EXHIBIT 99.1
[FLAGSTAR BANCORP, INC. LOGO]
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Michael W. Carrie
Executive Director / CFO
(248) 312-2000
FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS RECORD QUARTERLY RESULTS
FLAGSTAR ANNOUNCES NET EARNINGS OF $1.42 PER SHARE, UP 230.2%
MORTGAGE BANKING OPERATION TURNS IN ANOTHER RECORD QUARTER
RETAIL BANKING PROFITS CONTINUE TO INCREASE
Troy, Mich. (October 22, 2003) - Flagstar Bancorp, Inc. (NYSE:FBC), today
released record quarterly recurring earnings of $90.8 million, or $1.42 per
share - diluted. These recurring earnings compare to $26.6 million, or $0.43 per
share - diluted, reported in the comparable 2002 period.
During September of 2002, the Company recorded a one-time after-tax adjustment
to its financial statements for its adoption and implementation of the
Financial Accounting Standards Board's Statement 133 Implementation Issue
No. C13. This one-time adjustment increased net earnings in the 2002 quarter
$0.30 to $0.73 per share - diluted.
HIGHLIGHTS IN THE QUARTER INCLUDE:
- - An annualized return on average equity of 62.47%;
- - An annualized return on average assets of 3.35%;
- - A third quarter annualized balance sheet growth of 30.0%, including an
annualized increase of 29.8% in the deposit portfolio and an annualized
growth of 42.9% in the investment loan categories;
- - A record amount of net interest income of $53.7 million;
- - A record amount of mortgages serviced for others of $29.3 billion;
- - A record amount of servicing revenue during the quarter, $28.5 million;
- - A third quarter mortgage production volume of $16.0 billion;
- - A gain on loan sale spread of 62 basis points;
- - A third quarter operating efficiency ratio of 31.3%.
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RETAIL BANKING; PROFITS CONTINUE TO INCREASE
The Company's profits from its retail banking operation continued to rise but
still were overshadowed by the mortgage banking operation. During the quarter,
the retail banking group provided 22.3% of pretax earnings compared to 50.0% for
all of 2002 and 24.5% reported for the first nine months of 2003. On a
sequential quarter basis, earnings from the retail banking operations were up an
annualized 82.1%. The Company opened 3 banking centers during the quarter.
Flagstar's deposits were $5.7 billion at September 30, 2003 compared with $4.4
billion at December 31, 2002 and $5.3 billion at June 30, 2003. At September 30,
2003, transaction account balances, including checking, savings, and money
market accounts, represented $2.0 billion, compared with $1.3 billion at
December 31, 2002. On a sequential quarter basis, the Company reduced its cost
of deposits by 15 basis points.
As a part of its asset-liability management, the Company's $2.7 billion growth
in the balance sheet since year-end included a $1.3 billion increase in
deposits. This increase included a $0.7 billion increase in retail deposits,
$0.2 billion increase in public funds and a $0.4 billion increase in wholesale
deposits.
The Company's retail certificate of deposit portfolio carries a weighted rate of
3.57% and a weighted term of 20.4 months at September 30, 2003.
The Public Funds Unit totals $1.0 billion in funds from local governmental
entities within the Company's retail market area. These deposits carry a
weighted rate of 1.39% and a weighted term of 2.6 months at September 30, 2003.
The wholesale deposits are offerings comprised of strategically placed durations
that are provided to a national audience. These deposits carry a weighted rate
of 3.22% and a weighted term of 28.2 months at September 30, 2003.
NET INTEREST INCOME VOLUME GROWS WITH BALANCE SHEET INCREASE
Net interest income for the quarter ended September 30, 2003 was reported at a
record $53.7 million compared to $46.1 million in the comparable period last
year and $51.1 million in the June 2003 quarter. The net interest margin for the
quarter was 2.12%, compared with 2.75% for the same period last year. The large
decrease in the interest margin was primarily caused by the 142 basis point
decrease in the yield on earning assets while there was only a 69 basis point
decrease in liability costs.
On a sequential quarter basis, the Company's net interest income increased $2.6
million. The net interest margin decreased 14 basis points from the 2.26%
recorded in the second quarter of 2003, to 2.12% for the quarter ended September
30, 2003. The quarterly interest rate spread decreased 9 basis points, to 1.93%,
which was the result of a 19 basis point decline in the yield on earning assets,
which was offset by a 10 basis point decrease on the cost of interest bearing
liabilities.
