Flagstar Reports Fourth Quarter 2013 Net Income of $160.5 Million or $2.77 per Diluted Share

Recaptured deferred tax asset
Implemented organizational restructuring as part of ongoing cost optimization efforts, on track to achieve high end of expense reduction target by first quarter 2014
Prepaid $2.9 billion in long-term FHLB advances, anticipated to provide $60 to $80 million in annualized net interest income benefit

PR Newswire

TROY, Mich., Jan. 22, 2014 /PRNewswire/ -- Flagstar Bancorp, Inc. ( FBC ) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported fourth quarter 2013 net income applicable to common stockholders of $160.5 million, or $2.77 per share (diluted), as compared to income of $12.8 million, or $0.16 per share (diluted), in the third quarter 2013 and a loss of $(94.2) million, or a loss of $(1.75) per share (diluted), in the fourth quarter 2012.  The full year 2013 net income applicable to common stockholders was $261.2 million, or $4.37 per share (diluted), as compared to a full year 2012 net income applicable to common stockholders of $62.7 million, or $0.87 per share (diluted).  Book value per common share increased to $20.66 at December 31, 2013, as compared to $17.96 at September 30, 2013 and $16.12 at December 31, 2012.

"During 2013, we achieved important strategic and operational progress: improved the Company's risk profile, strengthened the balance sheet, built capital, eliminated valuation overhangs and optimized our cost structure," said Sandro DiNello, the Company's President and Chief Executive Officer.  "I am pleased with all that we accomplished in 2013, and I believe the Company has turned a corner and is poised for growth and success in 2014 and beyond.  Having taken the necessary steps to position our Company for sustainable growth over the long-term, and with a continued commitment to building on our culture of compliance, our focus now can shift to prudently redeploying excess capital, leveraging the balance sheet with our core businesses and increasing our share of wallet.  As we execute on these objectives, we will adhere to our core commitment to serving our customers and communities with an emphasis on quality, care and pride."    

Mr. DiNello continued, "Despite the near-term impact of initiatives designed to position the Company for long-term success, as well as a challenging mortgage market, we delivered net income of $261 million for the year and drove a 28 percent increase in book value per share from 2012.  We also increased our Tier 1 leverage ratio, lowered our MSR concentration, reduced operating costs and improved our asset quality and allowance coverage ratios."      

"While a decision to restructure the organization is never taken lightly, the cost savings from the workforce reductions, together with those already realized from our vendor management and procurement initiatives, the outsourcing of default servicing and other variable cost decreases, put us on track to achieve the high-end of our previously provided guidance for 2014 of $145 million to $190 million in annualized non-interest expense savings," added Lee Smith, the Bank's Chief Operating Officer.

Fourth Quarter 2013 Highlights:

  • Net income applicable to common stockholders increased to $160.5 million, as compared to $12.8 million in the prior quarter, primarily attributable to several significant items:
    • Tax benefit of $410.4 million, primarily due to the full reversal of the federal deferred tax asset ("DTA") valuation allowance and a partial reversal of the state DTA valuation allowance.
    • Loss on extinguishment of debt of $177.6 million (included in non-interest expense) from the prepayment of $2.9 billion in long-term fixed-rate Federal Home Loan Bank ("FHLB") advances.
    • Incremental non-interest expense of $61.0 million related to the estimated fair value liability associated with a lending-related legal settlement reached in February 2012 with the Department of Justice ("DOJ Settlement").
    • Benefit (included in non-interest income) of approximately $24.9 million associated with the previously announced settlement agreements with Fannie Mae and Freddie Mac.

  • Net gain on loan sales decreased to $44.8 million, as compared to $75.1 million in the prior quarter:
    • Total mortgage originations decreased to $6.4 billion, as compared to $7.7 billion in the prior quarter.
    • Gain on sale margin (based on fallout-adjusted rate locks) decreased to 0.85 percent, as compared to 1.14 percent in the prior quarter.

  • Sold $53.4 billion in aggregate unpaid principal balance of mortgage servicing rights ("MSR"):
    • Ratio of MSR-to-Tier 1 capital reduced to 22.6 percent, as compared to 56.8 percent in the prior quarter (see non-GAAP reconciliation).
    • Includes the previously announced bulk sale of MSRs of $40.7 billion, in which the Company will remain the sub-servicer of the loans.

  • Excluding the effect of the loss on extinguishment of debt and the expense related to the DOJ settlement noted above, non-interest expense decreased to $150.1 million, as compared to $158.4 million in the prior quarter, consistent with the Company's ongoing cost optimization efforts.

  • Tier 1 leverage ratio increased to 13.97 percent, as compared to 11.98 percent in the prior quarter.

  • Continued improvement in asset quality:
    • Net charge-offs decreased to $14.1 million, as compared to $40.1 million in the prior quarter.
    • Non-performing assets decreased to $182.3 million, as compared to $205.3 million in the prior quarter.
    • Ratio of allowance for loan losses to non-performing loans held-for-investment at 145.9 percent.

Significant Items

Reversal of Valuation Allowance on DTA

During the fourth quarter 2013, the Company reversed 100 percent of the valuation allowance on its federal DTA and a portion of its state DTA, which had been previously established as of September 30, 2009.  As a result, net income was increased due to the recording of a $410.4 million benefit for income taxes.  This benefit was comprised of a $355.8 DTA valuation allowance reversal, or $6.28 per diluted share, as of January 1, 2013 and the current period benefit for income taxes of $54.6 million.

DOJ Settlement Liability

In February 2012, the Bank entered into the DOJ settlement.  As part of the settlement, the Bank agreed to make payments totaling $118.0 million, contingent upon the occurrence of certain future events, including the reversal of the valuation allowance on the DTA.  As a result of the fourth quarter 2013 reversal of the DTA valuation allowance, the Company increased the fair value liability associated with its DOJ Settlement by $61.0 million.  The total fair value of the DOJ settlement liability was increased to $93.0 million for the fourth quarter 2013, as compared to $28.5 million for the third quarter 2013, resulting in total non-interest expense of $64.5 million for the fourth quarter 2013.  

