EXHIBIT 99.1
[FLAGSTAR BANCORP LOGO]
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 $0.65 PER SHARE
RETAIL BANKING PROFITS CONTRIBUTE 58.8% OF TOTAL
Troy, Mich. (July 15, 2004) - Flagstar Bancorp, Inc. (NYSE:FBC), today released
quarterly earnings of $41.2 million, or $0.65 per share -- diluted.
HIGHLIGHTS IN THE QUARTER INCLUDE:
o An annualized return on average equity of 23.8%;
o An annualized return on average assets of 1.4%;
o A retail banking contribution of approximately $0.38 per share;
o Record net interest income of $59.3 million;
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RETAIL BANKING
The Company's retail banking operation provided 58.8% of net earnings compared
to 33.0% for all of 2003 and 49.1% reported in the first quarter of 2004. The
Company opened 3 banking centers during the quarter.
Flagstar's deposits were $6.5 billion at June 30, 2004 compared with $5.7
billion at December 31, 2003 and $6.1 billion at March 31, 2004. At June 30,
2004, consumer direct transaction account balances, including checking, savings,
and money market accounts, represented $2.1 billion, compared with $2.0 billion
at December 31, 2003. On a sequential quarter basis, the Company's cost of
deposits increased by 9 basis points.
As a part of its asset-liability management, the Company's $1.4 billion growth
in the balance sheet and $1.9 billion growth in its held for investment
portfolio since year-end has included a $0.8 billion increase in deposits.
NET INTEREST INCOME
Net interest was reported at $59.3 million compared to $47.0 million in the
comparable period last year and $51.0 million in the March 2004 quarter. The net
interest margin for the quarter was 2.13%, compared with 2.26% for the same
period last year. The decrease in the interest margin was primarily caused by
the 10 basis point decrease in the spread between the yield on the earning asset
portfolio that declined 55 basis points and was not offset by the 45 basis point
decrease in liability costs.
On a sequential quarter basis, the Company's net interest income increased $8.3
million. Also, the net interest margin increased 13 basis points from the 2.00%
recorded in the first quarter of 2004. The quarterly increase was primarily
caused by a $541.3 million increase in the amount of earning assets versus
paying liabilities that was somewhat offset by a 2 basis point decrease in the
interest rate spread.
OUTLOOK
"The second quarter margin was a bright spot in our quarterly earnings release
and is a testament to what we are building. The record amount of interest income
is part of our plan to significantly reduce our reliance on mortgage banking
sale revenue. In the next two quarters, it is our intent to increase the earning
asset portfolio by another $2.0 billion, while adhering to sound underwriting
standards and maintaining our duration-matching guidelines," stated Mark T.
Hammond, President and CEO.
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LOAN SALE GAINS
Gains recorded on the sales of mortgage loans were $7.5 million during the
quarter ended June 30, 2004 from $154.3 million in the comparable 2003 period.
This decrease was attributable to the $9.2 billion decrease in the amount of
loans sold during the quarter. The gain on sale spread equaled 17 basis points
in the second quarter of 2004 versus 96 basis points in the second quarter of
2003.
As previously reported, the Company originated $9.0 billion in residential
mortgage loans in the second quarter of 2004. This production level compares to
the $17.5 billion originated in the comparable 2003 period. This decrease was
primarily attributable to a decrease in the amount of mortgage loan
refinancings.
For the three months ended For the six months ended
June 2004 June 2003 June 2004 June 2003
-------------- -------------- --------------- --------------
Net gain on loan sales $ 7,514 $ 154,256 $ 39,645 $ 243,503
Plus: FASB 133 adjustment 159 5,881 (6,545) 13,304
Plus: Secondary Market Reserve 5,849 5,396 13,916 11,908
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Gain on loan sales $ 13,522 $ 165,533 $ 47,016 $ 268,715
Loans sold $ 8,085,479 $ 17,287,723 $ 15,726,216 $ 30,540,969
Sales spread 0.17% 0.96% 0.30% 0.88%
OUTLOOK
"The second quarter was a challenging quarter for our mortgage banking
operation. The narrow amount of spread achieved on loan sales was caused by the
competitive pricing observed in the origination market. Our gain on sale margins
did improve as the quarter progressed but the average gain was the lowest in our
history. We expect our origination volume to slow during the second half of the
year and our gain on sale spreads to slightly increase from the second quarter's
low," stated Mark T. Hammond.
