EXHIBIT 99.1
NEWS RELEASE
FOR MORE INFORMATION CONTACT:
Paul D. Borja
Executive Vice President / CFO
(248) 312-2000
FOR IMMEDIATE RELEASE
FLAGSTAR REPORTS FOURTH QUARTER RESULTS
TROY, Mich. (January 24, 2006) - Flagstar Bancorp, Inc. (NYSE:FBC), today
reported fourth quarter 2005 net earnings of $22.8 million, or $0.36 per share -
diluted. For the year ended December 31, 2005, net earnings totaled $79.9
million, or $1.25 per share - diluted.
For the fourth quarter ended December 31, 2004, net earnings totaled $25.4
million, or $0.40 per share - diluted. For the year ended December 31, 2004, net
earnings totaled $142.7 million, or $2.22 per share - diluted. Each of these
amounts for 2004 reflects a restatement of earnings for 2004 and prior periods,
as further described below.
HIGHLIGHTS FROM THE QUARTER INCLUDE:
- - Completion of our first non-agency securitization, resulting in a $14.1
million pre-tax gain
- - A fourth quarter annualized return on average equity of 12.06%
- - The opening of our 137th banking center
- - Loan production of $6.1 billion, including $5.4 billion in residential
mortgage loans
- - Loans serviced for others of $29.7 billion at quarter-end
- - Received an "Outstanding" in Community Reinvestment Act performance
from our principal banking regulator
- - Reduction of $1.1 billion in FHLB Advances
- - Listing on Standard and Poor's Select Server list
BALANCE SHEET AND CAPITAL ADEQUACY
Consolidated assets at December 31, 2005 were $15.1 billion, compared with $15.4
billion at September 30, 2005 and $13.1 billion at December 31, 2004. With its
core capital ratio of 6.21% and risk-based capital ratio of 11.03%, Flagstar
Bank, our wholly-owned subsidiary, will be categorized as a "well-capitalized"
institution for regulatory purposes.
NET INTEREST MARGIN
The net interest margin for the quarter ended December 31, 2005 was 1.73%, which
was a decrease of 15 basis points when compared to the same period last year. On
a sequential quarter basis, our net interest margin increased 1 basis point from
1.72%. Our net interest margin for the year ended December 31, 2005 was 1.82%, a
decrease of 17 basis points when compared to 1.99% reported for the year ended
December 31, 2004.
RETAIL BANKING OPERATIONS
We had 137 branches in operation at December 31, 2005. We expect to open an
additional 15 branches by the end of 2006, nine in Georgia and six in Michigan.
Our banking operations contributed approximately $32.1 million of before-tax
earnings during the quarter. These results were down 4.5% from the third quarter
of 2005.
MORTGAGE BANKING OPERATIONS
Our gain on sale spread increased to 48 basis points during the quarter ended
December 31, 2005 as compared to 11 basis points recorded during the same period
last year. The increase was a result primarily of the $14.1 million pre-tax gain
recorded with the completion of our first non-agency securitization involving
$600 million of our home equity line of credit (HELOC) portfolio. The gain on
sale spread for the year ended December 31, 2005 totaled 31 basis points, which
was a 2 basis point increase when compared to the gain on sale spread for the
year ended December 31, 2004.
At December 31, 2005, our servicing portfolio totaled $29.7 billion with a
weighted average service fee of 34.7 basis points, an increase of $8.3 billion
from December 31, 2004. During December 2005, we completed a $4.8 billion
servicing sale, resulting in a pre-tax gain of $10.2 million.
The capitalized value of our servicing portfolio was $315.7 million, or 1.06% of
the outstanding balance of loans serviced for others, at December 31, 2005. The
estimated market value of the portfolio was $421.1 million at December 31, 2005.
ASSET QUALITY
Non-performing loans totaled $64.5 million at December 31, 2005, an increase of
$7.45 million as compared to $57.0 million recorded at December 31, 2004. The
increase was due in part to the recent surge in bankruptcy filings because of
the new bankruptcy laws. As a result, delinquencies as a percent of loans held
for investment increased to 1.10% at December 31, 2005, from 0.99% at December
31, 2004. Reflecting our business model of focusing primarily on the residential
mortgage market, 87.8% of non-performing loans were collateralized by
single-family homes. The single-family residential first mortgage loans in our
investment portfolio have an average FICO credit score of 721 and an average
loan-to-value ratio of 71%.