Settlements with Fannie Mae and Freddie Mac

On November 6, 2013, the Company announced that the Bank had entered into a settlement agreement with Fannie Mae to resolve substantially all of the repurchase requests and obligations associated with loans originated between January 1, 2000 and December 31, 2008 and sold to Fannie Mae.  The total resolution amount was $121.5 million.  After paid claim credits and other adjustments, the Bank paid $93.5 million to Fannie Mae.

On December 30, 2013, the Company announced that the Bank had entered into a settlement agreement with the Federal Home Loan Mortgage Corporation ("Freddie Mac") to resolve substantially all of the repurchase requests and obligations associated with loans originated between January 1, 2000 and December 31, 2008 and sold to Freddie Mac.  The total resolution amount was $10.8 million.  After paid claim credits and other adjustments, the Bank paid $8.9 million to Freddie Mac. 

As a result of these settlements, the Company released approximately $24.9 million of previously recognized reserves.

Organizational Restructuring

On January 16, 2014, the Company announced that it had implemented an organizational restructuring to reduce expenses in light of the current operating environment and consistent with its previously communicated strategy of optimizing its cost structure across all business lines.  As part of this restructuring initiative, the Company has reduced full-time equivalents by approximately 350 during the first quarter 2014, which did not impact the 2013 financial results.  Including the restructuring completed in the first quarter 2014, the Company has reduced staffing levels across the organization by approximately 600 full-time equivalents from its September 30, 2013 level. 

The Company estimates this restructuring initiative will generate annualized cost savings of approximately $40 million, the majority of which was not reflected in the 2013 financial results.  The Company also estimates it will incur a total pre-tax charge of $5.2 million related to this restructuring initiative, of which $1.4 million was expensed in the fourth quarter 2013.

Sale of Mortgage Servicing Rights

On December 18, 2013, the Bank entered into a definitive agreement to sell $40.7 billion unpaid principal balance of its MSR portfolio to Matrix Financial Services Corporation, a wholly owned subsidiary of Two Harbors Investment Corp.  Covered under the agreement are certain mortgage loans serviced for both Fannie Mae and Ginnie Mae, originated primarily after 2010.  Simultaneously, the Bank entered into an agreement with Matrix to sub-service the residential mortgage loans covered under the agreement to sell.

Prepayment of FHLB advances

During the fourth quarter 2013, the Company prepaid $2.9 billion in long-term FHLB advances with an average coupon of 3.29 percent, which resulted in a $177.6 million loss on extinguishment of debt (included in non-interest expense).

Net Interest Income

Fourth quarter 2013 net interest income decreased to $41.2 million, as compared to $42.7 million for the third quarter 2013 and $73.9 million for the fourth quarter 2012.  The decrease from the prior quarter is primarily due to lower average balances in the mortgage loans available-for-sale and warehouse loans held-for-investment portfolios, and a lower yield on loans repurchased with government guarantees.  

Net interest margin for the Bank increased to 1.80 percent for fourth quarter 2013, as compared to 1.68 percent for the third quarter 2013 and decreased from 2.26 percent for the fourth quarter 2012.  The decrease from the prior quarter was driven primarily by a decrease in the average cost of deposits.     

The average cost of funds for the fourth quarter 2013 was 1.44 percent, as compared 1.58 percent for the third quarter 2013 and 1.60 percent for the fourth quarter 2012.  The decrease from the prior quarter was primarily due to the run-off of retail certificates of deposits and wholesale deposits, both of which carry higher rates, and a lower average rate paid on savings accounts.  The average cost of total deposits decreased to 0.50 percent for the fourth quarter 2013, as compared to 0.67 percent for the third quarter 2013 and 0.86 percent for the fourth quarter 2012.

Non-interest Income

Fourth quarter 2013 non-interest income decreased to $113.1 million, as compared to $134.3 million for the third quarter 2013 and $285.8 million for the fourth quarter 2012.  The decrease from the prior quarter was driven by a decrease in net gain on loan sales and an increase in net transaction costs on sales of MSRs, partially offset by a decrease in representation and warranty provision - change in estimate (discussed in Credit-Related Costs and Asset Quality).   

Fourth quarter 2013 net gain on loan sales decreased to $44.8 million, as compared to $75.1 million for the third quarter 2013 and $239.0 million for the fourth quarter 2012.  The decrease from the prior quarter reflects both a lower level of mortgage rate lock commitments and a decrease in gain on loan sale margin.  

Mortgage originations decreased to $6.4 billion for the fourth quarter 2013, as compared to $7.7 billion for third quarter 2013 and $15.4 billion for the fourth quarter 2012.  The 16.8 percent decrease from the prior quarter was driven primarily by a decline in refinance originations, reflecting the rising mortgage interest rate environment during the fourth quarter.  Purchase originations increased to 57.1 percent of overall residential first mortgage originations in the fourth quarter 2013, from 47.6 percent in the prior quarter. 

Gain on loan sale income is driven by rate lock commitments net of estimated cancellations, or "fallout-adjusted locks", as the Company uses fair value accounting to account for the majority of its mortgage business.  Fallout-adjusted locks were $5.3 billion for the fourth quarter 2013, a 19.8 percent decrease from the third quarter 2013.

Gain on loan sale margin (based on the amount of fallout-adjusted locks) decreased to 0.85 percent for the fourth quarter 2013, as compared to 1.14 percent for the third quarter 2013 and 1.90 percent for the fourth quarter 2012.  The decrease from the prior quarter was driven primarily by mortgage interest rate volatility during the fourth quarter.

Net servicing revenue, which is the combination of loan administration income (including the off-balance sheet hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), was $28.9 million for the fourth quarter 2013, as compared to $30.4 million for the third quarter 2013 and $25.0 million for the fourth quarter 2012.  As discussed above, the Company sold $53.4 billion in aggregate unpaid principal balance of MSRs during the fourth quarter 2013, which improved its ratio of MSR-to-Tier 1 capital to 22.6 percent, as compared to 56.8 percent in the third quarter.  As a result, net transaction costs on sales of mortgage servicing rights increased to $9.0 million for the fourth quarter 2013, as compared to $1.8 million for the third quarter 2013.

