EXHIBIT 99.1
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Michael W. Carrie
Executive Director / CFO
(248) 312-2000
FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS SECOND QUARTER RESULTS
FLAGSTAR ANNOUNCES NET EARNINGS OF $1.34 PER SHARE, UP 211.6%
MORTGAGE BANKING OPERATION TURNS IN ANOTHER RECORD QUARTER
RETAIL BANKING PROFITS CONTINUE TO INCREASE
Troy, Mich. (July 17, 2003) - Flagstar Bancorp, Inc. (NYSE:FBC), today released
record quarterly earnings of $85.6 million, or $1.34 per share -- diluted. These
earnings compare to $26.4 million, or $0.43 per share -- diluted, reported in
the comparable 2002 period.
HIGHLIGHTS IN THE QUARTER INCLUDE:
- - An annualized return on average equity of 69.6%;
- - An annualized return on average assets of 3.48%;
- - The assets of the Company surpassed the $10 billion milestone for the first
time;
- - A second quarter annualized balance sheet growth of 28.0%, including an
annualized increase of 7.0% in the deposit portfolio and an annualized
growth of 54.4% in the investment loan categories;
- - Net interest income of $51.1 million;
- - A record amount of mortgages serviced for others of $29.0 billion;
- - A record amount of servicing revenue during the quarter, $24.7 million;
- - A record second quarter mortgage production volume of $17.5 billion;
- - A record gain on loan sale spread of 90 basis points;
- - A record monthly mortgage production volume of $6.5 billion reported for
June;
- - A second quarter operating efficiency ratio of 31.9%.
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RETAIL BANKING; PROFITS CONTINUE TO INCREASE
The Company's profits from its retail banking operation continued to rise but
were overshadowed by the comparable increase in the mortgage banking operation.
During the quarter, the retail banking group provided 19.6% of pretax earnings
compared to 50.0% for all of 2002 and 39.2% reported in the first quarter of
2003. On a sequential quarter basis, earnings from the retail banking operations
were up an annualized 13.5%. The Company opened 4 banking centers during the
quarter.
Flagstar's deposits were $5.3 billion at June 30, 2003 compared with $4.4
billion at December 31, 2002 and $5.2 billion at March 31, 2003. At June 30,
2003, transaction account balances, including checking, savings, and money
market accounts, represented $1.8 billion, compared with $1.3 billion at
December 31, 2002. On a sequential quarter basis, the Company reduced its cost
of funds on deposits by 12 basis points.
As a part of its asset-liability management, the Company's $2.0 billion growth
in the balance sheet since year-end included a $0.9 billion increase in
deposits. This increase included a $0.5 billion increase in retail deposits,
$0.1 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
3.59% and a weighted term of 20.0 months at June 30, 2003.
The Public Funds Unit, which opened during 2001, totals $0.9 billion in funds
from local governmental entities within the Company's retail market area. These
deposits carry a weighted rate of 1.58% and a weighted term of 2.0 months at
June 30, 2003.
The wholesale deposits are offerings comprised of strategically placed durations
which are provided to a national audience. These deposits carry a weighted rate
of 3.33% and a weighted term of 30.3 months at June 30, 2003.
NET INTEREST INCOME VOLUME GROWS WITH BALANCE SHEET INCREASE
Net interest was reported at $51.1 million compared to $46.5 million in the
comparable period last year and $53.6 million in the March 2003 quarter. The net
interest margin for the quarter was 2.26%, compared with 3.05% for the same
period last year. The large decrease in the interest margin was primarily caused
by the 148 basis point decrease in the yield on the earning asset portfolio
which was not offset by the 73 basis point decrease in liability costs.
On a sequential quarter basis, the Company's net interest income decreased $2.5
million. The net interest margin decreased 43 basis points from the 2.69%
recorded in the first quarter of 2003. The quarterly decrease was caused by a 53
basis point decrease in the interest rate spread that was made up of a 70 basis
point decline in the yield on the earning asset portfolio and a 17 basis point
decrease on the cost of interest bearing liabilities.
