 2.98 | 1.62 | 2.95 | 1.71 | ||||||||||||||
| Average common shares outstanding | 56,249,300 | 56,230,458 | 56,096,376 | 56,224,850 | 56,041,844 | ||||||||||||||
| Average fully diluted shares outstanding | 56,249,300 | 56,822,102 | 56,541,089 | 56,224,850 | 56,458,898 | ||||||||||||||
| Average interest-earning assets | $ | 8,814,713 | $ | 8,366,703 | $ | 10,564,417 | $ | 8,344,833 | $ | 11,311,033 | |||||||||
| Average interest paying liabilities | 7,034,094 | 6,795,144 | 9,054,952 | 6,734,056 | 9,673,571 | ||||||||||||||
| Average stockholders' equity | 1,402,165 | 1,381,948 | 1,266,267 | 1,409,641 | 1,226,683 | ||||||||||||||
| (Loss) return on average assets | (1.08 | )% | 1.04 | % | 0.42 | % | (1.10 | )% | 1.03 | % | |||||||||
| (Loss) return on average equity | (7.88 | ) | 7.38 | 4.05 | (7.66 | ) | 10.95 | ||||||||||||
| Efficiency ratio | 120.0 | 73.6 | 89.5 | 98.3 | 77.3 | ||||||||||||||
Efficiency ratio (adjusted) (4) | 86.8 | 80.2 | 87.0 | 90.0 | 76.2 | ||||||||||||||
| Equity-to-assets ratio (average for the period) | 13.68 | 14.12 | 10.26 | 14.39 | 9.44 | ||||||||||||||
Charge-offs to average LHFI (5) | 1.36 | 0.78 | 3.96 | 1.17 | 4.60 | ||||||||||||||
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
| Book value per common share | $ | 19.28 | $ | 19.90 | $ | 20.66 | $ | 17.96 | |||||||
| Number of common shares outstanding | 56,261,652 | 56,238,925 | 56,138,074 | 56,114,572 | |||||||||||
| Mortgage loans subserviced for others | $ | 46,695,465 | $ | 43,103,393 | $ | 40,431,865 | $ | — | |||||||
| Mortgage loans serviced for others | 26,377,572 | 25,342,335 | 25,743,396 | 74,200,317 | |||||||||||
| Weighted average service fee (basis points) | 26.8 | 29.2 | 28.7 | 29.3 | |||||||||||
| Capitalized value of mortgage servicing rights | 1.08 | % | 1.14 | % | 1.11 | % | 1.07 | % | |||||||
Mortgage servicing rights to Tier 1 capital (4) | 25.2 | 24.3 | 22.6 | 56.8 | |||||||||||
Ratio of allowance for loan losses to non-performing LHFI (5) | 295.4 | 263.1 | 145.9 | 152.6 | |||||||||||
Ratio of allowance for loan losses to LHFI (5) | 7.60 | 7.41 | 5.42 | 5.50 | |||||||||||
| Ratio of non-performing assets to total assets (bank only) | 1.40 | 1.54 | 1.95 | 1.74 | |||||||||||
| Equity-to-assets ratio | 14.04 | 13.95 | 15.16 | 10.78 | |||||||||||
| Number of bank branches | 106 | 106 | 111 | 111 | |||||||||||
| Number of loan origination centers | 32 | 32 | 39 | 45 | |||||||||||
| Number of FTE employees (excluding loan officers and account executives) | 2,492 | 2,481 | 2,894 | 3,069 | |||||||||||
| Number of loan officers and account executives | 233 | 260 | 359 | 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. |
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Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
| Three Months Ended | ||||||||||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | ||||||||||||||||||||||||
| Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | ||||||||||||||||||
| Interest-Earning Assets | ||||||||||||||||||||||||||
| Loans held-for-sale | $ | 1,628,874 | $ | 17,949 | 4.41 | % | $ | 1,516,813 | $ | 15,783 | 4.16 | % | $ | 2,156,966 | $ | 22,348 | 4.14 | % | ||||||||
| Loans repurchased with government guarantees | 1,215,357 | 7,589 | 2.50 | % | 1,237,491 | 7,970 | 2.58 | % | 1,364,949 | 12,307 | 3.61 | % | ||||||||||||||
| Loans held-for-investment | ||||||||||||||||||||||||||
Consumer loans (1) | 3,185,208 | 30,725 | 3.84 | % | 3,084,197 | 30,829 | 3.99 | % | �� | 3,412,909 | 34,711 | 4.06 | % | |||||||||||||
Commercial loans (1) | 902,654 | 7,797 | 3.38 | % | 818,674 | 7,328 | 3.54 | % | 637,711 | 6,267 | 3.85 | % | ||||||||||||||
| Total loans held-for-investment | 4,087,862 | 38,522 | 3.74 | % | 3,902,871 | 38,157 | 3.90 | % | 4,050,620 | 40,978 | 4.03 | % | ||||||||||||||
| Investment securities available-for-sale or trading | 1,642,071 | 10,880 | 2.65 | % | 1,541,215 | 9,885 | 2.57 | % | 295,923 | 1,465 | 1.98 | % | ||||||||||||||
| Interest-earning deposits and other | 240,550 | 154 | 0.25 | % | 168,313 | 118 | 0.28 | % | 2,695,959 | 1,709 | 0.25 | % | ||||||||||||||
| Total interest-earning assets | 8,814,714 | $ | 75,094 | 3.39 | % | 8,366,703 | $ | 71,913 | 3.43 | % | 10,564,417 | $ | 78,807 | 2.98 | % | |||||||||||
| Other assets | 1,437,898 | 1,417,105 | 1,775,102 | |||||||||||||||||||||||