Non-interest Expense

Non-interest expense was $388.7 million for the fourth quarter 2013, as compared to $158.4 million for the third quarter 2013 and $398.0 million for the fourth quarter 2012.  Excluding the loss on extinguishment of debt and the incremental expense related to the DOJ litigation liability (discussed in Significant Items), non-interest expense was $150.1 million, a decrease as compared to $158.4 million for the third quarter 2013, driven primarily by a decrease in asset resolution expense (discussed in Credit Related Costs and Asset Quality).

Compensation and benefits increased to $69.6 million for the fourth quarter 2013, as compared to $61.6 million for the third quarter 2013, but decreased from $72.1 million for the fourth quarter 2012.  The increase from the prior quarter was primarily due to expense associated with annual incentive compensation.  

Commission expense decreased to $9.4 million for the fourth quarter 2013, as compared to $12.1 million for the third quarter 2013 and $22.2 million for the fourth quarter 2012.  Loan processing expense also decreased to $8.8 million for the fourth quarter 2013, as compared to $10.9 million for the third quarter 2013 and $18.6 million for the fourth quarter 2012.  Commissions and loan processing expense are both driven by mortgage originations, and the decreases were consistent with the decrease in mortgage originations during the fourth quarter 2013. 

Fourth quarter 2013 legal and professional expenses increased to $79.2 million, as compared to $19.6 million for the third quarter 2013, but decreased from $213.4 million for the fourth quarter 2012.  The increase from the prior quarter was primarily driven by the $61.0 million in expense related to the fair value liability associated with the DOJ Settlement.

Credit-Related Costs and Asset Quality

For the fourth quarter 2013, total credit-related costs (see non-GAAP reconciliation) decreased to $2.1 million, as compared to $25.6 million for the third quarter 2013 and $97.6 million for the fourth quarter 2012.  The decrease from the prior quarter was primarily driven by a decrease in representation and warranty - change in estimate, reflecting the release of reserves of approximately $24.9 million associated with the settlements with Fannie Mae and Freddie Mac.

At December 31, 2013, the Company's allowance for loan losses was $207.0 million, unchanged from September 30, 2013 but decreased from $305.0 million at December 31, 2012.  At December 31, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment was 145.9 percent, as compared to 152.6 percent at September 30, 2013 and 76.3 percent at December 31, 2012.

Net charge-offs for the fourth quarter decreased to $14.1 million, as compared to $40.1 million for the third quarter 2013, and from $50.4 million for the fourth quarter 2012, driven primarily by a decrease in residential first mortgage loan charge-offs.  Provision for loan losses increased to $14.1 million for the fourth quarter 2013, as compared to $4.1 million for the prior quarter and $50.4 million for the fourth quarter 2012.  The increase from the prior quarter reflects an increased level of residential first mortgage reserves as the Company continues to refine some of the primary data inputs to its allowance methodology.

Total non-performing loans held-for-investment was $145.7 million at December 31, 2013, an increase as compared to $138.8 million at September 30, 2013 and a decrease from $399.8 million at December 31, 2012.  The increase from the prior quarter was driven primarily by an increase in residential first mortgage non-performing loans, partially offset by a decrease in commercial non-performing loans.  The ratio of non-performing loans held-for-investment to loans held-for-investment increased to 3.59 percent at December 31, 2013, from 3.46 percent at September 30, 2013 and 7.35 percent at December 31, 2012.

Real estate-owned and other non-performing assets decreased to $36.6 million at December 31, 2013, as compared to $66.5 million at September 30, 2013 and $120.7 million at December 31, 2012.  The decrease from the prior quarter was primarily due to payoffs resulting from liquidations and transfers of real estate-owned properties. 

The Company maintains a representation and warranty reserve on the balance sheet, which reflects an estimate of losses that may occur on both loans that have been sold or securitized into the secondary market and those currently in the repurchase pipeline, primarily with the GSEs.  At December 31, 2013, the representation and warranty reserve was $54.0 million, as compared to $174.0 million at September 30, 2013 and $193.0 million at December 31, 2012.  The decrease from the prior quarter was primarily driven by $24.9 million in releases of reserves associated with the settlements with Fannie Mae and Freddie Mac (discussed in Significant Items).

Asset resolution expense, which includes expenses associated with foreclosed properties (including the foreclosure claims in process with respect to government insured loans for which the Bank files claims with HUD) was $3.4 million for the fourth quarter 2013, as compared to $16.3 million for the third quarter 2013 and from $21.2 million for the fourth quarter 2012.  The decrease from the prior quarter was primarily driven by gains on the sale of commercial real-estate owned properties and a decrease in foreclosure costs associated with loans the Company services for others.

Balance Sheet and Funding

Total assets decreased to $9.4 billion at December 31, 2013, as compared to $11.8 billion at September 30, 2013.  The decrease from the prior quarter was primarily due to a decrease in interest-earning deposits, as the Company used excess cash for the prepayment of FHLB advances, and a decrease in MSRs resulting from the bulk sales completed during the quarter.

Loans repurchased with government guarantees totaled $1.3 billion at December 31, 2013, as compared to $1.2 billion at September 30, 2013 and $1.8 billion at December 31, 2012.  This portfolio represents delinquent loans which have been repurchased from Ginnie Mae pools that are insured or guaranteed by the Federal Housing Administration.   

Total deposits decreased to $6.1 billion at December 31, 2013, as compared to $6.6 billion at September 30, 2013, due to lower funding needs resulting from a reduction in mortgage originations.  This decrease was primarily driven by decreases in retail certificates of deposits.

At December 31, 2013, the Company had $0.3 billion of cash on hand and interest-earning deposits, as compared to $2.6 billion at September 30, 2013.  The decrease from the prior quarter was driven by the prepayment of FHLB advances, as well as the Company's investment of a portion of its excess cash into higher-yielding liquid securities.  The Bank maintains a line of credit with the FHLB under which borrowings are collateralized by residential first mortgage loans and other assets of the Bank.  At December 31, 2013, the Bank had outstanding borrowings from the FHLB of $1.0 billion and an additional $1.7 billion of collateralized borrowing capacity available at the FHLB. 

