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 ANNOUNCES FOURTH QUARTER NET EARNINGS OF $0.57 PER SHARE;
Troy, Michigan (January 20, 2004) - Flagstar Bancorp, Inc. (NYSE:FBC), today
reported quarterly earnings of $36.7 million, or $0.57 per share - diluted
compared to $32.1 million, or $0.51 per share - diluted, reported in the
comparable 2002 period.
Net earnings for 2003 were $254.4 million, or $3.99 per share - diluted compared
to the $129.3 million, or $2.09 per share - diluted reported for 2002.
HIGHLIGHTS IN THE REPORT INCLUDE:
- - An annualized return on average equity of 23.3% for the quarter and 47.6%
for 2003;
- - An annualized return on average assets of 1.36% for the quarter and 2.52%
for 2003;
- - A fourth quarter operating efficiency ratio of 50.3% and 37.4% for all of
2003.
- - An annual balance sheet growth of 29.3% including an increase of 29.5% in
the deposit portfolio and 70.0% in the investment loan categories;
- - Mortgages serviced for others of $30.4 billion with a recorded value of 86
basis points;
- - Mortgage origination volume of $7.8 billion for the quarter and a record
$56.4 billion for 2003;
RETAIL BANKING PROFITS
The portion of the Company's net earnings attributable to the retail banking
operation rose during the quarter. This primarily due to the reduced earnings
recorded by the mortgage banking operation. During the quarter, the retail
banking group provided 52.7% of net earnings, compared to 25.1% for all of 2003,
49.7% for all of 2002, and 21.1% reported in the third quarter. Current
projections show the majority of net earnings will come from the retail banking
operation in 2004.
Flagstar's deposits were $5.7 billion at December 31, 2003 compared with $4.4
billion at December 31, 2002. Transaction account balances, including checking,
savings and money market accounts, represented $2.0 billion and $1.3 billion at
December 31, 2003 and 2002, respectively. Over the past year, the Company has
reduced its cost of funds on deposits by 52 basis points.
The Company's $2.4 billion growth in the balance sheet included a $1.3 billion
increase in deposits and a $1.1 billion increase in advances from the Federal
Home Loan Bank. These liabilities were used to fund the $2.3 billion increase in
the earning asset portfolio. Mortgage loans held for investment increased $2.8
billion during the period, while assets held for sale decreased $530.7 million.
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NET INTEREST INCOME VOLUME GROWS WITH BALANCE SHEET INCREASE
Net interest income was reported at $44.4 million, equal to the $44.4 million
reported in the comparable period last year and down $9.3 million, or 17.3% from
the $53.7 million recorded in the September 2003 quarter. The net interest
margin for the quarter was 1.80%, compared with 2.42% for the same period last
year, and the 2.12% reported in the previous quarter. In each circumstance, the
decrease in the yield on the Company's earning assets was not offset by a like
reduction in liability costs. Additionally, management was not able to
immediately reinvest the vast amount of cash created when the Company's
investment loans refinanced.
On a sequential quarter basis, the Company's net interest income was negatively
impacted by a $169.3 million decrease in average earning assets, a $373.7
million increase in average overnight investments, and a 21 basis points
decrease in the interest spread. Management did deploy all of the Company's
excess cash into longer-term assets by December 31, 2003, but still has
substantial leverage available in the current balance sheet. The sequential
quarter decrease in the interest spread was caused by a 33 basis point decrease
in the earning asset yield that was not offset by the 12 basis point decrease in
liability costs.
On December 31, 2003, the Company had an interest margin of approximately 2.26%
within the current balance sheet. The margin was based on a $9.8 billion earning
asset portfolio that yielded 5.25% and a $9.1 billion liability base that had a
3.23% cost.
During 2003, net interest income grew $16.5 million, or 8.9%, versus 2002. The
increase was attributable to the $2.9 billion, or 44.6% increase in average
earning assets. This increase in earning assets was offset by a reduction of 70
basis points in the net interest margin.
LOAN SALE GAINS
Gains recorded on the sales of mortgage loans were $22.6 million during the
quarter ended December 31, 2003 versus $72.9 million in the comparable 2002
period. This decrease was attributable to the $8.1 billion decrease in the
amount of loans sold during the quarter. The gain on sale spread equaled 43
basis points in the fourth quarter and 75 basis points for year 2003 versus 63
basis points in the fourth quarter of 2002 and 53 basis points for all of 2002.
The decrease in quarterly loan sales was caused by the $7.8 billion decrease in
comparable loan originations. As previously reported, the Company recorded $7.8
billion in loan originations versus $15.6 billion originated in the 2002 period.