| Total assets | $ | 10,252,612 | $ | 9,783,808 | $ | 12,339,519 | ||||||||||||||||||||
| Interest-Bearing Liabilities | ||||||||||||||||||||||||||
| Retail deposits | ||||||||||||||||||||||||||
| Demand deposits | $ | 421,062 | $ | 147 | 0.14 | % | $ | 426,458 | $ | 147 | 0.14 | % | $ | 394,418 | $ | 183 | 0.18 | % | ||||||||
| Savings deposits | 3,274,268 | 5,482 | 0.66 | % | 3,010,108 | 4,396 | 0.59 | % | 2,815,893 | 4,268 | 0.60 | % | ||||||||||||||
| Money market deposits | 261,740 | 134 | 0.20 | % | 265,250 | 123 | 0.19 | % | 314,459 | 144 | 0.18 | % | ||||||||||||||
| Certificate of deposits | 891,308 | 1,682 | 0.75 | % | 945,622 | 1,747 | 0.74 | % | 1,787,318 | 4,068 | 0.90 | % | ||||||||||||||
| Total retail deposits | 4,848,378 | 7,445 | 0.61 | % | 4,647,438 | 6,413 | 0.55 | % | 5,312,088 | 8,663 | 0.65 | % | ||||||||||||||
| Government deposits | ||||||||||||||||||||||||||
| Demand deposits | 217,862 | 213 | 0.39 | % | 155,286 | 153 | 0.39 | % | 55,571 | 106 | 0.76 | % | ||||||||||||||
| Savings deposits | 378,013 | 504 | 0.53 | % | 301,243 | 397 | 0.53 | % | 163,869 | 113 | 0.27 | % | ||||||||||||||
| Certificate of deposits | 344,135 | 299 | 0.35 | % | 341,767 | 276 | 0.32 | % | 303,329 | 221 | 0.29 | % | ||||||||||||||
| Total government deposits | 940,010 | 1,016 | 0.43 | % | 798,296 | 826 | 0.41 | % | 522,769 | 440 | 0.33 | % | ||||||||||||||
| Wholesale deposits | — | — | — | % | — | — | — | % | 72,141 | 920 | 5.06 | % | ||||||||||||||
| Total deposits | 5,788,388 | 8,461 | 0.58 | % | 5,445,734 | 7,239 | 0.53 | % | 5,906,998 | 10,023 | 0.67 | % | ||||||||||||||
| Federal Home Loan Bank advances | 998,272 | 591 | 0.23 | % | 1,100,437 | 600 | 0.22 | % | 2,900,519 | 24,434 | 3.34 | % | ||||||||||||||
| Other | 247,435 | 1,679 | 2.69 | % | 248,973 | 1,649 | 2.66 | % | 247,435 | 1,665 | 2.67 | % | ||||||||||||||
| Total interest-bearing liabilities | 7,034,095 | 10,731 | 0.60 | % | 6,795,144 | 9,488 | 0.56 | % | 9,054,952 | 36,122 | 1.58 | % | ||||||||||||||
| Noninterest-bearing deposits | 1,258,864 | 1,073,674 | 1,263,435 | |||||||||||||||||||||||
Other liabilities (2) | 557,488 | 533,042 | 754,865 | |||||||||||||||||||||||
| Stockholders' equity | 1,402,165 | 1,381,948 | 1,266,267 | |||||||||||||||||||||||
| Total liabilities and stockholder's equity | $ | 10,252,612 | $ | 9,783,808 | $ | 12,339,519 | ||||||||||||||||||||
| Net interest-earning assets | $ | 1,780,619 | $ | 1,571,559 | $ | 1,509,465 | ||||||||||||||||||||
| Net interest income | $ | 64,363 | $ | 62,425 | $ | 42,685 | ||||||||||||||||||||
Interest rate spread (3) | 2.79 | % | 2.87 | % | 1.39 | % | ||||||||||||||||||||
Net interest margin (4) | 2.91 | % | 2.98 | % | 1.62 | % | ||||||||||||||||||||
| Ratio of average interest-earning assets to interest-bearing liabilities | 125.3 | % | 123.1 | % | 116.7 | % | ||||||||||||||||||||
| Total average deposits | $ | 7,047,252 | $ | 6,521,509 | $ | 7,170,433 | ||||||||||||||||||||
| (1) | Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans. |
| (2) | Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest. |
| (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. |
10
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
| Nine Months Ended | |||||||||||||||||
| September 30, 2014 | September 30, 2013 | ||||||||||||||||
| Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | ||||||||||||
| Interest-Earning Assets | |||||||||||||||||
| Loans held-for-sale | $ | 1,482,150 | $ | 47,385 | 4.26 | % | $ | 2,795,812 | $ | 71,357 | 3.40 | % | |||||
| Loans repurchased with government guarantees | 1,240,677 | 23,503 | 2.53 | % | 1,558,495 | 40,532 | 3.47 | % | |||||||||
| Loans held-for-investment | |||||||||||||||||
Consumer loans (1) | 3,153,021 | 92,431 | 3.90 | % | 3,795,003 | 116,625 | 4.10 | % | |||||||||
Commercial loans (1) | 803,576 | 21,320 | 3.50 | % | 668,189 | 20,798 | 4.10 | % | |||||||||
| Total loans held-for-investment | 3,956,597 | 113,751 | 3.82 | % | 4,463,192 | 137,423 | 4.10 | % | |||||||||
| Investment securities available-for-sale or trading | 1,453,914 | 28,302 | 2.60 | % | 294,722 | 5,397 | 2.44 | % | |||||||||
| Interest-earning deposits and other | 211,495 | 417 | 0.26 | % | 2,198,812 | 4,145 | 0.25 | % | |||||||||
| Total interest-earning assets | 8,344,833 | $ | 213,358 | 3.40 | % | 11,311,033 | $ | 258,854 | 3.05 | % | |||||||