Capital

The Bank's regulatory capital ratios remain above current regulatory quantitative guidelines for "well-capitalized" institutions.  At December 31, 2013, the Bank had a Tier 1 leverage ratio of 13.97 percent, as compared to 11.98 percent at September 30, 2013.  At December 31, 2013, the Company had an equity-to-assets ratio of 15.16 percent.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Thursday, January 23, 2014 from 11 a.m. until Noon (Eastern).

It is preferred that questions are emailed in advance to investors@flagstar.com , or they may be asked during the conference call.

To join the call, please dial (888) 715-1387 toll free or (913) 312-1521, and use passcode: 2979193.  Please call at least 10 minutes before the call is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, using passcode: 2979193.

The conference call will also be available as a live audio cast on the Investor Relations section of flagstar.com.  It will be archived on that site and will be available for replay and download.  A slide presentation to accompany the conference call will also be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. ("Flagstar") is the holding company for Flagstar Bank, FSB, a full-service financial institution offering a range of products and services to consumers, businesses, and homeowners.  With $9.4 billion in total assets at December 31, 2013, Flagstar is the largest bank headquartered in Michigan.  Flagstar operates 111 banking centers, all of which are located in Michigan and 39 home lending centers located in 19 states, which primarily originate one-to-four family residential first mortgage loans.  Originating loans nationwide, Flagstar is one of the leading originators of residential first mortgage loans.  For more information, please visit flagstar.com.

Non-GAAP

This press release contains both financial measures based on accounting principles generally accepted in the United States (GAAP) and non-GAAP based financial measures, which are used where management believes it to be helpful in understanding the Company's results of operations or financial position.  Where non-GAAP financial measures are used, the comparable GAAP financial measure, as well as the reconciliation to the comparable GAAP financial measure, can be found in this press release.  These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.  Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that are difficult to predict and could cause actual results or outcomes to differ materially from those expressed in a forward-looking statement.  Forward-looking statements contained in this press release and any information related to expectations about future events or results are based upon information available to the Company as of the date hereof.  Forward-looking statements can be identified by such words as "anticipates," "intends," "plans," "seeks," "believes," "expects", "estimates," and similar references to future periods.  Examples of forward-looking statements include, but are not limited to, statements made regarding the Company's current expectations, plans or forecasts of its core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, the suspension of dividend payments on preferred stock, the deferral of interest payment on trust preferred securities, the result of improvements to the Company's servicing processes, the Company's strategy for its servicing business and other similar matters.  Although we believe that these forward-looking statements are based on reasonable estimates and assumptions, they are not guarantees of future performance and are subject to known and unknown risks, uncertainties, contingencies, and other factors.  Accordingly, we cannot give you any assurance that our expectations will in fact occur or that actual results will not differ materially from those expressed or implied by such forward-looking statements.  We caution you not to place undue reliance on any forward-looking statement and to consider all of the following uncertainties and risks, as well as those more fully discussed in the Company's filings with the Securities and Exchange Commission ("SEC"), including, but not limited to, our Form 10-K and Forms 10-Q: volatile interest rates that impact, among other things, the mortgage banking business, our ability to originate loans and sell assets at a profit, prepayment speeds and our cost of funds; changes in regulatory capital requirements or an inability to achieve or maintain desired capital ratios; actions of mortgage loan purchasers, guarantors and insurers regarding repurchases and indemnity demands and uncertainty related to foreclosure procedures; uncertainty regarding pending and threatened litigation; our ability to control credit related costs and forecast the adequacy of reserves; the imposition of regulatory enforcement actions against us; our compliance with the Supervisory Agreement with the Board of Governors of the Federal Reserve System and the Consent Order with the Office of the Comptroller of the Currency.  Except to the extent required under the federal securities laws and the rules and regulations promulgated by the SEC, the Company undertakes no obligation to update any such statement to reflect events or circumstances after the date on which it is made.

 

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in thousands)








December 31, 2013


September 30, 2013


December 31,
2012

Assets

(Unaudited)


(Unaudited)



Cash and cash equivalents






Cash and cash items

$

55,913



$

68,228



$

38,070


Interest-earning deposits

224,592



2,482,882



914,723


Total cash and cash equivalents

280,505



2,551,110



952,793


Trading securities



50,053



170,086


Investment securities available-for-sale

1,045,548



495,423



184,445


Loans held-for-sale

1,480,418



1,879,290



3,939,720


Loans repurchased with government guarantees

1,273,690



1,231,765



1,841,342


Loans held-for-investment, net






Loans held-for-investment

4,055,756



4,013,507



5,438,101


Less: allowance for loan losses

(207,000)



(207,000)



(305,000)


Total loans held-for-investment, net

3,848,756



3,806,507



5,133,101


Mortgage servicing rights

284,678



797,029



710,791


Repossessed assets, net

36,636



66,530



120,732


Federal Home Loan Bank stock

209,737



301,737



301,737


Premises and equipment, net

231,350



229,117



219,059


Net deferred tax asset

414,681






Other assets

301,302



399,254



508,206


Total assets

$

9,407,301



$

11,807,815



$

14,082,012


Liabilities and Stockholders' Equity






Deposits






Non-interest bearing

$

930,060



$

1,002,472



$

1,309,649


Interest bearing

5,210,266



5,646,813



6,984,646


Total deposits

6,140,326



6,649,285



8,294,295


Federal Home Loan Bank advances

988,000



2,907,598



3,180,000


Long-term debt

353,248



360,389



247,435


Representation and warranty reserve

54,000



174,000



193,000


Other liabilities

445,853



444,188



1,007,920


Total liabilities

7,981,427



10,535,460



12,922,650


Stockholders' Equity






Preferred stock

266,174



264,726



260,390


Common stock

561



561



559


Additional paid in capital

1,479,265



1,478,391



1,476,569


Accumulated other comprehensive (loss) income

(4,831)



4,429



(1,658)


Accumulated deficit

(315,295)



(475,752)



(576,498)


Total stockholders' equity

1,425,874



1,272,355



1,159,362


Total liabilities and stockholders' equity

$

9,407,301



$

11,807,815



$

14,082,012


 