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RECORD LOAN SALE GAINS
Gains recorded on the sales of mortgage loans reached $155.9 million during the
quarter ended June 30, 2003 from $25.1 million in the comparable 2002 period.
This increase was attributable to the $10.5 billion increase in the amount of
loans sold during the quarter. The gain on sale profit margin equaled 90 basis
points in the second quarter of 2003 versus 37 basis points in the second
quarter of 2002. This increased profit margin was a product of the increased
loan volumes and the low interest rate environment experienced during the
quarter.
As previously reported, the Company originated a second quarter record $17.5
billion in residential mortgage loans. This production level compares to the
$7.5 billion originated in the comparable 2002 period. In June, Flagstar closed
a monthly corporate record $6.5 billion in mortgage loans.
OUTLOOK
"The second quarter was our best quarter ever in our mortgage banking operation.
We had record monthly originations in June and we begin the third quarter with a
record pipeline of locked loans. On a going forward basis, we expect a slight
slowdown from the second quarter, but we still expect a monthly pace of
approximately $4.5 billion, given the current rate scenario. Additionally, our
90 basis point profit margin on loan sales was well above expectations. We
expect profit margins to normalize around 60 basis points," said Mark T.
Hammond.
MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At June 30, 2003, the Company serviced $29.0 billion in loans for others. This
volume is up 34.3% from December 31, 2002. The portfolio contains 210,000 loans
that have a weighted rate of 6.13%, a weighted service fee of 34.6 basis points,
and a weighted seven months of seasoning. Revenue from the portfolio earned a
record $24.7 million during the quarter, up $9.9 million, or 66.7% over the
comparable 2002 period.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $210.9 million, or 0.73% of
the outstanding balance of the underlying loans. The preliminary market value of
the portfolio is $254.8 million. During the quarter, no impairment adjustment
was made to the book value of the portfolio. The Company wrote off $37.8 million
in book value for loan prepayments and scheduled amortization.
ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at June 30, 2003 were $69.7 million, down $11.9 million or
14.6% from year-end and down $11.6 million from March 31, 2003. Total
delinquencies in the Company's investment loan portfolio equaled 2.36% at June
30, 2003, compared with 3.69% at December 31, 2002 and 2.72% at March 31, 2003.
Consistent with the Company's business model, 95.0% of non-performing loans were
backed by single-family homes.
PROVISION FOR LOSSES
The provision for losses was $8.4 million for the three months ended June 30,
2003 from $3.6 million during the second quarter of 2002 and $9.5 million in the
quarter ended March 31, 2003. The provision for losses in the current quarter
and the comparable quarter in 2002 did not include an increase in the allowance
for losses. Net charge-offs were an annualized 0.73% and 0.34% of average
investment loans during the three months ended June 30, 2003 and June 30, 2002,
respectively. Net charge-offs were 0.72% of average investment loans during
2002.
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ALLOWANCE FOR LOSSES
The allowance for losses totaled $50.0 million at June 30, 2003. Management
believes the current reserve is set at an appropriate level given the current
business environment and the current portfolio of investment loans.
The allowance for losses as a percentage of non-performing loans is 71.7%. The
allowance for losses as a percentage of investment loans was 1.03% at June 30,
2003.
BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at June 30, 2003 were $10.2 billion, compared with $8.2
billion at December 31, 2002 and $9.5 billion at March 31, 2003.
Flagstar's stockholders' equity now stands at $535.2 million, or 5.26% of total
assets. The book value of the common stock at June 30, 2003 equaled $8.99 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 6.58% and the Total
risk-based capital ratio stood at 12.17% at June 30, 2003.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Friday, July
18, 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) 361-0912.