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MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At June 30, 2004, the Company serviced $26.7 billion in loans for others. This
volume is down 12.2% from December 31, 2003 and down 10.7% from March 31, 2004.
During the quarter the Company originated $8.1 billion and sold $8.6 billion of
servicing rights. The MSR sales consisted of $4.8 billion of bulk sales and $3.6
billion of flow sales.
The current portfolio contains 200,296 loans that have a weighted rate of 5.96%,
a weighted service fee of 34.8 basis points, and a weighted 12 months of
seasoning. Revenue from the portfolio earned a record $29.9 million during the
quarter, up $5.2 million over the comparable 2003 period.
For the three months ended For the six months ended
June 2004 June 2003 June 2004 June 2003
----------- ----------- ----------- -----------
Beginning balance $29,858,203 $22,336,428 $30,395,079 $21,586,797
Originations 8,085,479 17,287,722 15,726,216 30,540,969
Sales 8,599,572 7,774,003 14,957,626 18,202,613
Amortizations and prepayments 2,676,802 2,896,276 4,496,361 4,971,282
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Ending balance $26,667,308 $28,953,871 $26,667,308 $28,953,871
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MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $236.2 million, or 0.89% of
the outstanding balance of the underlying mortgage balances. The preliminary
market value of the portfolio is $346.2 million. During the quarter, no
impairment adjustment was made to the book value of the portfolio. The Company
wrote off $24.3 million in book value for loan prepayment and amortization.
OUTLOOK
"During the first six months of 2004, we have sold 95% of the mortgage servicing
rights we originated. On a going forward basis, the Company will continue to
accumulate and sell servicing rights. Historically, we have sold 75% of our
servicing originations, and in a rising or higher interest rate environment, we
have sold between 100% and 140% of the period's originations," added Mr.
Hammond.
SECONDARY MARKET RESERVE
REPURCHASED ASSETS
Net repurchased assets pending foreclosure totaled $21.9 million at June 30,
2004 compared to $12.0 million at December 31, 2003 and $18.7 million at March
31, 2004. During the second quarter of 2004, the Company repurchased $18.1
million in non-performing assets previously sold to the secondary market. During
2003, the Company repurchased a total of $46.3 million in non-performing assets.
RESERVE FOR LOSSES ON REPURCHASED ASSETS
The reserve for losses on repurchased assets was increased $2.6 million, or
25.2% to $12.9 million at June 30, 2004 from $10.3 million at December 31, 2003.
Losses attributable to repurchased assets totaled $5.0 million and $3.5 million
for the three months ended June 30, 2004 and 2003, respectively.
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ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at June 30, 2004 were $59.6 million, up $1.3 million or
2.2% from year-end and down $2.2 million from March 31, 2004. Total
delinquencies in the Company's investment loan portfolio equaled 1.20% at June
30, 2004, compared with 1.54% at December 31, 2003 and 1.30% at March 31, 2004.
Consistent with the Company's business model, 94.8% of non-performing loans were
backed by single-family homes.
PROVISION FOR LOSSES
The provision for losses was $3.6 million for the three months ended June 30,
2004 from $6.8 million during the second quarter of 2003 and $9.3 million in the
quarter ended March 31, 2004. The provision for losses in the current quarter
and the comparable quarter in 2003 included a $0.9 million and a $1.3 million
increase in the allowance for losses, respectively. Net charge-offs were an
annualized 0.12% and 0.73% of average investment loans during the three months
ended June 30, 2004 and June 30, 2003, respectively. Net charge-offs were 0.35%
of average investment loans during 2003.
ALLOWANCE FOR LOSSES
The allowance for losses totaled $41.7 million at June 30, 2004. 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 70.0%. The
allowance for losses as a percentage of investment loans was 0.48% at June 30,
2004.
BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at June 30, 2004 were $12.0 billion, compared with $10.6
billion at December 31, 2003 and $12.2 billion at March 31, 2004.
