EXHIBIT 99.1
[FLAGSTAR BANCORP LOGO]
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Paul D. Borja
Executive Vice Executive / CFO
(248) 312-2000
FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS SECOND QUARTER RESULTS
Troy, Mich. (July 27, 2005) - Flagstar Bancorp, Inc. (NYSE:FBC), today released
second quarter net earnings of $27.8 million, or $0.43 per share - diluted.
These results represent a 4.4% decrease when compared to previously-issued
Company guidance of $0.45 to $0.60 per share. For the second quarter ended June
30, 2004 net earnings totaled $41.2 million, or $0.65 per share - diluted.
For the six months ended June 30, 2005 net earnings totaled $47.6 million, or
$0.74 per share - diluted. These results compare to $78.1 million, or $1.22 per
share - diluted, reported in the comparable 2004 period.
HIGHLIGHTS FROM THE QUARTERLY REPORT INCLUDE:
- - An annualized return on average equity of 14.88%;
- - Total assets increased 4.2% in the quarter to $14.9 billion;
- - A second quarter annualized balance sheet growth of 27.5%, including an
annualized increase of 13.5% in the deposit portfolio and an annualized
growth of 24.8% in the investment loan categories;
- - Second quarter total loan production of $7.5 billion;
- - A second quarter operating efficiency ratio of 59.19%;
- - The opening of the Company's 128th banking center;
- - Retail banking earned 55.6% of pretax earnings for the quarter;
- - Mortgages serviced for others of $26.6 billion.
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RETAIL BANKING OPERATIONS
The Company's pre-tax profits from its banking operations totaled approximately
$24.1 million during the quarter. These results were down 20.5% from the first
quarter of 2005 and down 35.8% from the second quarter of 2004. During the
current quarter, the earning asset base of the retail banking operations
increased 4.5% and provided 55.6% of pre-tax operating earnings compared to
61.6% for 2004. This compares with a 98.2% contribution to pre-tax operating
earnings by the retail banking operation in the first quarter of 2005. This
change reflects the compressed net interest margin experienced in the second
quarter of 2005, resulting in lower earnings attributed to the retail banking
operations, coupled with the $18.7 million increase in revenues attributable to
the mortgage banking operations during the second quarter of 2005. The increase
in mortgage banking revenues was primarily from increased loan sales. The
Company opened five banking centers during the quarter and a total of eight
during the first six-months of 2005.
Flagstar's deposits were $7.9 billion at June 30, 2005 compared with $7.4
billion at December 31, 2004 and $6.5 billion at June 30, 2004. At June 30,
2005, consumer transaction account balances, including checking, savings, and
money market accounts, represented $1.8 billion compared with $2.1 billion at
December 31, 2004. During the past quarter, the Company's average weighted cost
of deposits increased by 28 basis points.
The Company's consumer certificate of deposit portfolio carries a weighted rate
of 3.67% and a weighted term of 16.1 months at June 30, 2005. On a sequential
quarter, the average weighted rate increased 3.7% from the 3.54% reported in the
first quarter of 2005.
The municipal division totals $1.5 billion in funds from local governmental
entities within the Company's immediate market area. These deposits carry a
weighted rate of 3.41% and a weighted term of 3.0 months at June 30, 2005. On a
sequential quarter, the weighted rate on municipal deposits increased by 15.6%
from the 2.95% reported in the first quarter of 2005.
The national deposits are comprised of strategically placed duration specific
offerings solicited to a nation wide audience. These deposits carry a weighted
rate of 3.28% and a weighted term of 21.4 months at June 30, 2005. The weighted
average rate for national deposits increased 3.1% from 3.18% reported for the
quarter ended March 31, 2005.
NET INTEREST INCOME
Net interest income was $58.4 million for the three months ended June 30, 2005
compared to $59.3 million in the comparable period for 2004, and $123.7 million
for the six months ended June 30, 2005 compared to $110.3 million in the same
period last year. The net interest margin for the quarter ended June 30, 2005
was 1.79%, which was a decrease of 34 basis points when compared to the same
period last year. The net interest margin for the six months ended June 30, 2005
was 1.90% compared to 2.07% for the six months ended June 30, 2004.