| Other assets | 1,451,384 | 1,681,689 | |||||||||||||||
| Total assets | $ | 9,796,217 | $ | 12,992,722 | |||||||||||||
| Interest-Bearing Liabilities | |||||||||||||||||
| Retail deposits | |||||||||||||||||
| Demand deposits | $ | 422,165 | $ | 438 | 0.14 | % | $ | 392,695 | $ | 627 | 0.21 | % | |||||
| Savings deposits | 3,053,225 | 13,210 | 0.58 | % | 2,588,468 | 13,302 | 0.69 | % | |||||||||
| Money market deposits | 268,957 | 383 | 0.19 | % | 349,016 | 697 | 0.27 | % | |||||||||
| Certificate of deposits | 941,036 | 5,240 | 0.74 | % | 2,353,359 | 15,914 | 0.90 | % | |||||||||
| Total retail deposits | 4,685,383 | 19,271 | 0.55 | % | 5,683,538 | 30,540 | 0.72 | % | |||||||||
| Government deposits | |||||||||||||||||
| Demand deposits | 165,644 | 468 | 0.38 | % | 89,416 | 327 | 0.49 | % | |||||||||
| Savings deposits | 297,587 | 1,111 | 0.50 | % | 213,403 | 591 | 0.37 | % | |||||||||
| Certificate of deposits | 341,111 | 807 | 0.32 | % | 395,499 | 1,372 | 0.46 | % | |||||||||
| Total government deposits | 804,342 | 2,386 | 0.40 | % | 698,318 | 2,290 | 0.44 | % | |||||||||
| Wholesale deposits | 1,112 | 31 | 3.76 | % | 75,973 | 2,850 | 5.01 | % | |||||||||
| Total deposits | 5,490,837 | 21,688 | 0.53 | % | 6,457,829 | 35,680 | 0.74 | % | |||||||||
| FHLB advances | 995,271 | 1,725 | 0.23 | % | 2,968,308 | 72,766 | 3.28 | % | |||||||||
| Other | 247,948 | 4,957 | 2.68 | % | 247,435 | 4,960 | 2.68 | % | |||||||||
| Total interest-bearing liabilities | 6,734,056 | 28,370 | 0.56 | % | 9,673,572 | 113,406 | 1.57 | % | |||||||||
| Noninterest-bearing deposits | 1,104,799 | 1,241,599 | |||||||||||||||
Other liabilities (2) | 547,721 | 850,868 | |||||||||||||||
| Stockholders' equity | 1,409,641 | 1,226,683 | |||||||||||||||
| Total liabilities and stockholder's equity | $ | 9,796,217 | $ | 12,992,722 | |||||||||||||
| Net interest-earning assets | $ | 1,610,777 | $ | 1,637,461 | |||||||||||||
| Net interest income | $ | 184,988 | $ | 145,448 | |||||||||||||
Interest rate spread (3) | 2.84 | % | 1.48 | % | |||||||||||||
Net interest margin (4) | 2.95 | % | 1.71 | % | |||||||||||||
| Ratio of average interest-earning assets to interest-bearing liabilities | 123.9 | % | 116.9 | % | |||||||||||||
| Total average deposits | $ | 6,595,636 | $ | 7,699,427 | |||||||||||||
| (1) | Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans. |
| (2) | Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest. |
| (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. |
11
Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)
| Three Months Ended | |||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | |||||||||||||||
| Description | |||||||||||||||||
| Valuation gain (loss) | |||||||||||||||||
| Value of interest rate locks | $ | (24,294 | ) | (0.34 | )% | $ | 29,698 | 0.49 | % | $ | 87,961 | 1.05 | % | ||||
| Value of forward sales | 23,145 | 0.33 | % | (31,534 | ) | (0.52 | )% | (217,987 | ) | (2.61 | )% | ||||||
| Fair value of loans held-for-sale | 79,868 | 1.13 | % | 126,399 | 2.10 | % | 63,394 | 0.76 | % | ||||||||
| Total valuation gains (losses) | 78,719 | 1.12 | % | 124,563 | 2.07 | % | (66,632 | ) | (0.80 | )% | |||||||
| Sales (losses) gains | |||||||||||||||||
| Marketing losses, net of adjustments | (2,392 | ) | (0.04 | )% | (15,365 | ) | (0.26 | )% | (52,120 | ) | (0.63 | )% | |||||
| Pair-off (losses) gains | (22,190 | ) | (0.31 | )% | (52,708 | ) | (0.87 | )% | 197,544 | 2.37 | % | ||||||
| Provision for representation and warranty reserve | (1,961 | ) | (0.03 | )% | (1,734 | ) | (0.03 | )% | (3,719 | ) | (0.04 | )% | |||||
| Total sales (losses) gains | (26,543 | ) | (0.38 | )% | (69,807 | ) | (1.16 | )% | 141,705 | 1.70 | % | ||||||
| Total gain on loan sales and securitizations | $ | 52,176 | $ | 54,756 | $ | 75,073 | |||||||||||
| Total mortgage rate lock commitments (gross) | $ | 7,713,074 | $ | 8,187,881 | $ | 8,340,000 | |||||||||||
| Total loan sales and securitizations | $ | 7,072,398 | 0.74 | % | $ | 6,029,817 | 0.91 | % | $ | 8,344,737 | 0.90 | % | |||||
| Total mortgage rate lock commitments (fallout-adjusted) (1) | $ | 6,304,425 | 0.83 | % | $ | 6,693,366 | 0.82 | % | $ | 6,605,432 | 1.14 | % | |||||
| Nine Months Ended | |||||||||||
| September 30, 2014 | September 30, 2013 | ||||||||||
| Description | |||||||||||
| Valuation gain (loss) | |||||||||||