Flagstar's stockholders' equity now stands at $709.8 million, or 5.93% of total
assets. The book value of the common stock at June 30, 2004 equaled $11.61 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 6.41% and the Total
risk-based capital ratio stood at 11.83% at June 30, 2004.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Friday, July
16, 2003 at 12:00 p.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) 289-0494;
passcode 109085.
Flagstar Bancorp is the second largest banking institution headquartered in
Michigan. Flagstar operates over 100 banking centers in Michigan and Indiana and
loan centers in 26 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 At or for the three months ended At or for the six months ended
EARNINGS June 30, June 30,
2004 2003 2004 2003
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(Unaudited, In Thousands, Except Share Data)
Interest income $ 140,214 $ 122,201 $ 271,055 $ 246,993
Interest expense 80,893 75,239 160,757 146,477
------------ ------------ ------------ ------------
Net interest income 59,321 46,962 110,298 100,516
Provision for losses 3,603 6,772 12,905 14,659
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Net interest income after provision 55,718 40,190 97,393 85,857
Loan servicing fees, net 5,589 (13,056) 13,822 (38,665)
Gain on loan sales, net 7,514 154,256 39,645 243,503
Gain on MSR sales, net 37,248 320 59,033 1,581
Other income 20,688 15,509 36,620 26,187
Operating expenses 63,337 65,489 125,716 123,060
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Earnings before federal income tax 63,420 131,730 120,797 195,403
Provision for federal income taxes 22,230 46,150 42,650 68,496
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Net earnings $ 41,190 $ 85,580 $ 78,147 $ 126,907
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Basic earnings per share $ 0.68 $ 1.44 $ 1.29 $ 2.14
Diluted earnings per share $ 0.65 $ 1.34 $ 1.22 $ 2.00
Dividends paid per common share $ 0.25 $ 0.10 $ 0.50 $ 0.15
Interest rate spread 1.92% 2.02% 1.90% 2.23%
Net interest margin 2.13% 2.26% 2.07% 2.47%
Return on average assets 1.37% 3.48% 1.34% 2.71%
Return on average equity 23.79% 69.55% 22.98% 54.67%
Efficiency ratio 48.59% 31.85% 48.46% 36.58%
Mortgage loans originated or purchased $ 9,001,224 $ 17,488,383 $ 18,451,534 $ 32,550,482
Mortgage loans sold $ 8,085,479 $ 17,287,723 $ 15,726,216 $ 30,540,969
Equity/assets ratio (average for the period) 5.75% 5.00% 5.83% 4.96%
Ratio of charge-offs to average investment loans 0.12% 0.73% 0.17% 0.84%
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SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
June 30, March 31, December 31, June 30,
2004 2004 2003 2003
------------ ------------ ------------ ------------
Total assets $ 11,965,611 $ 12,185,697 $ 10,570,193 $ 10,179,678
Loans held for sale 2,157,845 2,984,776 2,759,551 3,731,829
Investment loans portfolio, net 8,681,371 8,065,100 6,804,235 4,799,097
Allowance for losses 41,704 40,814 36,017 41,509
Mortgage servicing rights 236,211 261,132 260,128 210,869
Deposits 6,534,492 6,075,328 5,680,167 5,269,463
FHLB advances 3,633,199 4,067,409 3,246,000 2,436,122
Stockholders' equity 709,821 672,098 654,683 535,187
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.93% 5.52% 6.19% 5.26%
Core capital ratio 6.41% 6.58% 7.44% 6.58%
Total risk-based capital ratio 11.83% 12.01% 13.47% 12.17%
Book value per share $ 11.61 $ 11.05 $ 10.79 $ 8.99
Shares outstanding 61,141 60,832 60,675 59,499
Mortgage loans serviced for others $ 26,667,308 $ 29,858,203 $ 30,395,079 $ 28,953,871
Value of mortgage servicing rights 0.89% 0.87% 0.86% 0.73%
Allowance for losses to non performing loans 70.0% 66.1% 61.7% 71.7%
Allowance for losses to loans held for
investment 0.48% 0.50% 0.53% 1.03%
Non performing assets to total assets 1.00% 0.96% 1.01% 1.14%
Number of bank branches 103 100 98 95
Number of loan origination centers 137 131 128 108
Number of salaried employees 2,482 2,502 2,523 3,106
Number of commissioned employees 997 1,124 989 1,004