RESTATEMENT
During the fourth quarter of 2005, we identified errors in connection with the
computation of our state tax liability. As a result of this discovery, the
Company determined it had understated its state tax accrual by an aggregate
amount of $9.5 million for 2002, 2003 and 2004, which resulted in a $5.9 million
aggregate reduction in net earnings for those years. The Company intends to
restate its financial statements for the years ended December 31, 2002, 2003,
and 2004 to reflect a reduction in net earnings of approximately $2.5 million
for 2002, $2.4 million for 2003, and $1.0 million for 2004.
The restatements will be effected through the Company's filing of its Annual
Report on Form 10-K for the year ended December 31, 2005 (the "2005 Form 10-K").
As a result of the above restatements, management expects to report, in the 2005
Form 10-K, a material weakness in internal control over financial reporting
relating to the Company's process for computing its state tax liability.
Because preparation and completion of Flagstar's financial statements in
connection with its 2005 Form 10-K and restatements to its previously filed
financial statements are ongoing, the financial information presented herein,
including the cumulative effects of the errors described above, is preliminary
and subject to adjustment.
AS PREVIOUSLY ANNOUNCED
The Company's quarterly earnings conference call will be held on Wednesday,
January 25, 2006 from 11 a.m. until noon (Eastern).
Questions for discussion at the conference call should be submitted any time
prior to the call by sending e-mails to investors@flagstar.com.
The conference call and accompanying slide presentation will be webcast live at
http://www.flagstar.com/inside/presentations.jsp. The presentation for the
conference call can be downloaded from the investor relations section of
www.flagstar.com beginning on January 25, 2006.
To participate, please telephone at least 10 minutes prior at (913) 981-5533 or
toll free at (800) 289-0544, passcode: 4653307.
Flagstar Bancorp, which has $15.1 billion in total assets, is the largest
publicly held savings bank in the Midwest. Flagstar currently operates 137
banking centers with $8.0 billion in total deposits. Flagstar banking centers
are located throughout southern Michigan, Indiana and Georgia. Flagstar also
operates 101 loan centers in 24 states. Flagstar Bank is one of the nation's top
20 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.
FLAGSTAR BANCORP, INC.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except share data)
(unaudited)
SUMMARY OF THE CONSOLIDATED STATEMENTS OF At or for the three months ended At or for the year ended
EARNINGS
December 31, September 30, December 31, December 31,
2005 2005 2004 2005 2004
-------------------------------------------------- -------------- -------------
Interest income $ 194,035 $ 185,391 $ 151,563 $ 708,663 $ 563,437
Interest expense 132,191 124,617 94,476 462,393 340,146
----------------------------------------------- ------------- -------------
Net interest income 61,844 60,774 57,087 246,270 223,291
Provision for losses 6,036 3,690 -- 18,876 16,076
----------------------------------------------- ------------- -------------
Net interest income after provision 55,808 57,084 57,087 227,394 207,215
Loan fees and charges, net 3,180 3,587 4,162 12,603 18,003
Deposit fees and charges 4,585 4,356 2,833 16,918 12,125
Loan servicing fees, net 3,061 (1,913) 6,515 8,761 30,097
Gain on loan sales, net 14,644 846 (4,172) 56,424 59,714
Gain on MSR sales, net 11,155 492 16,973 18,157 91,740
Other income 11,625 13,399 12,324 46,585 44,442
Operating expenses
Compensation and benefits 37,475 37,231 38,220 150,738 154,111
Commissions 17,912 25,867 28,216 87,746 105,607
Occupancy and equipment 17,737 16,431 15,703 69,121 66,233
General and administrative 11,714 11,348 7,560 46,362 39,926
Other 7,220 6,321 7,188 26,004 31,199