This decrease was primarily attributable to a decrease in the amount of mortgage
loans that were refinanced. During the fourth quarter, 70.5% of loan
originations involved refinances of existing loans, whereas in the third quarter
88.1% of loan originations were refinances. During 2003, 85.1% of the Company's
loan originations were refinances compared to 80.2% in 2002. In December 2003,
68.7% of loan originations were refinances.
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MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At year-end the Company serviced $30.4 billion in loans for others. This volume
is up 40.7% from December 31, 2002. The portfolio contains 223,000 loans that
have a weighted rate of 6.02%, a weighted service fee of 35.0 basis points, and
a weighted nine months of seasoning. Gross portfolio revenue before amortization
was reported at a record $28.9 million during the quarter, up $10.4 million, or
56.2% over the comparable 2002 period.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $260.1 million, or 0.86% of
the outstanding balance. The preliminary market value of the portfolio is $411.4
million. During the quarter, no impairment adjustment or recapture was made to
the book value of the portfolio. The Company charged off $16.4 million in book
value for loan prepayments and amortization during the quarter.
ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at year-end were $58.3 million, down $9.7 million from
December 31, 2002. Total delinquencies in the Company's investment loan
portfolio equaled 0.85% at December 31, 2003, compared with 1.71% at December
31, 2002.
Consistent with the Company's business model over 95% of non-performing loans
were backed by single family homes. Additionally, all of the Company's real
estate owned are single-family homes acquired in the foreclosure process.
PROVISION FOR LOAN LOSSES
For the three months ended December 31, 2003, the provision for loan losses was
reported at $2.6 million as compared to the $7.5 million during the fourth
quarter of 2002. Net charge-offs were an annualized 0.17% and 0.45% of average
investment loans during the three months ended December 31, 2003 and December
31, 2002, respectively.
For the years 2003 and 2002, the provision for loan losses was reported as $22.2
million and $18.4 million, respectively. Net charge-offs were 0.43% and 0.31% of
average investment loans during 2003 and 2002, respectively.
ALLOWANCE FOR LOAN LOSSES
During the fourth quarter, the Company segregated its allowance for loan losses
into two categories, a loan loss segment and a secondary market repurchase
segment. During 2003 and 2002, approximately 43.2% and 32.1% of the Company's
recorded losses were attributable to loans sold to the secondary market,
repurchased, and then acquired in foreclosure. As the dollar amount of the
exposure to these repurchases has increased, we believe that the segregation of
this allowance provides more meaningful disclosure. During the quarter, the
Company reclassified $14.4 million of the previous allowance into this category.
For comparability purposes, approximately $6.5 million was allocated to this
allowance last year.
The allowance for loan losses totaled $36.0 million at December 31, 2003. The
unallocated portion of the secondary market reserve totals $10.3 million at
December 31, 2003.
The allowance for losses as a percentage of non-performing loans was 61.7% and
63.9% at December 31, 2003 and December 31, 2002, respectively. The allowance
for losses as a percentage of investment loans was 0.53% and 1.09% at December
31, 2003 and December 31, 2002, respectively.
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BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at December 31, 2003 were $10.6 billion, compared with $11.0
billion at September 30, 2003 and $8.2 billion at December 31, 2002.
Flagstar's stockholders' equity now stands at $654.6 million, or 6.19% of total
assets. The book value of the common stock at December 31, 2001 equaled $10.79
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 7.44% and the Total
risk-based capital ratio stood at 13.50% at December 31, 2003.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held today, Tuesday,
January 20, 2004, at 11:00 a.m. Eastern Time. To participate, please telephone
at least ten minutes prior at (800) 289-0572.