 



Flagstar Bancorp, Inc.
Consolidated Statements of Operations
 (Dollars in thousands, except per share data)

 


Three Months Ended


Year Ended


December 31,
2013


September 30,
2013


December 31,
2012


December 31,
2013


December 31,
2012


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)



Interest Income










Loans

$

64,165



$

75,633



$

112,464



$

313,477



$

456,141


Investment securities available-for-sale or trading

6,515



1,465



2,277



11,912



22,609


Interest-earning deposits and other

1,153



1,709



674



5,298



2,220


  Total interest income

71,833



78,807



115,415



330,687



480,970


Interest Expense










Deposits

6,713



10,023



15,017



42,392



70,143


Federal Home Loan Bank advances

22,257



24,434



24,756



95,024



106,625


Other

1,660



1,665



1,701



6,620



6,971


  Total interest expense

30,630



36,122



41,474



144,036



183,739


Net interest income

41,203



42,685



73,941



186,651



297,231


Provision for loan losses

14,112



4,053



50,351



70,142



276,047


Net interest income after provision for loan losses

27,091



38,632



23,590



116,509



21,184


Non-Interest Income










Loan fees and charges

19,349



20,876



40,793



103,501



142,908


Deposit fees and charges

5,193



5,410



5,154



20,942



20,370


Loan administration

28,924



30,434



25,010



115,872



100,007


(Loss) gain on trading securities

(20)



13



12



65



(2,011)


Net gain on loan sales

44,790



75,073



238,953



402,193



990,898


Net transactions costs on sales of mortgage servicing rights

(8,981)



(1,763)



(7,687)



(19,228)



(12,319)


Net gain (loss) on investment securities available-for-sale

1,023





(310)



1,023



2,636


Total other-than-temporary impairment (loss) gain







(8,789)



2,810


Loss recognized in other comprehensive income before taxes









(5,002)


Net impairment losses recognized in earnings







(8,789)



(2,192)


Representation and warranty reserve - change in estimate

15,424



(5,205)



(25,231)



(36,116)



(256,289)


Other non-interest income

7,444



9,458



9,101



72,880



37,234


  Total non-interest income

113,146



134,296



285,795



652,343



1,021,242


Non-Interest Expense










Compensation and benefits

69,572



61,552



72,081



279,268



270,859


Commissions

9,444



12,099



22,154



54,407



75,345


Occupancy and equipment

19,824



18,644



19,184



80,042



73,674


Asset resolution

3,372



16,295



21,241



52,033



91,349


Federal deposit insurance premiums

7,932



7,910



12,202



34,873



49,273


Loss on extinguishment of debt

177,556







177,556



15,246


Loan processing expense

8,833



10,890



18,590



52,223



56,070


Legal and professional expense

79,232



19,593



213,413



144,054



300,523


Other non-interest expense

12,928



11,453



19,097



43,659



57,356


  Total non-interest expense

388,693



158,436



397,962



918,115



989,695
































(Loss) income before income taxes

(248,456)



14,492



(88,577)



(149,263)



52,731


(Benefit) provision for income taxes

(410,362)



220



4,235



(416,250)



(15,645)


Net income (loss)

161,906



14,272



(92,812)



266,987



68,376


Preferred stock dividend/accretion

(1,449)



(1,449)



(1,417)



(5,784)



(5,658)


Net income (loss) applicable to common stockholders

$

160,457



$

12,823



$

(94,229)



$

261,203



$

62,718


Income (loss) per share










     Basic

$

2.79



$

0.16



$

(1.75)



$

4.40



$

0.88


     Diluted

$

2.77



$

0.16



$

(1.75)



$

4.37



$

0.87


 

 

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in thousands, except per share data)

(Unaudited)






Three Months Ended


Year Ended


December 31,
2013


September 30,
2013


December 31,
2012


December 31,
2013


December 31,
2012

Mortgage loans originated (1)

$

6,439,242



$

7,737,143



$

15,356,795



$

37,481,877



$

53,586,856


Other loans originated

$

64,973



$

93,347



$

113,458



$

300,823



$

754,155


Mortgage loans sold and securitized

$

6,783,212



$

8,344,737



$

15,610,590



$

39,074,649



$

53,094,326


Interest rate spread - bank only (2)

1.58

%


1.42

%


1.87

%


1.53

%


1.98

%

Net interest margin - bank only (3)

1.80

%


1.68

%


2.26

%


1.78

%


2.31

%

Interest rate spread - consolidated (2)

1.54

%


1.39

%


1.84

%


1.50

%


1.96

%

Net interest margin - consolidated (3)

1.73

%


1.62

%


2.21

%


1.72

%


2.26

%

Average common shares outstanding

56,126,895



56,096,376



55,842,910



56,063,282



55,762,196


Average fully diluted shares outstanding

56,694,096



56,541,089



55,842,910



56,518,181



56,193,515


Average interest-earning assets

$

9,607,376



$

10,564,417



$

13,349,991



$

10,881,618



$

13,104,401


Average interest paying liabilities

$

8,341,976



$

9,054,952



$

10,318,385



$

9,337,936



$

10,786,252


Average stockholders' equity

$

1,273,763



$

1,266,267



$

1,288,332



$

1,238,550



$

1,192,281


Return on average assets

5.70

%


0.42

%


(2.51)%



2.08

%


0.43

%

Return on average equity

50.39

%


4.05

%


(29.26)%



21.09

%


5.26

%

Efficiency ratio (4)

251.8

%


89.5

%


110.6

%


109.4

%


75.1

%

Efficiency ratio (credit-adjusted) (4) (5)

277.4

%


78.0

%


97.9

%


99.0

%


57.0

%

Equity-to-assets ratio (average for the period)

11.32

%


10.26

%


8.58

%


9.87

%


8.10

%

Charge-offs to average LHFI (6)

1.53

%


3.96

%


3.18

%


4.00

%


4.43

%

Charge-offs, to average LHFI adjusted (6)(7)

1.53

%


1.30

%


3.18

%


2.45

%


4.43

%

 

 