Capitalized direct cost of loan closing (23,196) (33,970) (40,280) (117,084) (154,070)
----------------------------------------------- ------------- -------------
Earnings before federal income tax 35,196 14,623 39,115 123,955 220,330
Provision for federal income taxes 12,369 5,163 13,753 44,090 77,592
----------------------------------------------- ------------- -------------
Net earnings $ 22,827 $ 9,460 $ 25,362 $ 79,865 $ 142,738
=============================================== ============= =============
Basic earnings per share $ 0.36 $ 0.15 $ 0.41 $ 1.29 $ 2.35
Diluted earnings per share $ 0.36 $ 0.15 $ 0.40 $ 1.25 $ 2.22
Dividends paid per common share $ 0.15 $ 0.25 $ 0.25 $ 0.90 $ 1.00
Interest rate spread 1.72% 1.68% 1.81% 1.74% 1.87%
Net interest margin 1.73% 1.72% 1.88% 1.82% 1.99%
Return on average assets 0.59% 0.25% 0.77% 0.54% 1.17%
Return on average equity 12.06% 5.03% 14.03% 10.66% 20.71%
Efficiency ratio 62.55% 77.54% 59.14% 64.80% 50.11%
Average earning assets $ 14,270,646 $ 14,053,098 $ 12,176,580 $ 13,550,366 $ 11,196,349
Average paying liabilities $ 14,106,712 $ 13,728,860 $ 11,818,776 $ 13,248,394 $ 10,779,332
Average stockholders' equity $ 757,235 $ 752,608 $ 723,312 $ 749,334 $ 689,368
Mortgage loans originated or purchased $ 5,391,749 $ 8,306,439 $ 8,009,740 $ 27,517,754 $ 33,990,965
Other loans originated or purchased $ 661,364 $ 489,665 $ 738,011 $ 2,433,053 $ 1,253,452
Loans sold $ 5,138,506 $ 6,983,384 $ 7,715,883 $ 23,451,429 $ 28,937,576
Equity/assets ratio (average for the period) 4.86% 4.95% 5.48% 5.07% 5.65%
Ratio of charge-offs to average loans held
for investment 0.10% 0.16% 0.15% 0.16% 0.16%
SUMMARY OF THE CONSOLIDATED
STATEMENTS OF FINANCIAL CONDITION:
December 31, September 30, December 31,
2005 2005 2004
---------------------------------------------------------
Total assets $ 15,075,430 $ 15,444,512 $ 13,140,103
Loans held for sale 1,773,394 1,630,527 1,506,311
Loans held for investment, net 10,537,330 11,666,645 10,520,836
Allowance for losses 39,140 35,898 38,318
Servicing rights 315,678 354,185 187,975
Deposits 7,979,000 8,161,415 7,379,655
FHLB advances 4,225,000 5,373,279 4,090,000
Repurchase agreements 1,060,097 - -
Stockholders' equity 764,238 747,163 728,954
OTHER FINANCIAL AND STATISTICAL DATA:
Equity/assets ratio 5.07% 4.84% 5.55%
Core capital ratio 6.21% 5.99% 6.19%
Total risk-based capital ratio 11.03% 10.44% 10.97%
Book value per share $ 12.18 $ 11.98 $ 11.98
Shares outstanding 63,208 62,368 61,358
Loans serviced for others $ 29,648,088 $ 31,282,929 $ 21,354,724
Weighted average service fee (bps) 35.0 35.1 34.1
Value of servicing rights 1.06% 1.13% 0.88%
Allowance for losses to non performing loans 60.71% 69.55% 67.22%
Allowance for losses to loans held for
investment 0.37% 0.31% 0.36%
Non performing assets to total assets 0.98% 0.86% 0.99%
Number of bank branches 137 129 120
Number of loan origination centers 101 105 112
Number of employees (excluding loan
officers & account executives 2,405 2,414 2,396
Number of loan officers and account
executives 689 790 980
FLAGSTAR BANCORP, INC.
LOANS HELD FOR INVESTMENT
(in thousands)
(unaudited)
December 31, September 30, December 31,
2005 % 2005 % 2004 %
----------------------------------------------------------------------------------
First mortgage loans $8,248,897 78.0 $8,901,744 76.1 $8,693,768 82.3
Second mortgage loans 700,492 6.6 532,760 4.6 196,518 1.9
Commercial real estate loans 995,411 9.4 888,051 7.6 751,730 7.1
Construction loans 65,646 0.6 66,811 0.6 67,640 0.6
Warehouse lending 146,694 1.4 242,541 2.1 249,291 2.4
Consumer loans 410,920 3.9 1,064,199 9.1 591,107 5.6
Non-real estate commercial loans 8,411 0.1 6,437 0.1 9,100 0.1
---------------------------------------------------------------------------------
Total loans held for investment $10,576,471 100.0 $11,702,543 100.0 $10,559,154 100.0
=================================================================================
Flagstar Bancorp, Inc.