Flagstar Bancorp, which has $10.6 billion in total assets, is the second largest
independent banking institution headquartered in Michigan. Flagstar operates 99
banking centers throughout Michigan and Indiana. Flagstar also operates 128 loan
centers in 25 states and 14 correspondent lending offices located 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
SUMMARY OF THE CONSOLIDATED STATEMENTS OF EARNINGS
At or for the three months ended For the year ended
December 31, December 31,
2003 2002 2003 2002
--------------- --------------- --------------- ---------------
(Unaudited, In Thousands, Except Share Data)
Interest income $ 124,885 $ 112,963 $ 511,185 $ 450,112
Interest expense 80,512 68,544 308,483 263,880
------------ ------------ ------------ ------------
Net interest income 44,373 44,419 202,702 186,232
Provision for losses 2,607 7,537 22,245 18,423
------------ ------------ ------------ ------------
Net interest income after provision 41,766 36,882 180,457 167,809
Loan servicing fees, net 12,543 (9,773) (18,660) (4,278)
Gain on loan sales, net 22,648 72,922 359,440 183,909
Gain on MSR sales, net 21,102 710 67,302 14,474
Other income 18,124 12,054 51,844 31,613
Operating expenses 60,253 62,929 249,276 222,274
------------ ------------ ------------ ------------
Earnings before federal tax provision and cumulative
effect of a change in accounting principle 55,930 49,866 391,107 171,253
Provision for federal income taxes 19,259 17,800 136,755 60,626
------------ ------------ ------------ ------------
Earnings before cumulative effect of a change in
accounting principle 36,671 32,066 254,352 110,627
Cumulative effect of a change in accounting principle - - 18,716
------------ ------------ ------------ ------------
NET EARNINGS $ 36,671 $ 32,066 $ 254,352 $ 129,343
============ ============ ============ ============
Earnings per share before cumulative effect of a change in
accounting principle*
Basic $ 0.60 $ 0.55 $ 4.25 $ 1.90
Diluted $ 0.57 $ 0.51 $ 3.99 $ 1.79
Earnings per share from cumulative effect of a change in
accounting principle*
Basic - - - $ 0.32
Diluted - - - $ 0.30
------------ ------------ ------------ ------------
Net earnings per share *
Basic $ 0.60 $ 0.55 $ 4.25 $ 2.22
Diluted $ 0.57 $ 0.51 $ 3.99 $ 2.09
============ ============ ============ ============
Dividends paid per common share * $ 0.15 $ 0.03 $ 0.50 $ 0.12
Interest rate spread 1.72% 2.27% 1.89% 2.74%
Net interest margin 1.80% 2.42% 2.17% 2.87%
Return on average assets 1.36% 1.62% 2.52% 1.79%
Return on average equity 23.29% 31.81% 47.58% 37.14%
Efficiency ratio 50.25% 51.20% 37.37% 52.64%
Mortgage loans originated or purchased $ 7,800,580 $ 15,577,278 $ 56,378,151 $ 43,192,312
Mortgage loans sold $ 6,403,128 $ 14,508,176 $ 51,922,757 $ 40,495,894
Equity/assets ratio (average for the period) 5.83% 5.09% 5.30% 4.82%
Ratio of charge-offs to average investment loans 0.17% 0.45% 0.43% 0.31%
* All statistics that relate to share data have been restated for a 2 for 1
stock dividend completed on May 15, 2003.
Certain amounts within the accompanying summary of selected consolidated
financial data have been reclassified to conform to the 2003 presentation.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA-CONTINUED
SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
December 31, September 30, December 31, December 31,
2003 2003 2002 2001
--------------- -------------- ------------ --------------
(Unaudited, In Thousands, Except Share Data)
Total assets $ 10,570,193 $ 10,952,997 $ 8,206,712 $ 6,628,637
Loans held for sale 2,771,507 3,264,471 3,312,278 2,759,929
Investment loans, net 6,801,357 5,348,662 3,985,126 3,152,804
Allowance for losses 36,017 36,605 43,499 32,631
Mortgage servicing rights 260,128 229,515 230,756 168,469
Total deposits 5,680,167 5,662,737 4,373,889 3,608,103
FHLB advances 3,246,000 3,320,000 2,222,000 1,970,505
Stockholders' equity 654,591 618,704 418,946 291,488
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 6.19% 5.65% 5.11% 4.40%
Core capital ratio 7.44% 6.89% 6.73% 6.13%
Total risk-based capital ratio 13.50% 13.74% 12.01% 11.44%
Book value per share * $ 10.79 $ 10.26 $ 7.08 $ 5.07
Shares outstanding * 60,671 60,273 59,190 57,420
Mortgage loans serviced for others $ 30,395,079 $ 29,312,081 $ 21,586,797 $ 14,222,802
Value of mortgage servicing rights 0.86% 0.78% 1.07% 1.18%
Allowance for losses to non performing loans 61.7% 67.6% 63.9% 46.6%
Allowance for losses to investment loans 0.53% 0.68% 1.09% 1.03%
Non performing assets to total assets 1.01% 0.97% 1.50% 1.35%
Number of bank branches 99 98 87 71
Number of loan origination centers 128 114 92 69
Number of correspondent offices 14 14 14 15
Number of employees 3,512 3,939 3,588 3,047
* All statistics that relate to share data have been restated for 2 for 1 stock
dividends completed on May 15, 2003.
Certain amounts within the accompanying summary of selected consolidated
financial data have been reclassified to conform to the 2003 presentation.