LOAN SALE GAINS
Gains recorded on the sales of mortgage loans reached $93.3 million during the
quarter ended September 30, 2003 from $42.8 million in the comparable 2002
period. This increase was attributable to the $4.8 billion increase in the
amount of loans sold during the quarter. The gain on sale profit margin equaled
62 basis points in the third quarter of 2003 versus 42 basis points in the third
quarter of 2002.
As previously reported, the Company originated $16.0 billion in residential
mortgage loans during the third quarter of 2003. This production level compares
to the $10.9 billion originated in the comparable 2002 period.
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MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At September 30, 2003, the Company serviced $29.3 billion in loans for others.
This volume is up 35.6% from December 31, 2002. The portfolio contains 214,000
loans that have a weighted rate of 6.03%, a weighted service fee of 34.5 basis
points, and a weighted eight months of seasoning. Revenue from the portfolio
earned a record $28.5 million during the quarter, up $16.7 million, or 141.5%
over the comparable 2002 period.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $229.5 million, or 0.78% of
the outstanding balance of the underlying loans. The preliminary market value of
the portfolio is $377.0 million. During the quarter, the Company wrote off $21.0
million in book value for loan prepayments and scheduled amortization.
ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at September 30, 2003 were $68.0 million, down $13.6
million or 16.7% from year-end and down $1.8 million from June 30, 2003. Total
delinquencies in the Company's investment loan portfolio equaled 1.27% at
September 30, 2003, compared with 2.02% at December 31, 2002 and 1.44% at June
30, 2003.
Consistent with the Company's business model, 95.6% of non-performing loans were
backed by single-family homes.
PROVISION FOR LOSSES
The provision for losses was $5.0 million for the three months ended September
30, 2003 from $6.9 million during the third quarter of 2002 and $8.4 million in
the quarter ended June 30, 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 0.33% and 0.79% of average
investment loans during the three months ended September 30, 2003 and September
30, 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 September 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 73.6%. The
allowance for losses as a percentage of investment loans was 0.93% at September
30, 2003.
BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at September 30, 2003 were $10.9 billion, compared with $8.2
billion at December 31, 2002 and $10.2 billion at June 30, 2003.
Flagstar's stockholders' equity now stands at $618.7 million, or 5.65% of total
assets. The book value of the common stock at September 30, 2003 equaled $10.27
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 6.89% and the Total
risk-based capital ratio stood at 13.74% at September 30, 2003.
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FASB 133
During September 2002, the Company recorded a one-time after-tax adjustment of
$18.7 million, or $0.60, as its cumulative effect to implement the Financial
Accounting Standards Board's (FASB) Statement 133 Implementation Issue No. C13
(Issue C13). The Company adopted FASB 133 in January 2001. Issue C13 clarifies
and provides further guidance to reporting entities that have issued interest
rate lock commitments on loans that will be originated and later resold. Issue
C13 was cleared for adoption on March 13, 2002 and implementation was required
for all reporting entities issuing financial statements for periods where the
first day of the fiscal quarter began after April 10, 2002. Since the prior
reporting of these rate lock commitments was different than what is expressed
in Issue C13, then the change is reported as a change in accounting principle.
Management does not believe that this one-time cumulative adjustment is part of
ongoing earnings and as such has not been portrayed as recurring earnings in
the current quarter.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Thursday,
October 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) 314-7867.