On a sequential quarter basis, the Company's net interest income decreased
because of the 19 basis point decrease in the interest rate spread. The net
interest margin decreased 21 basis points to 1.79% from the 2.00% recorded in
the first quarter of 2005.
MORTGAGE BANKING OPERATIONS
LOAN SALE GAINS
Gains recorded on the sales of mortgage loans were $31.2 million during the
quarter ended June 30, 2005 from $7.5 million recorded in the comparable 2004
period. This increase was attributable to the 30 basis point increase achieved
on the gain on sale spread during the quarter ended June 30, 2005 compared to
the same quarter in 2004. On a sequential quarter basis the gain on sale spread
equaled 47 basis points in the second quarter of 2005 versus 14 basis points in
the first quarter of 2005.
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LOAN SALE GAINS (CONTINUED)
As previously reported, the Company originated $7.1 billion in residential
mortgage loans in the second quarter of 2005. This production level compares to
the $9.1 billion originated in the comparable 2004 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 2005 June 2004 June 2005 June 2004
------------ ------------ ------------ ------------
Net gain on loan sales $ 31,177 $ 7,513 $ 40,933 $ 39,645
Plus: FASB 133 adjustment (5,866) 159 (9,001) (6,545)
Plus: Secondary Market Reserve 2,452 5,849 3,454 13,916
------------ ------------ ------------ ------------
Gain on loan sales $ 27,763 $ 13,521 $ 35,386 $ 47,016
Loans sold $ 5,891,492 $ 8,085,479 $ 11,329,539 $ 15,726,216
Sales spread 0.47% 0.17% 0.32% 0.30%
MORTGAGE SERVICING
LOANS SERVICED FOR OTHERS
At June 30, 2005, the Company serviced $26.6 billion in loans for others. This
volume is up 24.3% from December 31, 2004 and down 0.4% from June 30, 2004.
During the first six months of 2005 the Company sold $2.5 billion in bulk
servicing as compared to $8.8 billion of bulk servicing sales and $5.7 billion
in flow servicing sales completed in the first six months of 2004.
The current portfolio contains 198,102 loans that have a weighted rate of 6.03%,
a weighted service fee of 34.8 basis points, and a weighted 14 months of
seasoning. Revenue from the portfolio earned $21.7 million during the quarter,
down $8.2 million, or 27.4% over the comparable 2004 period. For the six months
ended June 30, 2005 revenue from the loan serviced for others portfolio totaled
$43.8 million, a decrease of $15.2 million, or 25.8% compared to the six months
ended June 30, 2004.
MORTGAGE SERVICING RIGHTS
The capitalized value of the servicing portfolio is $284.3 million, or 1.07% of
the outstanding balance. The estimated market value of the portfolio was $314.1
million at June 30, 2005. The Company amortized $36.2 million in book value for
loan prepayments and amortizations for the first six months of 2005.
ASSET QUALITY
NON-PERFORMING LOANS
Non-performing loans at June 30, 2005 were $65.2 million, down $1.9 million or
2.8% from year-end and up $3.7 million from June 30, 2004. Total delinquencies
in the Company's investment loan portfolio equaled 1.00% at June 30, 2005,
compared with 0.99% at December 31, 2004 and 1.20% at June 30, 2004. Delinquent
loans include $14.9 million in matured commercial real estate loans that are in
the process of being renegotiated.
Consistent with the Company's business model, 91% of non-performing loans were
backed by single family homes.
PROVISION FOR LOSSES
The provision for losses was $2.9 million for the three months ended June 30,
2005 as compared to the $3.6 million recorded during the second quarter of 2004.
Net charge-offs were an annualized 0.24% and 0.12% of average investment loans
during the three months ended June 30, 2005 and June 30, 2004, respectively.
Provision for losses were $9.2 million for the six months ended June 30, 2005, a
decrease of $3.7 million, or 28.7% when compared to the same period in 2004. Net
charge-offs were annualized at 0.24% of average investment loans for the six
months ended June 30, 2005 and 0.17% for the six months ended June 30, 2004.