| Value of interest rate locks | $ | 16,428 | 0.09 | % | $ | (22,406 | ) | (0.07 | )% | ||
| Value of forward sales | (25,015 | ) | (0.14 | )% | (55,385 | ) | (0.17 | )% | |||
| Fair value of loans held-for-sale | 269,269 | 1.53 | % | 129,905 | 0.40 | % | |||||
| Total valuation gains | 260,682 | 1.48 | % | 52,114 | 0.16 | % | |||||
| Sales (losses) gains | |||||||||||
| Marketing gains, net of adjustments | 3,882 | 0.03 | % | 2,491 | 0.02 | % | |||||
| Pair-off gains (losses) | (107,364 | ) | (0.61 | )% | 317,387 | 0.98 | % | ||||
| Provision for representation and warranty reserve | (4,925 | ) | (0.03 | )% | (14,588 | ) | (0.05 | )% | |||
| Total sales gains | (108,407 | ) | (0.61 | )% | 305,290 | 0.95 | % | ||||
| Total gain on loan sales and securitizations | $ | 152,275 | $ | 357,404 | |||||||
| Total mortgage rate lock commitments volume | $ | 21,940,826 | $ | 32,835,000 | |||||||
| Total loan sales and securitizations | $ | 17,576,502 | 0.87 | % | $ | 32,291,437 | 1.11 | % | |||
| Total mortgage rate lock commitments (fallout-adjusted) (1) | $ | 17,851,428 | 0.85 | % | $ | 26,291,422 | 1.36 | % | |||
| (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. |
12
Regulatory Capital - Bank
(Dollars in thousands)
(Unaudited)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
Tier 1 leverage (to adjusted tangible assets) (1) | $ | 1,134,429 | 12.38 | % | $ | 1,188,936 | 12.52 | % | $ | 1,257,608 | 13.97 | % | $ | 1,402,423 | 11.98 | % | |||||||
| Total adjusted tangible asset base | $ | 9,162,342 | $ | 9,493,531 | $ | 9,004,904 | $ | 11,708,635 | |||||||||||||||
Tier 1 capital (to risk weighted assets) (1) | $ | 1,134,429 | 22.84 | % | $ | 1,188,936 | 23.75 | % | $ | 1,257,608 | 26.82 | % | $ | 1,402,423 | 26.57 | % | |||||||
Total capital (to risk weighted assets) (1) | 1,199,410 | 24.14 | % | 1,254,445 | 25.05 | % | 1,317,964 | 28.11 | % | 1,470,060 | 27.85 | % | |||||||||||
| Risk weighted asset base | $ | 4,967,755 | $ | 5,006,897 | $ | 4,688,545 | $ | 5,275,254 | |||||||||||||||
| (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)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||
Tier 1 leverage (to adjusted tangible assets) (1) | $ | 1,146,187 | 12.50 | % | $ | 1,195,494 | 12.59 | % | $ | 1,280,532 | 14.21 | % | $ | 1,435,658 | 12.25 | % | |||||||
| Total adjusted tangible asset base | $ | 9,172,557 | $ | 9,495,500 | $ | 9,014,524 | $ | 11,723,683 | |||||||||||||||
Tier 1 capital (to risk weighted assets) (1) | $ | 1,146,187 | 23.03 | % | $ | 1,195,494 | 23.87 | % | $ | 1,280,532 | 27.25 | % | $ | 1,435,658 | 27.12 | % | |||||||
Total capital (to risk weighted assets) (1) | 1,211,976 | 24.35 | % | 1,261,799 | 25.19 | % | 1,341,616 | 28.55 | % | 1,503,483 | 28.40 | % | |||||||||||
| Risk weighted asset base | $ | 4,977,969 | $ | 5,008,866 | $ | 4,698,580 | $ | 5,293,302 | |||||||||||||||
| (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 | |||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | |||||||||||||||
| Consumer loans | |||||||||||||||||
Mortgage (1) | $ | 7,186,856 | 98.8 | % | $ | 5,950,650 | 97.8 | % | $ | 7,737,142 | 98.8 | % | |||||
Other consumer (2) | 28,678 | 0.4 | % | 20,262 | 0.3 | % | 24,811 | 0.3 | % | ||||||||
| Total consumer loans | 7,215,534 | 99.2 | % | 5,970,912 | 98.2 | % | 7,761,953 | 99.1 | % | ||||||||
Commercial loans (3) | 55,406 | 0.8 | % | 111,340 | 1.8 | % | 68,537 | 0.9 | % | ||||||||
| Total loan originations | $ | 7,270,940 | 100.0 | % | $ | 6,082,252 | 100.0 | % | $ | 7,830,490 | 100.0 | % | |||||
| Nine Months Ended | |||||||||||
| September 30, 2014 | September 30, 2013 | ||||||||||
| Consumer loans | |||||||||||
Mortgage (1) | $ | 18,004,136 | 97.9 | % | $ | 31,042,635 | 99.3 | % | |||
Other consumer (2) | 66,540 | 0.4 | % | 45,023 | 0.1 | % | |||||
| Total consumer loans | 18,070,676 | 98.3 | % | 31,087,658 | 99.4 | % | |||||
Commercial loans (3) | 321,452 | 1.7 | % | 190,827 | 0.6 | % | |||||
| Total loan originations | $ | 18,392,128 | 100.0 | % | $ | 31,278,485 | 100.0 | % | |||
| (1) | Includes residential first mortgage and second mortgage loans. |
| (2) | Other consumer loans include: Warehouse lending, HELOC and other consumer loans. |
| (3) | Commercial loans include: commercial real estate, commercial and industrial and commercial lease financing loans. |
13
Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||||||||||