December 31,
2013


September 30, 2013


December 31,
2012

Book value per common share

$

20.66



$

17.96



$

16.12


Number of common shares outstanding

56,138,074



56,114,572



55,863,053


Mortgage loans subserviced for others

$

40,431,865



$



$


Mortgage loans serviced for others

$

25,743,396



$

74,200,317



$

76,821,222


Weighted average service fee (basis points)

28.7



29.3



29.2


Capitalized value of mortgage servicing rights

1.11

%


1.07

%


0.93

%

Mortgage servicing rights to Tier 1 capital (5)

22.6

%


56.8

%


54.9

%

Ratio of allowance for loan losses to non-performing LHFI (8)

145.9

%


152.6

%


76.3

%

Ratio of allowance for loan losses to LHFI (6) (8)

5.42

%


5.50

%


5.61

%

Ratio of non-performing assets to total assets (bank only) (8)

1.95

%


1.74

%


3.70

%

Equity-to-assets ratio

15.16

%


10.78

%


8.23

%

Number of bank branches

111



111



111


Number of loan origination centers

39



45



31


Number of FTE employees (excluding loan officers and account executives)

2,894



3,069



3,328


Number of loan officers and account executives

359



359



334


 


(1) Includes residential first mortgage and second mortgage loans. 

(2) Interest rate spread is the difference between the annualized average yield earned on average interest-earning assets for the period and the annualized average rate of interest paid on average interest-bearing liabilities for the period.

(3) Net interest margin is the annualized effect of the net interest income divided by that period's average interest-earning assets.

(4) Ratios include $177.6 million and $61.0 million related to the prepayment of FHLB advances and the DOJ litigation, respectively, during the three months and year ended December 31, 2013, excluding these expenses the efficiency ratio would have been 97.3 percent and 81.0 percent for the three months and year ended December 31, 2013, respectively.

(5) See Non-GAAP reconciliation.

(6) Excludes loans carried under the fair value option.

(7) Excludes charge-offs of $26.8 million related to the sale of non-performing loans and TDRs, during the three months ended September 30, 2013, and $65.1 million during the year ended December 31, 2013.

(8) Only includes non-performing loans held-for-investment.

 

 


Regulatory Capital

(Dollars in thousands)

(Unaudited)











December 31, 2013



September 30, 2013



December 31, 2012



Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted tangible assets) (1)

$

1,257,608


13.97

%


$

1,402,423


11.98

%


$

1,295,841


9.26

%

Total adjusted tangible asset base

$

9,004,904




$

11,708,635




$

13,999,636



Tier 1 capital (to risk weighted assets) (1)

$

1,257,608


26.82

%


$

1,402,423


26.57

%


$

1,295,841


15.90

%

Total capital (to risk weighted assets) (1)

1,317,970


28.11

%


1,470,060


27.85

%


1,400,126


17.18

%

Risk weighted asset base

$

4,688,961




$

5,278,254




$

8,148,771


















(1) Based on adjusted total assets for purposes of core capital and risk-weighted assets for purposes of total risk-based capital. These ratios are applicable to the Bank only.

 

 


Loan Originations

(Dollars in thousands)

(Unaudited)



Three Months Ended


December 31, 2013



September 30, 2013


December 31, 2012


Consumer loans

















    Mortgage (1)

$

6,439,242


99.0

%


$

7,737,142


98.8

%


$

15,356,795


99.3

%

    Other consumer (2)

16,295


0.3

%


24,811


0.3

%


7,589


%

Total consumer loans

6,455,537


99.3

%


7,761,953


99.1

%


15,364,384


99.3

%

Commercial loans (3)

48,678


0.7

%


68,537


0.9

%


105,869


0.7

%

Total loan originations

$

6,504,215


100.0

%


$

7,830,490


100.0

%


$

15,470,253


100.0

%

















Year Ended









December 31, 2013



December 31, 2012


Consumer loans












    Mortgage (1)







$

37,481,877


99.2

%


$

53,586,856


98.6

%

    Other consumer (2)







61,318


0.2

%


27,058


0.1

%

Total consumer loans







37,543,195


99.4

%


53,613,914


98.7

%

Commercial loans (3)







239,505


0.6

%


727,097


1.3

%

Total loan originations







$

37,782,700


100.0

%


$

54,341,011


100.0

%



















(1) Includes residential first mortgage and second mortgage loans.

(2) Other consumer loans include: HELOC and other consumer loans.




(3) Commercial loans include: commercial real estate, commercial and industrial and commercial lease financing loans.

 

 

Loans Held-for-Investment

(Dollars in thousands)

(Unaudited)











December 31, 2013



September 30, 2013



December 31, 2012


Consumer loans









Residential first mortgage

$

2,508,968


61.9

%


$

2,478,599


61.8

%


$

3,009,251


55.3

%

Second mortgage

169,525


4.2

%


174,383


4.3

%


114,885


2.1

%

Warehouse lending

423,517


10.4

%


390,348


9.7

%


1,347,727


24.8

%

HELOC

289,880


7.1

%


307,552


7.7

%


179,447


3.3

%

Other

37,468


0.9

%


39,043


1.0

%


49,611


0.9

%

Total consumer loans

3,429,358


84.5

%


3,389,925


84.5

%


4,700,921


86.4

%

Commercial loans









Commercial real estate

408,870


10.1

%


420,879


10.4

%


640,315


11.8

%

Commercial and industrial

207,187


5.1

%


187,639


4.7

%


90,565


1.7

%

Commercial lease financing

10,341


0.3

%


15,064


0.4

%


6,300


0.1

%

Total commercial loans

626,398


15.5

%


623,582


15.5

%


737,180


13.6

%

Total loans held-for-investment

$

4,055,756


100.0

%


$

4,013,507


100.0

%


$

5,438,101


100.0

%



















Residential Loans Serviced

(Dollars in thousands)

(Unaudited)











December 31, 2013



September 30, 2013



December 31, 2012



Unpaid Principal Balance

Number of accounts


Unpaid Principal Balance

Number of accounts


Unpaid Principal Balance

Number of accounts










Serviced for own loan portfolio (1)

$

4,375,009


28,069



$

4,727,135


30,971



$

6,078,758


32,597


Serviced for others

25,743,396


131,413



74,200,317


369,368



76,821,222


377,210


Sub-serviced for others (2)

40,431,867


198,256








Total residential loans serviced (2)

$

70,550,272


357,738



$

78,927,452


400,339



$

82,899,980


409,807




















(1) Includes both loans held-for-investment (residential first mortgage, second mortgage and HELOC) and loans-held-for-sale (residential first mortgage).