Deposit Portfolio
(in thousands)
(unaudited)
December 31, 2005 September 30, 2005 December 31, 2004
--------------------------------------------------------------------------
Balance Rate Balance Rate Balance Rate
($ '000) (%) ($ '000) (%) ($ '000) (%)
--------------------------------------------------------------------------
Demand deposits $374,816 0.60 $336,976 0.64 $376,506 0.64
Savings deposits 239,215 1.52 293,704 1.60 884,117 2.12
Money market deposits 781,087 2.98 938,232 2.99 859,573 1.97
Certificates of deposits 3,450,450 3.94 3,135,556 3.80 2,056,608 3.51
--------------------------------------------------------------------------
Total retail deposits 4,845,568 3.41 4,704,468 3.27 4,176,804 2.65
Municipal deposits 1,353,633 4.30 1,621,740 3.81 1,264,225 2.37
Wholesale deposits 1,779,799 3.42 1,835,207 3.37 1,938,626 3.05
--------------------------------------------------------------------------
Total deposits $7,979,000 3.56 $8,161,415 3.40 $7,379,655 2.71
==========================================================================
FLAGSTAR BANCORP, INC.
Gain on Loan Sales
(in thousands)
(unaudited)
For the quarter ended December 31, For the year ended December 31,
---------------------------------- --------------------------------------
2005 2004 2005 2004
---------------------------------- --------------------------------------
Net gain on loan sales $14,644 ($4,172) $56,424 $59,714
Plus: FASB 133 adjustment 4,939 7,019 2,902 357
Plus: secondary market reserve 4,932 5,706 12,484 24,037
---------------------------------- --------------------------------------
Gain on loan sales $24,515 $8,553 $71,810 $84,108
================================== ======================================
Loans sold $5,138,506 $7,715,883 $23,451,429 $28,937,576
================================== ======================================
Sales spread 0.48% 0.11% 0.31% 0.29%
================================== ======================================
FLAGSTAR BANCORP, INC.
ASSET QUALITY & RESERVES
(in thousands)
(unaudited)
DELINQUENCIES AT
December 31, September December
Days delinquent 2005 % 30, 2005 % 31, 2004
------------------------------------------------------------------
30 $30,973 26.7 $28,287 26.9 $34,346
60 20,456 17.7 24.0
25,247 13,247
90 61,816 53.3 45.1
47,397 55,398
matured - delinquent 2,650 2.3 4.0
4,221 1,628
------------------------------------------------------------------
Total $115,895 100.0 $105,152 100.0 $104,619
==================================================================
Investment loans $10,576,471 $11,702,543 $10,559,154
==================================================================
Delinquency % 1.10% 0.90% 0.99%
==================================================================
NON-PERFORMING LOANS AND
ASSETS AT
December September December 31,
31, 2005 30, 2005 2004
------------------------------------------
Non-performing loans $64,466 $51,618 $57,008
As a percent of investment loans 0.61% 0.44% 0.55%
Non-performing assets $146,967 $133,017 $129,844
As a percent of total assets 0.98% 0.86% 0.99%
FLAGSTAR BANCORP, INC.
LOAN ORIGINATIONS
(in millions)
(unaudited)
For the quarter ended For the year ended
December 31, September 30, December 31, December 31, December 31,
Loan type 2005 % 2005 % 2004 % 2005 % 2004 %
- ------------------------------------------------------------------------------------------------------------------------------------
Residential mortgage loans $ 5,621 92.9 $ 8,306 94.4 $ 8,815 95.5 $ 28,245 94.3 $ 34,249 97.2
Consumer loans 230 3.8 350 4.0 264 2.9 1,151 3.8 627 1.8
Commercial loans 202 3.3 140 1.6 156 1.7 555 1.9 368 1.0
--------------------------------------------------------------------------------------------------------
Total loan production $ 6,053 100.0 $ 8,796 100.0 $ 9,235 100.0 $ 29,951 100.0 $ 35,244 100.0
========================================================================================================