| Consumer loans | |||||||||||||||||||||||
| Residential first mortgage | $ | 2,224,734 | 53.1 | % | $ | 2,352,965 | 53.9 | % | $ | 2,508,968 | 61.9 | % | $ | 2,478,599 | 61.8 | % | |||||||
| Second mortgage | 153,891 | 3.7 | % | 157,772 | 3.6 | % | 169,525 | 4.2 | % | 174,383 | 4.3 | % | |||||||||||
| Warehouse lending | 594,526 | 14.2 | % | 683,258 | 15.7 | % | 423,517 | 10.4 | % | 390,348 | 9.7 | % | |||||||||||
| HELOC | 261,826 | 6.3 | % | 268,655 | 6.2 | % | 289,880 | 7.1 | % | 307,552 | 7.7 | % | |||||||||||
| Other | 31,612 | 0.8 | % | 33,364 | 0.8 | % | 37,468 | 0.9 | % | 39,043 | 1.0 | % | |||||||||||
| Total consumer loans | 3,266,589 | 78.1 | % | 3,496,014 | 80.2 | % | 3,429,358 | 84.5 | % | 3,389,925 | 84.5 | % | |||||||||||
| Commercial loans | |||||||||||||||||||||||
| Commercial real estate | 566,870 | 13.5 | % | 523,006 | 12.0 | % | 408,870 | 10.1 | % | 420,879 | 10.4 | % | |||||||||||
| Commercial and industrial | 341,312 | 8.2 | % | 330,256 | 7.6 | % | 207,187 | 5.1 | % | 187,639 | 4.7 | % | |||||||||||
| Commercial lease financing | 9,853 | 0.2 | % | 10,017 | 0.2 | % | 10,341 | 0.3 | % | 15,064 | 0.4 | % | |||||||||||
| Total commercial loans | 918,035 | 21.9 | % | 863,279 | 19.8 | % | 626,398 | 15.5 | % | 623,582 | 15.5 | % | |||||||||||
| Total loans held-for-investment | $ | 4,184,624 | 100.0 | % | $ | 4,359,293 | 100.0 | % | $ | 4,055,756 | 100.0 | % | $ | 4,013,507 | 100.0 | % | |||||||
Residential Loans Serviced
(Dollars in thousands)
(Unaudited)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||||||||||||||||
| Unpaid Principal Balance | Number of accounts | Unpaid Principal Balance | Number of accounts | Unpaid Principal Balance | Number of accounts | Unpaid Principal Balance | Number of accounts | |||||||||||||||||
Serviced for own loan portfolio (1) | $ | 3,870,117 | 21,617 | $ | 4,068,682 | 26,614 | $ | 4,375,009 | $ | 28,069 | $ | 4,727,135 | 30,971 | |||||||||||
| Serviced for others | 26,377,572 | 122,788 | 25,342,335 | 127,409 | 25,743,396 | 131,413 | 74,200,317 | 369,368 | ||||||||||||||||
Subserviced for others (2) | 46,695,465 | 238,425 | 43,103,393 | 212,927 | 40,431,867 | 198,256 | — | — | ||||||||||||||||
Total residential loans serviced (2) | $ | 76,943,154 | 382,830 | $ | 72,514,410 | 366,950 | $ | 70,550,272 | 357,738 | $ | 78,927,452 | 400,339 | ||||||||||||
| (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 subservicing performed as a result of sales of servicing-released mortgage servicing rights. |
14
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
| Beginning balance | $ | 306,000 | $ | 307,000 | $ | 243,000 | $ | 207,000 | $ | 305,000 | |||||||||
| Provision for loan losses | 8,097 | 6,150 | 4,053 | 126,567 | 56,030 | ||||||||||||||
| Charge-offs | |||||||||||||||||||
| Consumer loans | |||||||||||||||||||
| Residential first mortgage | (12,320 | ) | (5,603 | ) | (34,666 | ) | (28,785 | ) | (123,456 | ) | |||||||||
| Second mortgage | (645 | ) | (1,145 | ) | (1,534 | ) | (2,858 | ) | (5,522 | ) | |||||||||
| Warehouse lending | (74 | ) | — | (45 | ) | (74 | ) | (45 | ) | ||||||||||
| HELOC | (1,355 | ) | (1,055 | ) | (872 | ) | (5,099 | ) | (3,745 | ) | |||||||||
| Other | (565 | ) | (479 | ) | (1,341 | ) | (1,505 | ) | (2,627 | ) | |||||||||
| Total consumer loans | (14,959 | ) | (8,282 | ) | (38,458 | ) | (38,321 | ) | (135,395 | ) | |||||||||
| Commercial loans | |||||||||||||||||||
| Commercial real estate | (672 | ) | (1,789 | ) | (8,419 | ) | (2,461 | ) | (42,931 | ) | |||||||||
| Commercial and industrial | — | — | (302 | ) | — | (302 | ) | ||||||||||||
| Total commercial loans | (672 | ) | (1,789 | ) | (8,721 | ) | (2,461 | ) | (43,233 | ) | |||||||||
| Total charge-offs | (15,631 | ) | (10,071 | ) | (47,179 | ) | (40,782 | ) | (178,628 | ) | |||||||||
| Recoveries | |||||||||||||||||||
| Consumer loans | |||||||||||||||||||
| Residential first mortgage | 1,267 | 458 | 2,256 | 2,841 | 14,296 | ||||||||||||||
| Second mortgage | 204 | 95 | 348 | 383 | 825 | ||||||||||||||
| Warehouse lending | 58 | — | — | 58 | — | ||||||||||||||
| HELOC | 45 | 62 | 143 | 156 | 705 | ||||||||||||||
| Other | 768 | 370 | 470 | 1,458 | 844 | ||||||||||||||
| Total consumer loans | 2,342 | 985 | 3,217 | 4,896 | 16,670 | ||||||||||||||
| Commercial loans | |||||||||||||||||||
| Commercial real estate | 183 | 1,896 | 3,860 | 3,194 | 7,862 | ||||||||||||||
