Exhibit 99.1
[FLAGSTAR LOGO]
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Michael W. Carrie
Executive Director / CFO
(248) 312-2000
FLAGSTAR ANNOUNCES FOURTH QUARTER NET EARNINGS OF $0.44 PER SHARE;
Troy, Michigan (January 24, 2005) - Flagstar Bancorp, Inc. (NYSE:FBC), today
reported quarterly earnings of $28.2 million, or $0.44 per share - diluted
compared to $36.7 million, or $0.57 per share - diluted, reported in the
comparable 2003 period.
The quarterly net earnings reported are $0.07 per share lower than previously
projected. The shortfall in earnings can be seen in the lower than expected gain
on sale margin recorded on loan sales completed during the quarter and the
decreased interest margin.
Net earnings for 2004 were $146.4 million, or $2.28 per share - diluted compared
to the $254.4 million, or $3.99 per share - diluted reported for 2003.
HIGHLIGHTS IN THE REPORT INCLUDE:
- - An annualized return on average equity of 15.3% for the quarter and 20.8%
for all of 2004;
- - An annualized return on average assets of 0.85% for the quarter and 1.20%
for all of 2004;
- - An interest margin of 1.88%, down on a sequential quarter basis by 0.10%;
- - A fourth quarter operating efficiency ratio of 57.2% and 49.8% for all of
2004;
- - An annual balance sheet growth of 24.3% including an increase of 29.8% in
the deposit portfolio and 54.6% in the investment loan categories;
- - An annual growth of 141.7% in the Company's consumer loan portfolio and a
37.1% increase in the Company's commercial real estate portfolio;
- - The grand opening of 12 new banking centers in the fourth quarter and 22
new banking centers for all of 2004;
- - Mortgages serviced for others of $21.4 billion with a recorded value of 88
basis points;
- - A fourth quarter gain on sale margin of 13 basis points, down on a
sequential quarter basis by 36 basis points;
- - Mortgage origination volume of $8.7 billion for the quarter and $34.0
billion for 2004;
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RETAIL BANKING PROFITS
The portion of the Company's net earnings attributable to the retail banking
operation rose during the quarter. This was primarily due to the reduced
earnings recorded by the mortgage banking operation. During the fourth quarter
of 2004, the banking operation provided approximately 76.5% of net earnings,
compared with 60.1% reported for the third quarter of 2004 and the 53.8%
reported for the comparable 2003 period. Current projections show the majority
of net earnings will come from the retail banking operation for 2005.
Flagstar's deposits were $7.4 billion at December 31, 2004 compared with $5.7
billion at December 31, 2003. Consumer direct transaction account balances,
including checking, savings and money market accounts, represented $2.1 billion
and $2.0 billion at December 31, 2004 and 2003, respectively. Over the past
year, the Company's total cost of deposits has risen by 33 basis points and
increased 16 basis points in the fourth quarter.
The Company's $2.5 billion annual growth in the balance sheet included a $1.7
billion increase in deposits and a $0.9 billion increase in advances from the
Federal Home Loan Bank. These liabilities were used to fund the $2.5 billion
annual increase in the earning asset portfolio. Mortgage loans held for
investment increased $3.2 billion during the year, while loans held for sale
decreased $1.3 billion.
NET INTEREST INCOME VOLUME GROWS WITH BALANCE SHEET INCREASE
Net interest income was reported at $57.1 million, up $15.1 million over the
$42.0 million reported in the comparable period last year and up $1.2 million,
or 2.1% over the $55.9 million recorded in the September 2004 quarter. The net
interest margin for the quarter was 1.88%, compared with 1.80% for the same
period last year, and the 1.98% reported in the previous quarter. The net
decrease reported from the September 2004 quarter was caused by the decreased
spread on newly acquired assets and the rising interest rate environment.
Although virtually all of the Company's assets are duration matched, a portion
of the Company's assets and liabilities are interest sensitive and are affected
by a sharp rise in short term rates.
