Exhibit 99.1
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Michael W. Carrie
Executive Director / CFO
(248) 312-2000
FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS RECORD FIRST QUARTER RESULTS
FLAGSTAR ANNOUNCES FIRST QUARTER NET EARNINGS OF $1.32 PER SHARE, UP 62.0%
MORTGAGE BANKING OPERATION TURNS IN ANOTHER RECORD QUARTER RETAIL BANKING
PROFITS CONTINUE TO INCREASE
Troy, Mich. (April 22, 2003) - Flagstar Bancorp, Inc. (NYSE:FBC), today released
record quarterly earnings of $41.3 million, or $1.32 per share - diluted. These
earnings compare to $25.5 million, or $0.83 per share - diluted, reported in the
comparable 2002 period.
HIGHLIGHTS IN THE QUARTER INCLUDE:
|X| An annualized return on average equity of 37.82%;
|X| An annualized return on average assets of 1.86%;
|X| A first quarter annualized balance sheet growth of 63.4%, including an
annualized increase of 72.7% in the deposit portfolio and an annualized
growth of 30.0% in the investment loan categories;
|X| Net interest income of $53.6 million, a quarterly record;
|X| A sequential quarter increase of 27 basis points in the net interest
margin;
|X| A record amount of mortgages serviced for others of $22.3 billion;
|X| Record first quarter mortgage production volume of $15.1 billion;
|X| Record monthly mortgage production volume of $5.3 billion reported for
March;
|X| A first quarter operating efficiency ratio of 44.0%.
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RETAIL BANKING; PROFITS CONTINUE TO INCREASE
The Company's profits from its retail banking operation rose during the quarter
primarily because of the 70.6% annualized increase in the level of attributable
assets. During the quarter, the retail banking group provided 39.2% of pretax
recurring operating earnings compared to 50.0% for all of 2002 and 39.8%
reported in the fourth quarter of 2002. The Company opened 4 banking centers
during the quarter.
Flagstar's deposits were $5.2 billion at March 31, 2003 compared with $4.4
billion at December 31, 2002 and $3.4 billion at March 31, 2002. At March 31,
2003, transaction account balances, including checking, savings, and money
market accounts, represented $1.4 billion, compared with $1.3 billion at
December 31, 2002. During the past quarter, the Company has reduced its cost of
funds on deposits by 23 basis points.
As a part of its asset-liability management, the Company's $1.3 billion growth
in the balance sheet included a $0.8 billion increase in deposits. This increase
included a $0.2 billion increase in retail deposits, $0.3 billion increase in
public funds and a $0.3 billion increase in wholesale deposits.
The Company's retail certificate of deposit portfolio carries a weighted rate of
3.65% and a weighted term of 21.4 months at March 31, 2003.
The Public Funds Unit, which opened during 2001, totals $1.1 billion in funds
from local governmental entities within the Company's retail market area. These
deposits carry a weighted rate of 1.81% and a weighted term of 2.3 months at
March 31, 2003.
The wholesale deposits are comprised of strategically placed duration specific
offerings solicited to a national audience. These deposits carry a weighted rate
of 3.36% and a weighted term of 32.5 months at March 31, 2003.
OUTLOOK
"Our primary focus continues to be our development of the retail banking
franchise. The growth in the first quarter and the completion of the 2003
scheduled expansion will lessen our reliance on our mortgage origination
platform," stated Mark Hammond, president and chief executive officer.
NET INTEREST INCOME VOLUME GROWS WITH BALANCE SHEET INCREASE
Net interest was reported at $53.6 million compared to $49.2 million in the
comparable period last year and $44.4 million in the December 2002 quarter. The
net interest margin for the quarter was 2.69%, compared with 3.25% for the same
period last year. The large decrease in the interest margin was primarily caused
by the 131 basis point decrease in the yield on the earning asset portfolio
which was not offset by the 75 basis point decrease in liability costs.
On a sequential quarter basis, the Company's net interest income increased
because of the $0.8 billion increase in the level of average earning assets and
the increase in the net interest margin. The net interest margin increased 27
basis points to 2.69% from the 2.42% recorded in the fourth quarter of 2002.
OUTLOOK
"At the end of 2002, we believed our mortgage investment portfolio and our
pipeline of mortgage loans held for sale were at levels that their repricing
would dictate the direction of our spreads and margins in 2003. During the
current quarter, there was an 11 basis point increase in rate related interest
income caused by a more positive utilization of cash flows. This increase was
recorded along with a 16 basis point decrease in the cost of our liabilities,
causing the 27 basis point increase in our margin", stated Mark T. Hammond.
