TROY, Mich., Jan. 30 /PRNewswire-FirstCall/ -- Flagstar Bancorp, Inc. , today reported 2006 year to date net earnings of $75.2 million, or $1.17 per share (diluted) and 2006 fourth quarter net earnings of $6.9 million, or $0.11 per share (diluted). Full year 2005 earnings were $79.9 million, or $1.25 per share (diluted) and 2005 fourth quarter net earnings were $22.8 million, or $0.36 per share (diluted). On a linked-quarter basis, net earnings were $20.8 million, or $0.32 per share (diluted) in 2006 third quarter. Return on equity for the full year and the fourth quarter 2006 were 9.42% and 3.41%, respectively, as compared to 10.66% and 12.06% for the same periods in 2005.
Full year 2006 earnings were negatively affected by lower net interest income, a decline in gain on loan sales, and a one-time charge in the fourth quarter, relating to a fidelity bond coverage dispute. These were largely offset by an increase in gain on mortgage servicing sales.
The 2006 fourth quarter earnings as compared to the same period in 2005, as well as on a linked-quarter basis, were negatively impacted by, among other factors, lower net interest income, a one-time charge of $8.7 million resulting from a fidelity bond coverage dispute and a reduction in gain on sale of mortgage servicing rights. These were partially offset by an improvement in gain on loan sales.
Balance Sheet and Capital Adequacy
Consolidated assets increased $0.4 billion or 2.6%, to $15.5 billion at December 31, 2006 as compared to $15.1 billion at December 31, 2005. The regulatory capital ratios of Flagstar Bank, our wholly owned subsidiary, were 6.4% core capital and 11.6% risk-based capital at December 31, 2006. Flagstar Bank was considered "well-capitalized" for regulatory purposes at December 31, 2006.
Net Interest Margin
The net interest margin of Flagstar Bank for the year ended December 31, 2006 was 1.63%, as compared to 1.88% for the year ended December 31, 2005. Flagstar Bank's net interest margin for the fourth quarter 2006 was 1.58%, as compared to 1.67% for the third quarter 2006 and 1.73% for the fourth quarter 2005.
Retail Banking Operations
Flagstar Bank had 151 retail banking branches at December 31, 2006, an increase of 10.2% as compared to 137 branches as of December 31, 2005. At year-end 2006, the Bank had 13 branches in Georgia, an increase of 160% as compared to five branches as of December 31, 2005. Flagstar currently plans to open 13 branches during 2007, seven in Georgia. During 2006, the total number of retail accounts increased 8.5% to over 277,900 as compared to approximately 256,100 at December 31, 2005.
Mortgage Banking Operations
Loan production for 2006 totaled $20.2 billion, including $19.0 billion of residential loans, as compared to $30.0 billion, including $28.2 billion of residential loans, for 2005. Loan production for the fourth quarter 2006 was $5.4 billion, including $5.1 billion of residential loans, as compared to $4.8 billion, including $4.6 billion of residential loans during the third quarter 2006. For the years ended December 31, 2006 and 2005, gain on loan sale spread was 28 basis points and 31 basis points, respectively. Gain on sale spread was 52 basis points during the quarter ended December 31, 2006 as compared to 4 basis points for the third quarter 2006 and 48 basis points for the 2005 fourth quarter.
Sales of servicing rights for the year ended December 31, 2006 related to $25.2 billion of underlying loans as compared to $7.2 billion during 2005, with gain on sales of $92.6 million and $18.2 million, respectively. During the fourth quarter 2006, Flagstar sold servicing rights related to underlying loans of $2.3 billion as compared to $10.7 billion during the third quarter 2006 and $4.8 billion during the fourth quarter 2005. This resulted in a gain on sales of servicing rights of $3.9 million in the fourth quarter 2006 as compared to $45.2 million in the third quarter 2006 and $11.2 million in the fourth quarter 2005. "These transactions reflect the strategic nature of our MSR sales, which we have historically engaged in and which form an integral part of our overall business model," said Mark Hammond, president and CEO of Flagstar Bank.
At December 31, 2006, Flagstar's mortgage servicing portfolio totaled $15.0 billion with a weighted average service fee of 37.1 basis points, an increase from $14.8 billion at September 30, 2006 with a weighted average servicing fee of 34.6 basis points. The capitalized value of Flagstar's servicing portfolio was $173.3 million, or 1.15% of the outstanding balance of loans serviced for others, at December 31, 2006 with an estimated market value of $197.6 million. This compares to the capitalized value of $150.7 million, or 1.02%, at September 30, 2006 with an estimated market value of $180.0 million.