On December 31, 2004, the Company had a calculated interest margin of
approximately 2.18% within the current balance sheet. The calculated margin was
based on a $12.0 billion earning asset portfolio that yielded 5.18% and an $11.6
billion liability base that had a cost of 3.12%.
For all of 2004, net interest income grew $28.7 million, or 14.7%, versus 2003.
The increase was primarily attributable to the $2.0 billion, or 21.7% increase
in average earning assets. This increase in earning assets was offset by a
reduction of 22 basis points in the net interest margin.
LOAN SALE GAINS
Gains recorded on the sales of mortgage loans were a negative $2.6 million
during the quarter ended December 31, 2004 versus $22.1 million in the
comparable 2003 period. This decrease was attributable to the 24 basis point
reduction in the gain on sale spread and the increased amount of adjustments to
the period gains. The calculated spread equaled 13 basis points in the fourth
quarter and 29 basis points for all of 2004 versus 37 basis points in the fourth
quarter of 2003 and 74 basis points for all of 2003. During the quarter ended
December 31, 2004, the Company recorded a net $7.0 million reduction in the fair
value of its mortgage banking derivate portfolio and a net $5.7 in charges
attributable to representation and warranty issues.
For the three months ended For the year ended
December December December December
2004 2003 2004 2003
---------- ---------- ----------- -----------
Net gain on loan sales $ (2,633) $ 22,107 $ 61,253 $ 357,276
Plus: FASB 133 adjustment 7,019 1,442 357 10,695
Plus: Secondary Market Reserve 5,706 273 22,498 14,160
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Gain on loan sales $ 10,092 $ 23,822 $ 84,108 $ 382,131
========== ========== =========== ===========
Loans sold $7,715,883 $6,403,128 $28,937,576 $51,922,757
Sales spread 0.13% 0.37% 0.29% 0.74%
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LOAN SALE GAINS - (CONTINUED)
As previously reported, the Company recorded $8.7 billion in loan originations
during the quarter versus $7.8 billion originated in the 2003 period. During the
fourth quarter, 57.6% of loan originations involved refinances of existing
loans, whereas in the comparable 2003 period 70.5% of loan originations were
refinances. During 2004, 60.4% of the Company's loan originations were
refinances compared to 85.1% in 2003. In December 2004, 57.7% of loan
originations were refinances.
MORTGAGE SERVICING
GAIN ON SALES OF MORTGAGE SERVICING RIGHTS
Gains recorded on the sales of mortgage serving rights totaled $17.0 million
during the quarter ended December 31, 2004 versus $21.1 million in the
comparable 2003 period. This decrease, despite an increase in the amount of
underlying mortgages sold, was attributable to the final settlement on a number
of MSR sales closed throughout 2003 ($6.3 million in 2003 versus $0.8 million in
2004). During 2004, the Company sold $30.6 billion, or 105.9% of its MSR
originations versus $33.1 billion, or 63.8% of the MSR originated in 2003.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $188.0 million, or 0.88% of
the outstanding balance. The preliminary market value of the portfolio is $257.0
million. During the quarter, no impairment adjustment or recapture was made to
the book value of the portfolio. The Company charged off $15.4 million in book
value for loan prepayments and amortization during the quarter.
LOANS SERVICED FOR OTHERS
At year-end, the Company serviced $21.4 billion in loans for others. This volume
is down 29.7% from December 31, 2003. The portfolio contains 167,300 loans that
have a weighted rate of 6.13%, a weighted service fee of 34.1 basis points, and
a weighted fifteen months of seasoning. Gross portfolio revenue before
amortization was reported at $21.9 million during the quarter, down $7.0
million, or 24.2% over the comparable 2003 period.