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ALLOWANCE FOR LOSSES
The allowance for losses totaled $33.3 million at June 30, 2005, as compared to
$37.6 million at December 31, 2004 and $41.7 million at June 30, 2004. The
allowance for losses decreased slightly on a sequential quarter basis due to a
minimal improvement in delinquency ratios and a small decrease in non-performing
loans. Non-performing loan to loans held for investment declined to 0.55% from
0.71% at June 30, 2004. The ratio of non-performing assets to total assets
declined to 93 basis points at June 30, 2005 from 102 basis points at June 30,
2004.
The allowance for losses as a percentage of non-performing loans was 51.2%,
56.1%, and 67.8% at June 30, 2005, December 31, 2004, and June 30, 2004,
respectively. The allowance for losses as a percentage of investment loans was
0.28%, 0.36%, and 0.48% at June 30, 2005, December 31, 2004, and June 30, 2004,
respectively.
REPURCHASED ASSETS
Net repurchased assets pending foreclosure totaled $15.8 million at June 30,
2005, a decrease of $1.3 million, or 7.6% compared to $17.1 million at December
31, 2004, and a decrease of $6.1 million, or 28.9%, compared to $21.9 million at
June 30, 2004. During the first six months of 2005, the Company repurchased
$27.6 million in non-performing assets previously sold to the secondary market.
During 2004, the Company repurchased a total of $68.7 million in non-performing
assets.
SECONDARY MARKET RESERVE
The secondary market reserve totaled $15.6 million at June 30, 2005 compared to
$19.0 million at December 31, 2004. The secondary market reserve is determined
based upon a systematic methodology that incorporates management's analysis of
the potential for future repurchased loans and the effects of actual
recoveries. Provisions charged to earnings attributable to secondary market
activities totaled $2.5 million and $5.8 million for the three months ended June
30, 2005 and 2004, respectively. During the six months ended June 30, 2005 and
2004, provisions charged to earnings attributable to secondary market activities
totaled $3.5 million and $13.9 million, respectively.
BALANCE SHEET AND CAPITAL ADEQUACY
Consolidated assets at June 30, 2005 were $14.9 billion, compared with $13.1
billion at December 31, 2004 and $11.9 billion at June 30, 2004.
The Company's investment loan portfolio totaled $11.8 billion at June 30, 2005
as compared to $10.5 billion at December 31, 2004. The investment loan portfolio
was comprised of the following loans:
June 30, December 31, June 30,
DESCRIPTION: 2005 2004 2004
----------- ----------- -----------
(In thousands)
First mortgage loans $ 9,341,981 $ 8,657,293 $ 7,369,787
Second mortgage loans 293,582 196,518 133,769
Commercial real estate loans 846,706 751,730 575,459
Construction loans 67,749 67,640 67,793
Warehouse lending 289,244 249,291 237,343
Consumer loans 937,503 627,576 330,675
Non-real estate commercial loans 8,415 7,715 8,250
----------- ----------- -----------
Total investment loan portfolio $11,784,480 $10,558,463 $ 8,723,076
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Flagstar's stockholders' equity now stands at $755.3 million, or 5.06% of total
assets. The book value of the common stock at June 30, 2005 equaled $12.13 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 6.07% and the total
risk-based capital ratio stood at 10.50% at June 30, 2005.
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AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Thursday, July
28, 2005 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 (913)
981-5572 or toll free at (800) 406-5356, passcode: 4953117.