Asset Quality
Net charge-offs of loans for 2006 totaled $18.8 million as compared to $18.1 million in 2005. Net charge-offs of loans during the fourth quarter 2006 increased to $5.2 million from $4.2 million during the third quarter 2006. Non-performing loans were $57.1 million at December 31, 2006 as compared to $64.5 million at December 31, 2005, and $55.5 million at September 30, 2006. Seriously delinquent loans (90 days and over) as a percent of loans held for investment were 0.64% at December 31, 2006, as compared to 0.62% at September 30, 2006 and 0.61% at December 31, 2005. At December 31, 2006, 90.7% of non-performing loans were secured by first or second mortgages on single-family homes.
During the fourth quarter 2006, Flagstar increased its allowance for loan losses to $45.8 million, or 0.51% of loans held for investment at December 31, 2006, from $42.7 million, or 0.48% of loans held for investment, at September 30, 2006 and from $39.1 million, or 0.37% of loans held for investment, at December 31, 2005. Single-family residential first mortgage loans held for investment at December 31, 2006 had an average FICO credit score of 721 and an average original loan-to-value ratio of 73%.
As Previously Announced
The Company's quarterly earnings conference call will be held on Wednesday, January 31, 2007 from 11 a.m. until noon (Eastern).
Questions for discussion at the conference call may only be submitted in advance by e-mail to
The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company's Web site, http://www.flagstar.com/, with replays available at that site for at least 10 days.
To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (719) 457-2698 or toll free at (800) 500-0311, passcode: 6646747.
Flagstar Bancorp, with $15.5 billion in total assets, is the largest publicly held savings bank headquartered in the Midwest. At December 31, 2006, Flagstar operated 151 banking centers in Michigan, Indiana and Georgia and 76 home loan centers in 22 states. Flagstar Bank originates loans nationwide and is one of the leading 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 At or for the three months ended
Statements of
Earnings December 31, September 30, December 31,
2006 2006 2005
Interest income $211,363 $205,557 $194,035
Interest expense (159,457) (151,929) (132,191)
Net interest income 51,906 53,628 61,844
Provision for losses (8,237) (7,291) (6,036)
Net interest income after
provision 43,669 46,337 55,808
Non-interest income
Loan fees and charges, net 2,444 2,146 3,180
Deposit fees and charges 5,310 5,080 4,585
Loan servicing fees, net 603 7,766 3,061
Gain on loan sales, net 23,843 (8,197) 18,228
Gain on MSR sales, net 3,901 45,202 11,155
Net loss on securities
available for sale (462) (2,144) -
Other income 7,991 4,485 8,041
Non-interest expenses
Compensation and
benefits (37,405) (41,715) (37,475)
Commissions (17,925) (18,405) (17,912)
Occupancy and equipment (18,914) (17,749) (17,737)
General and
administrative (19,754) (9,242) (11,714)
Other (5,556) (4,829) (7,220)
Capitalized direct cost
of loan closing 23,193 23,087 23,196
Earnings before federal income tax 10,938 31,822 35,196
Provision for federal income
taxes (4,039) (11,070) (12,369)
Net earnings $6,899 $20,752 $22,827
Basic earnings per share $0.11 $0.33 $0.36
Diluted earnings per share $0.11 $0.32 $0.36
Dividends paid per common share $0.15 $0.15 $0.15
Interest rate spread - Bank only 1.32% 1.44% 1.72%
Net interest margin - Bank only 1.58% 1.67% 1.73%
Net interest spread -
Consolidated 1.38% 1.47% 1.72%
Net interest margin -
Consolidated 1.47% 1.54% 1.73%
Return on average assets 0.18% 0.55% 0.59%
Return on average equity 3.41% 10.10% 12.06%