| Commercial and industrial | 9 | 40 | 49 | 78 | 66 | ||||||||||||||
| Commercial lease financing | — | — | — | 47 | — | ||||||||||||||
| Total commercial loans | 192 | 1,936 | 3,909 | 3,319 | 7,928 | ||||||||||||||
| Total recoveries | 2,534 | 2,921 | 7,126 | 8,215 | 24,598 | ||||||||||||||
| Charge-offs, net of recoveries | (13,097 | ) | (7,150 | ) | (40,053 | ) | (32,567 | ) | (154,030 | ) | |||||||||
| Ending balance | $ | 301,000 | $ | 306,000 | $ | 207,000 | $ | 301,000 | $ | 207,000 | |||||||||
Net charge-off ratio (annualized) (1) | 1.36 | % | 0.78 | % | 3.96 | % | 1.17 | % | 4.60 | % | |||||||||
| Net charge-off ratio (annualized) also by loan type (1) | |||||||||||||||||||
| Residential first mortgage | 1.92 | % | 0.88 | % | 4.99 | % | 1.44 | % | 5.14 | % | |||||||||
| Second mortgage | 1.78 | 4.08 | 2.67 | 3.24 | 4.67 | ||||||||||||||
| HELOC and consumer | 47.03 | 60.21 | 3.40 | 70.59 | 3.15 | ||||||||||||||
| Warehouse | 0.01 | — | 0.04 | 0.01 | 0.01 | ||||||||||||||
| Commercial real estate | 0.36 | (0.08 | ) | 3.94 | (0.19 | ) | 8.79 | ||||||||||||
| Commercial and industrial | (0.01 | ) | (0.05 | ) | 0.58 | (0.06 | ) | 0.23 | |||||||||||
| (1) | Excludes loans carried under the fair value option. |
15
Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||||
| Balance, beginning of period | $ | 50,000 | $ | 48,000 | $ | 185,000 | $ | 54,000 | $ | 193,000 | |||||||||||
| Provision | |||||||||||||||||||||
| Charged to gain on sale for current loan sales | 1,981 | 1,734 | 3,719 | 5,149 | 14,588 | ||||||||||||||||
| Charged to representation and warranty reserve - change in estimate | 12,538 | 5,226 | 5,205 | 16,092 | 51,541 | ||||||||||||||||
| Total | 14,519 | 6,960 | 8,924 | 21,241 | 66,129 | ||||||||||||||||
| Charge-offs, net | (7,519 | ) | (4,960 | ) | (19,924 | ) | (18,241 | ) | (85,129 | ) | |||||||||||
| Balance, end of period | $ | 57,000 | $ | 50,000 | $ | 174,000 | $ | 57,000 | $ | 174,000 | |||||||||||
Composition of Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
| September 30, 2014 | Collectively Evaluated Reserves | Individually Evaluated Reserves | Total | ||||||||
| Consumer loans | |||||||||||
| Residential first mortgage | $ | 157,198 | $ | 82,858 | $ | 240,056 | |||||
| Second mortgage | 7,089 | 5,514 | 12,603 | ||||||||
| Warehouse lending | 2,234 | — | 2,234 | ||||||||
| HELOC | 17,453 | 1,179 | 18,632 | ||||||||
| Other | 1,545 | — | 1,545 | ||||||||
| Total consumer loans | 185,519 | 89,551 | 275,070 | ||||||||
| Commercial loans | |||||||||||
| Commercial real estate | 20,584 | — | 20,584 | ||||||||
| Commercial and industrial | 5,202 | — | 5,202 | ||||||||
| Commercial lease financing | 144 | — | 144 | ||||||||
| Total commercial loans | 25,930 | — | 25,930 | ||||||||
| Total allowance for loan losses | $ | 211,449 | $ | 89,551 | $ | 301,000 | |||||
| June 30, 2014 | Collectively Evaluated Reserves | Individually Evaluated Reserves | Total | ||||||||
| Consumer loans | |||||||||||
| Residential first mortgage | $ | 162,272 | $ | 86,918 | $ | 249,190 | |||||
| Second mortgage | 7,561 | 6,094 | 13,655 | ||||||||
| Warehouse lending | 2,557 | — | 2,557 | ||||||||
| HELOC | 12,313 | 1,753 | 14,066 | ||||||||
| Other | 2,030 | — | 2,030 | ||||||||
| Total consumer loans | 186,733 | 94,765 | 281,498 | ||||||||
| Commercial loans | |||||||||||
| Commercial real estate | 19,266 | — | 19,266 | ||||||||
| Commercial and industrial | 5,096 | — | 5,096 | ||||||||
| Commercial lease financing | 140 | — | 140 | ||||||||
| Total commercial loans | 24,502 | — | 24,502 | ||||||||
| Total allowance for loan losses | $ | 211,235 | $ | 94,765 | $ | 306,000 | |||||
16
Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
| Non-performing loans | $ | 72,361 | $ | 86,373 | $ | 98,976 | $ | 94,062 | |||||||
| Non-performing TDRs | 17,507 | 17,596 | 25,808 | 21,104 | |||||||||||
| Non-performing TDRs at inception but performing for less than six months | 17,076 | 16,193 | 20,901 | 23,638 | |||||||||||
| Total non-performing loans held-for-investment | 106,944 | 120,162 | 145,685 | 138,804 | |||||||||||
| Real estate and other non-performing assets, net | 27,149 | 31,579 | 36,636 | 66,530 | |||||||||||
Non-performing assets held-for-investment, net (1) | $ | 134,093 | $ | 151,741 | $ | 182,321 | $ | 205,334 | |||||||