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RECORD LOAN SALE GAINS
Gains recorded on the sales of mortgage loans reached $90.9 million during the
quarter ended March 31, 2003 from $50.8 million in the comparable 2002 period.
This increase was attributable to the $4.3 billion increase in the amount of
loans sold during the quarter. The gain on sale spread equaled 63 basis points
in the first quarter of 2003 versus 57 basis points in the first quarter of 2002
and 61 basis points in the fourth quarter of 2002.
As previously reported, the Company originated a first quarter record $15.1
billion in residential mortgage loans. This production level compares to the
$9.3 billion originated in the comparable 2002 period. This increase was
primarily attributable to an increase in the amount of mortgage loan
refinancings. In March, Flagstar closed a monthly corporate record $5.3 billion
in mortgage loans.
OUTLOOK
"The first quarter was our best quarter ever in our mortgage banking operation.
We had record monthly originations in March, we begin the second quarter with a
record pipeline of locked loans, and the 63 basis point profit margin on our
sales is well above expectations. We expect to continue to originate loans at
the current monthly pace of approximately $5 billion given the current rate
scenario," Mark T. Hammond said.
MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At March 31, 2003, the Company serviced $22.3 billion in loans for others with
an additional $11.5 billion of loans sub-serviced for others. This volume is up
3.2% from December 31, 2002 and 46.7% from March 31, 2002. The portfolio
contains 162,000 loans that have a weighted rate of 6.37%, a weighted service
fee of 34.3 basis points, and a weighted seven months of seasoning. Revenue from
the portfolio earned a record $22.2 million during the quarter, up $9.0 million,
or 68.2% over the comparable 2002 period.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $181.6 million, or 0.81% of
the outstanding balance. The preliminary market value of the portfolio is $243.4
million. During the quarter, no impairment adjustment was made to the book value
of the portfolio. The Company wrote off $47.8 million in book value for loan
prepayment and amortization.
"We increased the size of our servicing portfolio slightly during the quarter.
The retention of a larger portfolio will enhance our earnings potential when
rates go up. We have continued to monitor our internal valuation models versus
the market pricing on similar portfolios and sold approximately $10.0 billion in
servicing during the quarter. Our ability to maintain a larger servicing
portfolio is complementary to our retail banking and mortgage origination
operations. Our business plan calls for a balancing of each business line to
take advantage of the counter cyclical nature of each in order to manage
earnings volatility," stated Mark T. Hammond.
ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at March 31, 2003 were $81.3 million, down $0.3 million or
0.2% from year-end and down $7.3 million from March 31, 2002. Total
delinquencies in the Company's investment loan portfolio equaled 2.72% at March
31, 2003, compared with 3.69% at December 31, 2002 and 4.50% at March 31, 2002.
Consistent with the Company's business model, 94.7% of non-performing loans were
backed by single family homes.
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PROVISION FOR LOSSES
The provision for losses was increased to $9.5 million for the three months
ended March 31, 2003 from $8.2 million during the first quarter of 2002. The
provision for losses in the current quarter did not include an increase in the
allowance for losses. The comparable 2002 quarter included a $3.0 million
increase in the allowance for losses. Net charge-offs were an annualized 1.16%
and 0.65% of average investment loans during the three months ended March 31,
2003 and March 31, 2002, respectively. Net charge-offs were 0.72% of average
investment loans during 2002.
ALLOWANCE FOR LOSSES
The allowance for losses totaled $50.0 million at March 31, 2003. The allowance
stood at $45.0 million at March 31, 2002. Management believes the increase was
appropriate based upon the following factors:
1. A 40.0% increase in the investment loan portfolio during the twelve
months ended March 31, 2003;
2. The Company's portfolio of non-first lien single family mortgage loans
and non-single family mortgage loans has risen $510.1 million, or
58.5% during the twelve months ended March 31, 2003.
The allowance for losses as a percentage of non-performing loans was 61.5% and
50.8% at March 31, 2003 and March 31, 2002, respectively. The allowance for
losses as a percentage of investment loans was 1.17% and 1.49% at March 31, 2003
and March 31, 2002, respectively.
BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at March 31, 2003 were $9.5 billion, compared with $8.2
billion at December 31, 2002 and $6.4 billion at March 31, 2002.