Flagstar Bancorp, which has $14.9 billion in total assets, is the second largest
banking institution headquartered in Michigan. Flagstar currently operates 128
banking centers with $7.9 billion in total deposits. Flagstar banking centers
are located throughout southern Michigan, Indiana and Georgia. Flagstar also
operates 114 loan centers in 27 states and 11 correspondent lending offices
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
(unaudited, in thousands, except share data)
SUMMARY OF THE CONSOLIDATED STATEMENTS OF At or for the three months At or for the six months
EARNINGS ended June 30, ended June 30,
2005 2004 2005 2004
----------- ----------- ----------- -----------
Interest income $ 166,111 $ 140,214 $ 329,237 $ 271,055
Interest expense 107,670 80,893 205,586 160,757
----------- ----------- ----------- -----------
Net interest income 58,441 59,321 123,651 110,298
Provision for losses 2,904 3,603 9,150 12,905
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Net interest income after provision 55,537 55,718 114,501 97,393
Loan fees and charges, net 3,213 6,017 5,835 10,088
Deposit fees and charges 4,400 3,291 7,977 6,159
Loan servicing fees, net 1,669 5,590 7,614 13,822
Gain on loan sales, net 31,177 7,513 40,933 39,645
Gain on MSR sales, net 2,262 37,248 6,510 59,033
Other income 12,148 11,380 21,561 20,373
Operating expenses 67,074 63,337 130,796 125,716
----------- ----------- ----------- -----------
Earnings before federal income tax 43,332 63,420 74,135 120,797
Provision for federal income taxes 15,532 22,230 26,557 42,650
----------- ----------- ----------- -----------
Net earnings $ 27,800 $ 41,190 $ 47,578 $ 78,147
=========== =========== =========== ===========
Basic earnings per share $ 0.45 $ 0.68 $ 0.77 $ 1.29
Diluted earnings per share $ 0.43 $ 0.65 $ 0.74 $ 1.22
Dividends paid per common share $ 0.25 $ 0.25 $ 0.50 $ 0.50
Interest rate spread 1.71% 1.91% 1.71% 1.90%
Net interest margin 1.79% 2.13% 1.90% 2.07%
Return on average assets 0.78% 1.37% 0.67% 1.34%
Return on average equity 14.88% 24.18% 12.80% 23.26%
Efficiency ratio 59.19% 48.59% 61.10% 48.46%
Average earning assets $13,061,872 $11,148,249 $13,108,399 $10,705,189
Average paying liabilities $12,795,846 $10,440,973 $12,576,554 $10,225,249
Average stockholders' equity $ 747,452 $ 681,407 $ 743,618 $ 669,086
Mortgage loans originated or purchased $ 7,103,622 $ 9,054,958 $14,316,714 $18,543,272
Other loans originated or purchased $ 427,368 $ 172,330 $ 784,876 $ 297,472
Mortgage loans sold $ 5,891,492 $ 8,085,479 $11,329,539 $15,726,216
Equity/assets ratio (average for the period) 5.27% 5.66% 5.25% 5.74%
Ratio of charge-offs to average investment loans 0.24% 0.12% 0.24% 0.17%
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SUMMARY OF THE CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION:
June 30, March 31, December 31, June 30,
2005 2005 2004 2004
----------- ----------- ----------- -----------
Total assets $14,916,627 $14,273,842 $13,125,488 $11,948,665
Loans held for sale 1,961,977 1,980,854 1,506,311 2,157,845
Investment loans portfolio, net 11,751,110 11,158,390 10,520,836 8,681,371
Allowance for losses 33,372 37,018 37,627 41,704
Mortgage servicing rights 284,331 215,043 187,975 236,211
Deposits 7,887,028 7,744,681 7,379,655 6,534,492
FHLB advances 5,161,035 4,738,000 4,090,000 3,633,199
Stockholders' equity 755,278 743,198 734,837 698,806
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.06% 5.21% 5.60% 5.85%
Core capital ratio 6.07% 6.24% 6.19% 6.36%
Total risk-based capital ratio 10.50% 10.99% 10.97% 11.72%
Book value per share $ 12.13 $ 11.99 $ 11.98 $ 11.43
Shares outstanding 62,244 62,006 61,358 61,141
Mortgage loans serviced for others $26,646,531 $22,518,180 $21,354,724 $26,667,308
Value of mortgage servicing rights 1.07% 0.95% 0.88% 0.89%
Allowance for losses to non performing loans 51.2% 64.6% 56.1% 67.8%
Allowance for losses to loans held for 0.28% 0.33% 0.36% 0.48%
Non performing assets to total assets 0.93% 0.92% 1.07% 1.02%
Number of bank branches 128 123 120 103
Number of loan origination centers 114 109 112 137
Number of salaried employees 2,431 2,404 2,396 2,482
Number of commissioned employees 800 838 980 997