(2) Does not include temporary short-term sub-servicing performed as a result of sales of servicing-released mortgage servicing rights.

 

 


Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)






Three Months Ended


Year Ended


December 31,
2013


September 30,
2013


December 31,
2012


December 31,
2013


December 31,
2012

Beginning balance

$

207,000



$

243,000



$

305,000



$

305,000



$

318,000


Provision for loan losses

14,110



4,053



50,351



70,142



276,047


Charge-offs










Consumer loans










Residential first mortgage

(9,868)



(34,666)



(33,802)



(133,326)



(175,803)


Second mortgage

(730)



(1,534)



(5,423)



(6,252)



(18,753)


Warehouse lending



(45)





(45)




HELOC

(1,728)



(872)



(5,000)



(5,473)



(17,159)


Other

(995)



(1,341)



(1,613)



(3,622)



(4,423)


Total consumer loans

(13,321)



(38,458)



(45,838)



(148,718)



(216,138)


Commercial loans










Commercial real estate

(5,051)



(8,419)



(13,443)



(47,982)



(105,285)


Commercial and industrial

(48)



(302)



(3,011)



(350)



(4,627)


Commercial lease financing

(1,299)





(1,191)



(1,299)



(1,191)


Total commercial loans

(6,398)



(8,721)



(17,645)



(49,631)



(111,103)


Total charge-offs

(19,719)



(47,179)



(63,483)



(198,349)



(327,241)


Recoveries










Consumer loans










Residential first mortgage

1,033



2,256



5,530



15,329



18,561


Second mortgage

353



348



196



1,178



1,912


HELOC

315



143



67



1,020



461


Other

1,235



470



731



2,079



1,786


Total consumer loans

2,936



3,217



6,524



19,606



22,720


Commercial loans










Commercial real estate

2,300



3,860



6,600



10,162



15,397


Commercial and industrial

85



49



8



151



77


Commerci...

al lease financing

288







288




Total commercial loans

2,673



3,909



6,608



10,601



15,474


Total recoveries

5,609



7,126



13,132



30,207



38,194


Charge-offs, net of recoveries

(14,110)



(40,053)



(50,351)



(168,142)



(289,047)


Ending balance

$

207,000



$

207,000



$

305,000



$

207,000



$

305,000


Net charge-off ratio (annualized) (1)

1.53

%


3.96

%


3.18

%


4.00

%


4.43

%

Net charge-off ratio, adjusted (annualized) (1)(2)

1.53

%


1.30

%


3.18

%


2.45

%


4.43

%
















(1) Excludes loans carried under the fair value option.

(2) Excludes charge-offs of $26.8 million related to the sale of non-performing loans and TDRs during the three months ended September 30, 2013 and $65.1 million during the year ended December 31, 2013.

 

 

Representation and Warranty Reserve

(Dollars in thousands)

(Unaudited)








Three Months Ended


Year Ended


December 31, 2013


September 30, 2013


December 31, 2012


December 31, 2013


December 31, 2012

Balance, beginning of period

$

174,000



$

185,000



$

202,000



$

193,000



$

120,000


Provision











Charged to gain on sale for current loan sales

3,018



3,719



7,285



17,606



24,410



Charged to representation and warranty reserve - change in estimate

(15,425)



5,205



25,231



36,116



256,289



Total

(12,407)



8,924



32,516



53,722



280,699


Charge-offs, net

(107,593)



(19,924)



(41,516)



(192,722)



(207,699)


Balance, end of period

$

54,000



$

174,000



$

193,000



$

54,000



$

193,000
























 

 


Composition of Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)







December 31, 2013

Collectively Evaluated
Reserves


Individually Evaluated
Reserves


Total

Consumer loans






Residential first mortgage

$

79,377



$

81,765



$

161,142


Second mortgage

7,575



4,566



12,141


Warehouse lending 

1,392





1,392


HELOC

7,488



405



7,893


Other

2,412





2,412


Total consumer loans

98,244



86,736



184,980


Commercial loans






Commercial real estate

18,540





18,540


Commercial and industrial

3,332





3,332


Commercial lease financing 

148





148


Total commercial loans

22,020





22,020


Total allowance for loan losses

$

120,264



$

86,736



$

207,000














September 30, 2013

Collectively Evaluated
Reserves


Individually Evaluated
Reserves


Total

Consumer loans






Residential first mortgage

$

65,490



$

81,087



$

146,577


Second mortgage

10,124



8,571



18,695


Warehouse lending 

408





408


HELOC

8,567



540



9,107


Other

2,130





2,130


Total consumer loans

86,719



90,198



176,917


Commercial loans






Commercial real estate

25,331



1,161



26,492


Commercial and industrial

3,407



88



3,495


Commercial lease financing 

96





96


Total commercial loans

28,834



1,249



30,083


Total allowance for loan losses

$

115,553



$

91,447



$

207,000


 

 

Non-Performing Loans and Assets

(Dollars in thousands)

(Unaudited)








December 31, 2013


September 30, 2013


December 31, 2012

Non-performing loans

$

98,976



$

94,062



$

254,582


Non-performing TDRs

25,808



21,104



60,516


Non-performing TDRs at inception but performing for less than six months

20,901



23,638



84,728


Total non-performing loans held-for-investment

145,685



138,804



399,826


Real estate and other non-performing assets, net

36,636



66,530



120,732


Non-performing assets held-for-investment, net

182,321



205,334



520,558


Non-performing loans held-for-sale

771



3,099



1,835


Total non-performing assets including loans held-for-sale

$

183,092



$

208,433



$

522,393


Ratio of non-performing assets to total assets (Bank only)