For the three months ended For the year ended
December December December December
2004 2003 2004 2003
----------- ----------- ----------- -----------
Beginning balance $20,824,209 $29,312,081 $30,395,079 $21,586,797
Originations 7,715,883 6,403,128 28,937,576 51,922,757
Sales 5,829,791 3,666,296 30,608,474 33,132,061
Amortizations and prepayments 1,355,577 1,653,834 7,369,457 9,982,414
----------- ----------- ----------- -----------
Ending balance $21,354,724 $30,395,079 $21,354,724 $30,395,079
=========== =========== =========== ===========
ASSET QUALITY
PROVISION FOR LOAN LOSSES
For the three months ended December 31, 2004, the provision for loan losses was
reported at $1.5 million as compared to the $2.1 million during the fourth
quarter of 2003. Net charge-offs were an annualized 0.18% and 0.17% of average
investment loans during the three months ended December 31, 2004 and December
31, 2003, respectively.
For the years 2004 and 2003, the provision for loan losses was reported as $17.6
million and $20.1 million, respectively. Net charge-offs were 0.20% and 0.35% of
average investment loans during 2004 and 2003, respectively.
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ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses totaled $37.6 million at December 31, 2004. The
allowance for loan losses totaled $36.0 million at December 31, 2003.
The allowance for losses as a percentage of non-performing loans was 66.2% and
61.7% at December 31, 2004 and December 31, 2003, respectively. The allowance
for losses as a percentage of investment loans was 0.36% and 0.53% at December
31, 2004 and December 31, 2003, respectively.
NON-PERFORMING LOANS
Non-performing loans at year-end were $56.9 million, down $1.4 million from
December 31, 2003. Total delinquencies in the Company's investment loan
portfolio equaled 0.99% at December 31, 2003, compared with 1.54% at December
31, 2003.
Consistent with the Company's business model approximately 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.
SECONDARY MARKET RESERVE
The reserve for losses on repurchased assets was increased $8.7 million, or
84.4% to $19.0 million at December 31, 2004 from $10.3 million at December 31,
2003.
Net losses attributable to repurchased assets totaled $4.2 million and $3.5
million for the three months ended December 31, 2004 and 2003, respectively.
Net losses attributable to repurchased assets totaled $20.0 million during 2004.
This total compares to the $12.0 million recorded in 2003.
REPURCHASED ASSETS
Net repurchased assets pending foreclosure totaled $17.1 million at December 31,
2004 compared to $12.0 million at December 31, 2003 and $20.9 million at
September 30, 2004. During 2004, the Company repurchased $64.1 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.
BALANCE SHEET AND CAPITAL MANAGEMENT
Consolidated assets at December 31, 2004 were $13.1 billion, compared with $12.8
billion at September 30, 2004 and $10.6 billion at December 31, 2003.
Flagstar's stockholders' equity now stands at $745.8 million, or 5.67% of total
assets. The book value of the common stock at December 31, 2004 equaled $12.16
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 6.28% and the Total
risk-based capital ratio stood at 11.13% at December 31, 2004.
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AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held Tuesday, January
25, 2005, at 11:00 a.m. Eastern Time. To participate, please telephone at least
ten minutes prior at (800) 310-6649.