Efficiency ratio 79.93% 63.77% 62.55%
Average interest earning assets $14,168,117 $13,814,697 $14,270,646
Average interest paying
liabilities $13,784,942 $13,461,132 $14,106,712
Average stockholders' equity $809,655 $821,699 $757,235
Equity/assets ratio (average for
the period) 5.29% 5.46% 4.86%
Ratio of charge-offs to average
loans held for investment 0.23% 0.18% 0.10%
Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial Data
(in thousands, except share data)
(unaudited)
Summary of the
Consolidated At or for the years ended
Statements of
Earnings December 31, December 31,
2006 2005
Interest income $800,866 $708,663
Interest expense (585,919) (462,393)
Net interest income 214,947 246,270
Provision for losses (25,450) (18,876)
Net interest income after
provision 189,497 227,394
Non-interest income
Loan fees and charges, net 7,440 12,603
Deposit fees and charges 20,894 16,918
Loan servicing fees, net 13,033 8,761
Gain on loan sales, net 42,381 63,579
Gain on MSR sales, net 92,621 18,157
Net loss on securities
available for sale (6,163) -
Other income 31,957 39,430
Non-interest expenses
Compensation and benefits (157,751) (150,738)
Commissions (74,208) (87,746)
Occupancy and equipment (70,319) (69,121)
General and administrative (49,824) (46,362)
Other (17,020) (26,004)
Capitalized direct cost of
loan closing 93,483 117,084
Earnings before federal income tax 116,021 123,955
Provision for federal income taxes (40,819) (44,090)
Net earnings $75,202 $79,865
Basic earnings per share $1.18 $1.29
Diluted earnings per share $1.17 $1.25
Dividends paid per common share $0.60 $0.90
Interest rate spread - Bank only 1.41% 1.68%
Net interest margin - Bank only 1.63% 1.88%
Net interest spread - Consolidated 1.42% 1.74%
Net interest margin - Consolidated 1.54% 1.82%
Return on average assets 0.49% 0.54%
Return on average equity 9.42% 10.66%
Efficiency ratio 66.08% 64.80%
Average interest earning assets $13,951,393 $13,550,366
Average interest paying
liabilities $13,562,001 $13,248,394
Average stockholders' equity $798,492 $749,334
Equity/assets ratio (average for
the period) 5.22% 5.07%
Ratio of charge-offs to average
loans held for investment 0.20% 0.16%
Summary of the Consolidated
Statements of Financial December 31, September 30, December 31,
Condition: 2006 2006 2005
Total assets $15,497,205 $15,120,025 $15,075,430
Mortgage backed securities held
to maturity 1,565,421 1,552,040 1,414,986
Loans held for sale 3,188,795 3,286,263 1,773,394
Loans held for investment, net 8,893,906 8,881,437 10,537,331
Allowance for loan losses 45,779 42,744 39,140
Servicing rights 173,288 150,663 315,678
Deposits 7,379,295 8,212,773 7,979,000
FHLB advances 5,407,000 4,517,308 4,225,000
Repurchase agreements 990,806 734,495 1,060,097
Stockholders' equity 812,234 815,012 771,883
Other Financial and Statistical
Data:
Equity/assets ratio 5.24% 5.39% 5.12%
Core capital ratio 6.37% 6.52% 6.26%
Total risk-based capital ratio 11.55% 11.52% 11.09%
Book value per share $12.77 $12.82 $12.21
Shares outstanding 63,605 63,571 63,208
Loans serviced for others $15,032,504 $14,829,396 $29,648,088
Weighted average service fee
(bps) 37.1 34.6 34.7
Value of servicing rights 1.15% 1.02% 1.06%
Allowance for loan losses to
non performing loans 80.2% 77.1% 60.7%
Allowance for loan losses to
loans held for investment 0.51% 0.48% 0.37%
Non performing assets to total
assets 1.03% 1.05% 0.98%
Number of bank branches 151 146 137
Number of loan origination
centers 76 85 101
Number of employees (excluding
loan officers & account
executives) 2,510 2,559 2,405
Number of loan officers and
account executives 444 491 689
Flagstar Bancorp, Inc.