Flagstar's stockholders' equity now stands at $457.9 million, or 4.82% of total
assets. The book value of the common stock at March 31, 2003 equaled $15.43 per
share. Flagstar Bank, the Company's wholly-owned subsidiary reported capital
ratios that categorize the Bank as a "well-capitalized" institution for
regulatory purposes. The Bank's Core capital ratio stood at 6.79% and the Total
risk-based capital ratio stood at 12.33% at March 31, 2003.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Wednesday,
April 23, 2003 at 11:00 a.m. Eastern Time.
The conference call will also be webcast at
http://www.flagstar.com/inside/presentations.jsp
To participate, please telephone at least ten minutes prior at (800) 311-0799.
Flagstar Bancorp, which has $9.5 billion in total assets, is the second largest
banking institution headquartered in Michigan. Flagstar currently operates 91
banking centers with $5.2 billion in total deposits. Flagstar banking centers
are located throughout southern Michigan and Indiana. Flagstar also operates 101
loan centers in 21 states and 14 correspondent lending offices across the United
States. Flagstar Bank is one of the nation's largest originators of residential
mortgage loans.
The information contained in this release is not intended as a solicitation to
buy Flagstar Bancorp, Inc. stock and is provided for general information. This
release contains certain statements that may constitute "forward-looking
statements" within the meaning of federal securities laws. These forward-looking
statements include statements about the Company's beliefs, plans, objectives,
goals, expectations, anticipations, estimates, and intentions, that are subject
to significant risks and uncertainties, and are subject to change based upon
various factors (some of which may be beyond the Company's control). The words
"may," "could," "should," "would," "believe," and similar expressions are
intended to identify forward-looking statements.
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SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
(unaudited, in thousands, except share data)
SUMMARY OF THE CONSOLIDATED STATEMENTS OF EARNINGS At or for the three months ended March 31,
2003 2002
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Interest income $ 124,792 $ 114,821
Interest expense 71,238 65,663
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Net interest income 53,554 49,158
Provision for losses 9,541 8,174
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Net interest income after provision 44,013 40,984
Loan servicing fees, net (25,609) 780
Gain on loan sales, net 90,901 50,824
Gain on MSR sales, net 1,261 650 `
Other income 10,678 6,457
Operating expenses 57,571 60,268
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Earnings before federal income tax 63,673 39,427
Provision for federal income taxes 22,346 13,904
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Net earnings $ 41,327 $ 25,523
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Basic earnings per share: $ 1.40 $ 0.89
Diluted earnings per share: $ 1.32 $ 0.83
Dividends paid per common share $ 0.10 $ 0.05
Interest rate spread 2.55% 3.10%
Net interest margin 2.69% 3.25%
Return on average assets 1.86% 1.55%
Return on average equity 37.82% 33.58%
Efficiency ratio 44.02% 55.87%
Mortgage loans originated or purchased $ 15,062,099 $ 9,262,184
Mortgage loans sold $ 13,253,246 $ 8,944,320
Equity/assets ratio (average for the period) 4.92% 4.60%
Ratio of charge-offs to average investment loans 1.16% 0.65%
SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
March 31, December 31, March 31,
2003 2002 2002
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Total assets $ 9,506,721 $ 8,203,702 $ 6,402,675
Loans available for sale 4,357,802 3,302,212 2,685,184
Investment loans portfolio, net 4,224,196 3,948,682 2,968,356
Allowance for losses 50,000 50,000 45,000
Mortgage servicing rights 181,606 230,756 154,865
Deposits 5,178,966 4,373,889 3,380,854
FHLB advances 2,364,597 2,222,000 1,975,000
Stockholders' equity 457,883 418,946 317,232
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 4.82% 5.11% 4.95%
Core capital ratio 6.79% 6.73% 6.70%
Total risk-based capital ratio 12.33% 12.01% 12.45%
Book value per share $ 15.43 $ 14.16 $ 10.95
Shares outstanding 29,666 29,595 28,968
Mortgage loans serviced for others $22,336,428 $21,586,797 $15,249,763
Value of mortgage servicing rights 0.81% 1.07% 1.02%
Allowance for losses to problem loans 61.5% 61.3% 50.8%
Allowance for losses to total investment loans 1.17% 1.25% 1.49%
Non performing assets to total assets 1.34% 1.54% 2.08%
Number of bank branches 91 87 74
Number of loan origination centers 101 92 73
Number of correspondent offices 14 14 15
Number of employees 3,777 3,588 3,071
* All statistics that relate to share data have been restated for 3 for 2
stock dividends completed on May 31, 2002.