Flagstar Bancorp, which has $13.1 billion in total assets, is the second largest
independent banking institution headquartered in Michigan. Flagstar operates 120
banking centers in Michigan and Indiana, 112 loan centers in 26 states and
correspondent 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,
2004 2003 2004 2003
----------- ---------- ----------- -----------
(Unaudited, In Thousands,Except Share Data)
Interest income $ 151,563 $ 122,535 $ 563,437 $ 503,068
Interest expense 94,476 80,512 340,147 308,483
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Net interest income 57,087 42,023 223,290 194,585
Provision for losses 1,539 2,067 17,616 20,081
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Net interest income after provision 55,548 39,956 205,674 174,504
Loan fees and charges, net 4,162 3,663 18,003 17,440
Deposit fees and charges 2,833 2,530 12,125 7,006
Loan servicing fees, net 6,515 12,543 30,097 (18,660)
Gain on loan sales, net (2,633) 22,107 61,253 357,276
Gain on MSR sales, net 16,973 21,102 91,740 67,302
Other income 16,329 14,282 48,447 35,514
Operating expenses 56,217 60,253 241,441 249,275
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Earnings before federal tax provision 43,510 55,930 225,898 391,107
Provision for federal income taxes 15,292 19,259 79,541 136,755
----------- ---------- ----------- -----------
NET EARNINGS $ 28,218 $ 36,671 $ 146,357 $ 254,352
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Basic earnings per share $ 0.46 $ 0.60 $ 2.40 $ 4.25
Diluted earnings per share $ 0.44 $ 0.57 $ 2.28 $ 3.99
Dividends paid per common share $ 0.25 $ 0.15 $ 1.00 $ 0.50
Interest rate spread 1.81% 1.72% 1.87% 2.00%
Net interest margin 1.88% 1.80% 1.99% 2.21%
Return on average assets 0.85% 1.36% 1.20% 2.52%
Return on average equity 15.29% 23.29% 20.79% 47.58%
Efficiency ratio 57.21% 50.25% 49.79% 37.70%
Average earning assets $12,176,580 $9,865,496 $11,196,349 $ 9,168,237
Average paying liabilities $11,818,776 $9,573,434 $10,770,332 $ 8,635,368
Average stockholders' equity $738,011 $ 629,801 $ 704,067 $ 534,626
Mortgage loans originated or purchased $ 8,730,154 $7,800,580 $33,990,965 $56,378,151
Mortgage loans sold $ 7,715,883 $6,403,128 $28,937,576 $51,922,757
Equity/assets ratio (average for the period) 5.59% 5.83% 5.76% 5.30%
Ratio of charge-offs to average investment loans 0.18% 0.17% 0.20% 0.35%
Certain amounts within the accompanying summary of selected consolidated
financial data have been reclassified to conform to the 2004 presentation.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA-CONTINUED
SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL
CONDITION:
December 31, September 30, December 31, December 31,
2004 2004 2003 2002
----------- ------------ ----------- -----------
(Unaudited, In Thousands, Except Share Data)
Total assets $13,142,361 $12,783,121 $10,570,193 $ 8,212,786
Loans held for sale 1,506,311 2,174,186 2,759,551 3,302,212
Investment loans portfolio, net 10,520,836 9,415,255 6,804,236 3,947,362
Allowance for losses 37,627 40,980 36,017 37,764
Mortgage servicing rights 187,975 175,593 260,128 230,756
Deposits 7,379,655 7,542,581 5,680,167 4,373,889
FHLB advances 4,090,000 3,408,000 3,246,000 2,222,000
Stockholders' equity 745,804 731,242 654,683 418,946
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.67% 5.72% 6.19% 5.10%
Core capital ratio 6.28% 6.15% 7.44% 6.73%
Total risk-based capital ratio 11.13% 11.20% 13.47% 12.01%
Book value per share $ 12.16 $ 11.92 $ 10.79 $ 7.08
Shares outstanding 61,357 61,338 60,675 59,190
Mortgage loans serviced for others $21,354,724 $20,824,209 $30,395,079 $21,586,797
Value of mortgage servicing rights 0.88% 0.84% 0.86% 1.07%
Allowance for losses to non performing loans 66.2% 71.4% 61.7% 55.5%
Allowance for losses to investment loans 0.36% 0.43% 0.53% 0.95%
Non performing assets to total assets 0.85% 0.90% 1.01% 1.50%
Number of banking centers 120 108 99 87
Number of home lending centers 112 123 128 92
Number of salaried employees 2,396 2,407 2,523 2,754
Number of commissioned employees 980 989 989 834
Certain amounts within the accompanying summary of selected consolidated
financial data have been reclassified to conform to the 2004 presentation.