Loan Originations
(in millions)
(unaudited)
For the three months ended
December September December
Loan type 31, 2006 % 30, 2006 % 31, 2005 %
Residential mortgage loans $5,083 93.4 $4,634 95.9 $5,621 92.9
Consumer loans 85 1.6 113 2.3 230 3.8
Commercial loans 272 5.0 87 1.8 202 3.3
Total loan production $5,440 100.0 $4,834 100.0 $6,053 100.0
For the years ended
December December
Loan type 31, 2006 % 31, 2005 %
Residential mortgage loans $18,966 93.8 $28,244 94.3
Consumer loans 571 2.8 1,151 3.8
Commercial loans 672 3.3 556 1.9
Total loan production $20,209 100.0 $29,951 100.0
Gain on Loan Sales
(in thousands)
(unaudited)
For the three months ended
December 31, September 30, December 31,
Description 2006 2006 2005
Net gain on loan sales $23,843 ($8,197) $18,228
Plus: FASB 133 adjustment (2,017) 8,248 4,939
Plus: secondary market reserve 1,845 1,626 1,348
Gain on loan sales $23,671 $1,677 $24,515
Loans sold $4,466,314 $4,045,915 $5,138,506
Sales spread 0.52% 0.04% 0.48%
For the years ended
December 31, December 31,
Description 2006 2005
Net gain on loan sales $42,381 $63,579
Plus: FASB 133 adjustment (2,487) 2,902
Plus: secondary market reserve 5,897 5,329
Gain on loan sales $45,791 $71,810
Loans sold $16,370,925 $23,451,429
Sales spread 0.28% 0.31%
Loans Held for Investment
(in thousands)
(unaudited)
Description December 31, 2006 September 30, 2006
First mortgage loans $6,211,765 69.5% $6,427,010 72.0%
Second mortgage loans 715,154 8.0% 589,860 6.6%
Commercial real estate loans 1,301,819 14.6% 1,260,338 14.1%
Construction loans 64,528 0.7% 64,014 0.7%
Warehouse lending 291,656 3.3% 203,187 2.3%
Consumer loans 340,156 3.8% 365,289 4.1%
Non-real estate commercial loans 14,607 0.2% 14,483 0.2%
Total loans held for investment $8,939,685 100.0% $8,924,181 100.0%
Description December 31, 2005
First mortgage loans $8,248,897 78.0%
Second mortgage loans 700,492 6.6%
Commercial real estate loans 995,411 9.4%
Construction loans 65,646 0.6%
Warehouse lending 146,694 1.4%
Consumer loans 410,920 3.9%
Non-real estate commercial loans 8,411 0.1%
Total loans held for investment $10,576,471 100.0%
Deposit Portfolio
(in thousands)
(unaudited)
Description December 31, 2006 September 30, 2006
Balance Rate Balance Rate
($ '000) (%) ($ '000) (%)
Demand deposits $380,162 1.28 $351,233 0.85
Savings deposits 144,460 1.55 159,769 1.61
Money market deposits 608,282 4.05 620,019 3.98
Certificates of deposits 3,763,781 4.86 3,846,023 4.73
Total retail deposits 4,896,685 4.38 4,977,044 4.26
Municipal deposits 1,419,964 5.33 1,988,616 5.40
Wholesale deposits 1,062,646 3.66 1,247,113 3.59
Total deposits $7,379,295 4.46 $8,212,773 4.43
Description December 31, 2005
Balance Rate
($ '000) (%)
Demand deposits $374,816 0.60
Savings deposits 239,215 1.52
Money market deposits 781,087 2.98
Certificates of deposits 3,450,450 3.94
Total retail deposits 4,845,568 3.41
Municipal deposits 1,353,633 4.30
Wholesale deposits 1,779,799 3.42
Total deposits $7,979,000 3.56
Asset Quality & Reserves
(in thousands)
(unaudited)
Delinquencies at
December 31, September 30,
2006 2006
Days delinquent ($ '000) (%) ($ '000) (%)
30 $40,140 33.6 $33,738 32.0
60 22,163 18.6 16,150 15.3
90 56,554 47.4 54,743 52.0
Matured - Delinquent 517 0.4 721 0.7
Total $119,374 100.0 $105,352 100.0
Investment loans $8,939,685 $8,924,181
Delinquency % (90+ Days and Matured) 0.64% 0.62%
December 31, 2005
Days delinquent ($ '000) (%)
30 $30,972 26.7
60 20,456 17.7
90 61,816 53.3
Matured - Delinquent 2,650 2.3
Total $115,894 100.0
Investment loans $10,576,471
Delinquency % (90+ Days and Matured) 0.61%
Non-Performing Loans and Assets at
December 31, September 30, December 31,
2006 2006 2005
Non-Performing Loans $57,071 $55,464 $64,466
As a Percentage of Investment Loans 0.64% 0.62% 0.61%
Non-Performing Assets $160,162 $158,832 $146,967
As a Percentage of Total Assets 1.03% 1.05% 0.98%