| Ratio of non-performing assets to total assets (Bank only) | 1.40 | % | 1.54 | % | 1.95 | % | 1.74 | % | |||||||
| Ratio of non-performing loans held-for-investment to loans held-for-investment | 2.56 | % | 2.76 | % | 3.59 | % | 3.46 | % | |||||||
| Ratio of non-performing assets to loans held-for-investment and repossessed assets | 3.18 | % | 3.46 | % | 4.46 | % | 5.03 | % | |||||||
| (1) | Does not include non-performing loans held-for-sale of $18.0 million, $6.0 million, $0.8 million and $3.1 million at September 30, 2014, June 30, 2014, December 31, 2013 and September 30, 2013, respectively. |
Asset Quality - Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
| 30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 days | Total Past Due | Total Investment Loans | |||||||||||
| September 30, 2014 | |||||||||||||||
| Consumer loans | $ | 40,188 | $ | 12,139 | $ | 106,944 | $ | 159,271 | $ | 3,266,589 | |||||
| Commercial loans | 5,489 | — | — | 5,489 | 918,035 | ||||||||||
| Total loans | $ | 45,677 | $ | 12,139 | $ | 106,944 | $ | 164,760 | $ | 4,184,624 | |||||
| June 30, 2014 | |||||||||||||||
| Consumer loans | $ | 42,840 | $ | 8,978 | $ | 120,162 | $ | 171,980 | $ | 3,496,014 | |||||
| Commercial loans | — | — | — | — | 863,279 | ||||||||||
| Total loans | $ | 42,840 | $ | 8,978 | $ | 120,162 | $ | 171,980 | $ | 4,359,293 | |||||
| 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 | |||||
17
Troubled Debt Restructurings
(Dollars in thousands)
(Unaudited)
| TDRs | |||||||||||||||
| Performing | Non-performing | Non-performing TDRs at inception but performing for less than six months | Total | ||||||||||||
| 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 | |||||||
| June 30, 2014 | |||||||||||||||
| Consumer loans | $ | 371,562 | $ | 17,596 | $ | 16,193 | $ | 405,351 | |||||||
| Commercial loans | 432 | — | — | 432 | |||||||||||
| Total TDRs | $ | 371,994 | $ | 17,596 | $ | 16,193 | $ | 405,783 | |||||||
| 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 | |||||||
18
Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, 2014 | June 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
| Efficiency ratio (adjusted) | |||||||||||||||||||
| Net interest income (a) | $ | 64,363 | $ | 62,425 | $ | 42,685 | $ | 184,988 | $ | 145,448 | |||||||||
| Noninterest income (b) | 85,188 | 102,484 | 134,296 | 262,625 | 539,198 | ||||||||||||||
| Less provisions: | |||||||||||||||||||
| Representation and warranty reserve - change in estimate | 12,538 | 5,226 | 5,205 | 16,092 | 51,541 | ||||||||||||||
| Significant items: | |||||||||||||||||||
| Net impairment loss recognized through earnings | — | — | — | — | 8,789 | ||||||||||||||
| Other noninterest income | — | (10,000 | ) | — | (10,000 | ) | (36,854 | ) | |||||||||||
| Adjusted income (c) | $ | 162,089 | $ | 160,135 | $ | 182,186 | $ | 453,705 | $ | 708,122 | |||||||||
| Noninterest expense (d) | $ | 179,389 | $ | 121,353 | $ | 158,436 | $ | 439,994 | $ | 529,422 | |||||||||
| Significant items: | |||||||||||||||||||
| Other noninterest expense | (38,616 | ) | 7,121 | — | (31,495 | ) | 10,000 | ||||||||||||
| Adjusted noninterest expense (e) | $ | 140,773 | $ | 128,474 | $ | 158,436 | $ | 408,499 | $ | 539,422 | |||||||||
| Efficiency ratio (d/(a+b)) | 120.0 | % | 73.6 | % | 89.5 | % | 98.3 | % | 77.3 | % | |||||||||
| Efficiency ratio (adjusted) (e/c) | 86.8 | % | 80.2 | % | 87.0 | % | 90.0 | % | 76.2 | % | |||||||||
| September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | ||||||||||||
| Non-performing assets / Tier 1 capital + allowance for loan losses | |||||||||||||||
| Non-performing assets | $ | 134,093 | $ | 151,741 | $ | 182,321 | $ | 205,334 | |||||||
Tier 1 capital (1) | 1,134,429 | 1,188,936 | 1,257,608 | 1,402,423 | |||||||||||
| Allowance for loan losses | 301,000 | 306,000 | 207,000 | 207,000 | |||||||||||
| Tier 1 capital + allowance for loan losses | $ | 1,435,429 | $ | 1,494,936 | $ | 1,464,608 | $ | 1,609,423 | |||||||
| Non-performing assets / Tier 1 capital + allowance for loan losses | 9.3 | % | 10.2 | % | 12.4 | % | 12.8 | % | |||||||
| Mortgage servicing rights to Tier 1 capital ratio | September 30, 2014 | June 30, 2014 | December 31, 2013 | September 30, 2013 | |||||||||||
| Mortgage servicing rights | $ | 285,386 | $ | 289,185 | $ | 284,678 | $ | 797,029 | |||||||