Flagstar Bancorp, which has $10.2 billion in total assets, is the second largest
banking institution headquartered in Michigan. Flagstar currently operates 96
banking centers with $5.3 billion in total deposits. Flagstar banking centers
are throughout southern Michigan and Indiana. Flagstar operates 108 loan centers
in 21 states and 15 correspondent lending offices across the nation. 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
SUMMARY OF THE CONSOLIDATED STATEMENTS OF EARNINGS At or for the three months ended At or for the six months ended
June 30, June 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
( Unaudited, In Thousands, Except Share Data )
Interest income $ 126,323 $ 109,152 $ 251,115 $ 223,974
Interest expense 75,239 62,622 146,477 128,286
------------ ------------ ------------ ------------
Net interest income 51,084 46,530 104,638 95,688
Provision for losses 8,426 3,589 17,967 11,763
------------ ------------ ------------ ------------
Net interest income after provision 42,658 42,941 86,671 83,925
Loan servicing fees, net (13,056) 5,508 (38,665) 6,288
Gain on loan sales, net 155,910 25,117 246,811 75,941
Gain on MSR sales, net 320 10,179 1,581 10,830
Other income 11,387 5,840 22,065 12,297
Operating expenses 65,489 48,772 123,060 109,041
------------ ------------ ------------ ------------
Earnings before federal income tax 131,730 40,813 195,403 80,240
Provision for federal income taxes 46,150 14,395 68,496 28,299
------------ ------------ ------------ ------------
Net earnings $ 85,580 $ 26,418 $ 126,907 $ 51,941
============ ============ ============ ============
Basic earnings per share * $ 1.44 $ 0.45 $ 2.14 $ 0.90
Diluted earnings per share * $ 1.34 $ 0.43 $ 2.00 $ 0.84
Dividends paid per common share * $ 0.10 $ 0.03 $ 0.15 $ 0.05
Interest rate spread 2.02% 2.77% 2.23% 2.92%
Net interest margin 2.26% 3.05% 2.47% 3.13%
Return on average assets 3.48% 1.53% 2.71% 1.54%
Return on average equity 69.55% 32.00% 54.67% 32.75%
Efficiency ratio 31.85% 52.35% 36.58% 54.24%
Mortgage loans originated or purchased $ 17,488,383 $ 7,488,490 $ 32,550,482 $ 16,750,674
Mortgage loans sold $ 17,287,723 $ 6,818,644 $ 30,540,969 $ 15,762,964
Equity/assets ratio (average for the period) 5.00% 4.79% 4.96% 4.70%
Ratio of charge-offs to average investment loans 0.73% 0.34% 0.84% 0.52%
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SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
June 30, March 31, December 31, June 30,
2003 2003 2002 2002
------------ ------------ ------------ ------------
Total assets $ 10,172,982 $ 9,506,721 $ 8,203,702 $ 6,788,880
Loans held for sale 3,731,829 4,357,802 3,302,212 2,755,274
Investment loans portfolio, net 4,798,327 4,224,196 3,948,682 3,285,480
Allowance for losses 50,000 50,000 50,000 46,000
Mortgage servicing rights 210,869 181,606 230,756 192,280
Deposits 5,269,463 5,178,967 4,373,889 3,593,615
FHLB advances 2,436,122 2,364,597 2,222,000 2,206,000
Stockholders' equity 535,187 457,883 418,946 343,849
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.26% 4.82% 5.11% 5.06%
Core capital ratio 6.58% 6.79% 6.73% 6.73%
Total risk-based capital ratio 12.17% 12.33% 12.01% 12.54%
Book value per share * $ 8.99 $ 7.72 $ 7.08 $ 5.88
Shares outstanding * 59,499 59,332 59,190 58,478
Mortgage loans serviced for others $ 28,953,871 $ 22,336,428 $ 21,586,797 $ 19,390,204
Value of mortgage servicing rights 0.73% 0.81% 1.07% 0.99%
Allowance for losses to non performing loans 71.7% 61.5% 61.3% 56.6%
Allowance for losses to loans held for investment 1.03% 1.17% 1.25% 1.38%
Non performing assets to total assets 1.14% 1.34% 1.54% 1.86%
Number of bank branches 95 91 87 76
Number of loan origination centers 108 101 92 83
Number of correspondent offices 15 14 14 15
Number of employees 4,110 3,777 3,588 3,059
* All statistics that relate to share data have been restated for a 2 for 1
stock dividend announced April 23, 2003 and completed on May 15, 2003.