Flagstar Bancorp, which has $10.9 billion in total assets, is the second largest
banking institution headquartered in Michigan. Flagstar currently operates 98
banking centers with $5.7 billion in total deposits. Flagstar banking centers
are throughout southern Michigan and Indiana. Flagstar operates 114 loan centers
in 21 states and 14 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 nine months ended
September 30, September 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
(Unaudited, In Thousands, Except Share Data)
Interest income $ 135,185 $ 113,176 $ 386,300 $ 337,149
Interest expense 81,494 67,051 227,971 195,336
------------ ------------ ------------ ------------
Net interest income 53,691 46,125 158,329 141,813
Provision for losses 5,009 6,868 22,976 18,631
------------ ------------ ------------ ------------
Net interest income after provision 48,682 39,257 135,353 123,182
Loan servicing fees, net 7,462 (793) (31,203) 5,495
Gain on loan sales, net 93,319 42,791 340,130 118,732
Gain on MSR sales, net 44,619 2,935 46,200 13,764
Other income 11,655 7,262 33,720 19,559
Operating expenses 65,963 50,305 189,023 159,345
------------ ------------ ------------ ------------
Earnings before federal tax provision and cumulative
effect of a change in accounting principle 139,774 41,147 335,177 121,387
Provision for federal income taxes 49,000 14,527 117,496 42,826
------------ ------------ ------------ ------------
Earnings before cumulative effect of a change in
accounting principle 90,774 26,620 217,681 78,561
Cumulative effect of a change in accounting principle - 18,716 - 18,716
------------ ------------ ------------ ------------
NET EARNINGS $ 90,774 $ 45,336 $ 217,681 $ 97,277
============ ============ ============ ============
Earnings per share before cumulative effect of a change in
accounting principle*
Basic $ 1.51 $ 0.45 $ 3.65 $ 1.35
Diluted $ 1.42 $ 0.43 $ 3.42 $ 1.27
Earnings per share from cumulative effect of a change in
accounting principle*
Basic - $ 0.32 - $ 0.32
Diluted - $ 0.30 - $ 0.30
------------ ------------ ------------ ------------
Net earnings per share *
Basic $ 1.51 $ 0.77 $ 3.65 $ 1.67
Diluted $ 1.42 $ 0.73 $ 3.42 $ 1.57
============ ============ ============ ============
Dividends paid per common share * $ 0.15 $ 0.03 $ 0.30 $ 0.085
Interest rate spread 1.93% 2.66% 2.09% 2.79%
Net interest margin 2.12% 2.75% 2.37% 2.99%
Return on average assets from recurring operations 3.35% 1.43% 2.95% 1.50%
Return on average equity from recurring operations 62.47% 30.04% 57.61% 31.77%
Efficiency ratio 31.30% 51.16% 34.55% 53.23%
Mortgage loans originated or purchased $ 16,027,089 $ 10,864,362 $ 48,577,571 $ 27,615,035
Mortgage loans sold $ 14,978,660 $ 10,224,954 $ 45,519,629 $ 25,987,918
Equity/assets ratio (average for the period) 5.37% 4.77% 5.11% 4.72%
Ratio of charge-offs to average investment
loans 0.33% 0.79% 0.58% 0.60%
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA-CONTINUED
SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
September June December September
30, 30, 31, 30,
2003 2003 2002 2002
----------- ----------- ----------- -----------
Total assets $10,943,160 $10,172,982 $ 8,203,702 $ 7,658,661
Loans held for sale 3,254,212 3,731,829 3,302,212 3,061,501
Investment loans portfolio, net 5,312,480 4,798,327 3,948,682 3,443,370
Allowance for losses 50,000 50,000 50,000 46,000
Mortgage servicing rights 229,515 210,869 230,756 156,015
Total deposits 5,662,737 5,269,463 4,373,889 4,152,497
FHLB advances 3,320,000 2,436,122 2,222,000 2,120,000
Stockholders' equity 618,704 535,187 418,946 390,109
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.65% 5.26% 5.11% 5.09%
Core capital ratio 6.89% 6.58% 6.73% 6.51%
Total risk-based capital ratio 13.74% 12.17% 12.01% 12.02%
Book value per share * $ 10.26 $ 8.99 $ 7.08 $ 6.64
Shares outstanding * 60,273 59,499 59,190 58,730
Mortgage loans serviced for others $29,312,081 $28,953,871 $21,586,797 $14,394,125
Value of mortgage servicing rights 0.78% 0.73% 1.07% 1.08%
Allowance for losses to non performing loans 73.6% 71.7% 61.3% 56.2%
Allowance for losses to loans held for investment 0.93% 1.03% 1.25% 1.32%
Non performing assets to total assets 1.01% 1.14% 1.54% 1.68%
Number of bank branches 98 95 87 83
Number of loan origination centers 114 108 92 91
Number of correspondent offices 14 15 14 14
Number of employees 3,939 4,110 3,588 3,342
* 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.