Tier 1 capital (to adjusted total assets) (1) | 1,134,429 | 1,188,936 | 1,257,608 | 1,402,423 | |||||||||||
| Mortgage servicing rights to Tier 1 capital ratio | 25.2 | % | 24.3 | % | 22.6 | % | 56.8 | % | |||||||
| (1) | Represents Tier 1 capital for Bank. |
19
| Quarter ended September 30, 2014 | Quarter ended June 30, 2014 | ||||||||||||||||||||||
| Operating Income / Expense | As Reported | Significant Items | Operating | As Reported | Significant Items | Operating | |||||||||||||||||
| Net interest income after provision for loan losses | $ | 56,266 | $ | — | $ | 56,266 | $ | 56,275 | $ | — | $ | 56,275 | |||||||||||
| Noninterest Income | |||||||||||||||||||||||
Loan fees and charges (1) | 18,661 | 18,661 | 25,301 | (10,000 | ) | 15,301 | |||||||||||||||||
Representation and warranty reserve - change in estimate (2) | (12,538 | ) | 10,375 | (2,163 | ) | (5,226 | ) | (5,226 | ) | ||||||||||||||
| All other noninterest income | 79,065 | 79,065 | 82,409 | 82,409 | |||||||||||||||||||
| Total noninterest income | 85,188 | 10,375 | 95,563 | 102,484 | (10,000 | ) | 92,484 | ||||||||||||||||
| Noninterest Expense | |||||||||||||||||||||||
Legal and professional expense (3) | 15,044 | (1,116 | ) | 13,928 | 13,524 | (2,879 | ) | 10,645 | |||||||||||||||
Other noninterest expense (4) | 50,254 | (37,500 | ) | 12,754 | (8,195 | ) | 10,000 | 1,805 | |||||||||||||||
| All other noninterest expense | 114,091 | 114,091 | 116,024 | 116,024 | |||||||||||||||||||
| Total noninterest expense | 179,389 | (38,616 | ) | 140,773 | 121,353 | 7,121 | 128,474 | ||||||||||||||||
| (Loss) income before income taxes | (37,935 | ) | 48,991 | 11,056 | 37,406 | (17,121 | ) | 20,285 | |||||||||||||||
| (Benefit) provision for income taxes | (10,303 | ) | 13,646 | 3,343 | 11,892 | (5,992 | ) | 5,900 | |||||||||||||||
| Net (loss) income | (27,632 | ) | 35,345 | 7,713 | 25,514 | (11,129 | ) | 14,385 | |||||||||||||||
| Preferred stock dividend/accretion | — | — | — | — | — | — | |||||||||||||||||
| Net (loss) income applicable to common stockholders | $ | (27,632 | ) | $ | 35,345 | $ | 7,713 | $ | 25,514 | $ | (11,129 | ) | $ | 14,385 | |||||||||
| (Loss) income per share | |||||||||||||||||||||||
| Basic | $ | (0.61 | ) | $ | 0.60 | $ | (0.01 | ) | $ | 0.33 | $ | (0.19 | ) | $ | 0.14 | ||||||||
| Diluted | $ | (0.61 | ) | $ | 0.60 | $ | (0.01 | ) | $ | 0.33 | $ | (0.20 | ) | $ | 0.13 | ||||||||
| (1) | Significant item for benefit for contract renegotiation for the second quarter 2014 located in loan fees and charges. |
| (2) | Significant item for charge for government loan indemnification for the third quarter 2014 located in representation and warranty |
| reserve-change in estimate. |
| (3) | Significant item for charge for CFPB CID - related costs for the third and second quarter of 2014 located in legal and |
professional expense.
| (4) | Significant item for charge for CFPB settlement for the third quarter 2014 located in other noninterest expense. |
20
The Bank currently calculates 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. The Company will begin transitioning to the Basel III framework in January 2015 subject to a phase-in period extending through January 2019. The Company is currently evaluating the impact of the final Basel III rules. Accordingly, the calculations provided below are estimates.
| September 30, 2014 | Common Equity Tier 1 (to Risk Weighted Assets) | Tier 1 Leverage (to Adjusted Tangible Assets) (1) | |||||
| Flagstar Bank (the Bank) | |||||||
Regulatory capital – Basel I to Basel III (fully phased-in) (2) | |||||||
| Basel I capital | $ | 1,134,429 | $ | 1,134,429 | |||
| Increased deductions related to deferred tax assets, mortgage servicing assets, and other capital components | (136,389 | ) | (136,389 | ) | |||
Basel III (fully phased-in) capital (2) | $ | 998,040 | $ | 998,040 | |||
Risk-weighted assets – Basel I to Basel III (fully phased-in) (2) | |||||||
| Basel I assets | $ | 4,967,755 | $ | 9,162,342 | |||
| Net change in assets | 94,479 | 491,646 | |||||
Basel III (fully phased-in) assets (2) | $ | 5,062,234 | $ | 9,653,988 | |||
| Capital ratios | |||||||
Basel I (3) | 22.84 | % | 12.38 | % | |||
Basel III (fully phased-in) (2) | 19.72 | % | 10.34 | % | |||
| (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) | The Bank is currently subject to the requirements of Basel I. |
21