1.95

%


1.74

%


3.70

%

Ratio of non-performing loans held-for-investment to loans held-for-investment

3.59

%


3.46

%


7.35

%

Ratio of non-performing assets to loans held-for-investment and repossessed assets

4.46

%


5.03

%


9.36

%

 

 


Asset Quality - Loans Held-for-Investment

(Dollars in thousands)

(Unaudited)








30-59 Days Past Due

60-89 Days Past Due

Greater than 90 days

Total Past Due

Total Investment Loans

December 31, 2013






Consumer loans

$

41,013


$

20,732


$

144,185


$

205,930


$

3,429,358


Commercial loans



1,500


1,500


626,398


Total loans

$

41,013


$

20,732


$

145,685


$

207,430


$

4,055,756


September 30, 2013






Consumer loans

$

51,176


$

18,244


$

123,289


$

192,709


$

3,389,925


Commercial loans


208


15,515


15,723


623,582


Total loans

$

51,176


$

18,452


$

138,804


$

208,432


$

4,013,507


December 31, 2012






Consumer loans

$

66,687


$

18,578


$

313,418


$

398,683


$

4,700,921


Commercial loans

6,979


6,990


86,408


100,377


737,180


Total loans

$

73,666


$

25,568


$

399,826


$

499,060


$

5,438,101


 

 


Troubled Debt Restructurings

(Dollars in thousands)

(Unaudited)




TDRs


Performing


Non-performing


Non-performing TDRs
at inception but
performing for less
than six months


Total

December 31, 2013


Consumer loans

$

382,529



$

25,808



$

20,901



$

429,238


Commercial loans

456







456


Total TDRs

$

382,985



$

25,808



$

20,901



$

429,694


September 30, 2013








Consumer loans

$

387,671



$

21,104



$

21,353



$

430,128


Commercial loans

268





2,284



2,552


Total TDRs

$

387,939



$

21,104



$

23,637



$

432,680


December 31, 2012








Consumer loans

$

588,475



$

60,493



$

82,695



$

731,663


Commercial loans

1,287



23



2,033



3,343


Total TDRs

$

589,762



$

60,516



$

84,728



$

735,006


 

 


Gain on Loan Sales and Securitizations

(Dollars in thousands)

(Unaudited)





Three Months Ended



December 31, 2013



September 30, 2013



December 31, 2012


Description









Valuation gain (loss)









Value of interest rate locks

$

(53,542)


(0.79)%



$

87,961


1.05

%


$

(143,364)


(0.94)%


Value of forward sales

89,330


1.31

%


(217,987)


(2.61)%



123,602


0.82

%

Fair value of loans held-for-sale

68,938


1.02

%


63,394


0.76

%


213,512


1.38

%

LOCOM adjustments on loans held-for-investment


%



%


(1,103)


(0.01)%


Total valuation gains (losses)

104,726


1.54

%


(66,632)


(0.80)%



192,647


1.25

%










Sales (losses) gains









Marketing (losses) gains, net of adjustments

(3,313)


(0.05)%



(52,120)


(0.63)%



161,163


1.03

%

Pair-off (losses) gains

(53,605)


(0.79)%



197,544


2.37

%


(107,572)


(0.70)%


Provision for representation and warranty reserve

(3,018)


(0.04)%



(3,719)


(0.04)%



(7,285)


(0.05)%


Total sales (losses) gains

(59,936)


(0.88)%



141,705


1.70

%


46,306


0.28

%

Total gain on loan sales and securitizations

$

44,790




$

75,073




$

238,953



Total mortgage rate lock commitments (gross)

$

6,481,782




$

8,340,000




$

16,242,000



Total loan sales and securitizations

$

6,783,212


0.66

%


$

8,344,737


0.90

%


$

15,610,590


1.53

%

Total mortgage rate lock commitments (fallout adjusted) (1)

$

5,298,728


0.85

%


$

6,605,432


1.14

%


$

12,587,980


1.90

%

















Year Ended









December 31, 2013



December 31, 2012


Description












Valuation gain (loss)












Value of interest rate locks







$

(75,948)


(0.19)%



$

15,235


0.03

%

Value of forward sales







33,945


0.09

%


28,957


0.05

%

Fair value of loans held-for-sale







200,639


0.5

%


784,587


1.48

%

LOCOM adjustments on loans held-for-investment







(1,797)


%


(1,124)


%

Total valuation gains







156,839


0.4

%


827,655


1.56

%













Sales (losses) gains












Marketing (losses) gains, net of adjustments







(822)


%


731,648


1.38

%

Pair-off gains (losses)







263,782


0.68

%


(543,995)


(1.02)%


Provision for representation and warranty reserve







(17,606)


(0.05)%



(24,410)


(0.05)%


Total sales gains







245,354


0.63

%


163,243


0.31

%

Total gain on loan sales and securitizations







$

402,193




$

990,898



Total mortgage rate lock commitments volume







$

39,316,782




$

66,732,000



Total loan sales and securitizations







$

39,074,649


1.03

%


$

53,094,326


1.87

%

Total mortgage rate lock commitments (fallout adjusted) (1)







$

31,590,150


1.27

%


$

50,633,088


1.96

%



















(1) Fallout adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based
on previous historical experience and the level of interest rates. The net margin is based on net gain on loan sales to fallout adjusted mortgage rate
lock commitments.

 

 

Average Balances, Yields and Rates


(Dollars in thousands)


(Unaudited)






Three Months Ended



December 31, 2013



September 30, 2013



December 31, 2012



Average Balance

Annualized

Yield/Rate


Average Balance

Annualized

Yield/Rate


Average Balance

Annualized

Yield/Rate

Interest-Earning Assets



Loans held-for-sale

$

1,617,817


4.28

%


$

2,156,966


4.14

%


$

3,633,394


3.47

%

Loans repurchased with government guarantees

1,234,383


2.46

%


1,364,949


3.61

%


1,912,722


3.13

%

Loans held-for-investment









Consumer loans (1) (2)

3,296,584


4.01

%


3,412,909


4.06

%


4,608,093


4.28

%

Commercial loans (1)

630,953


3.84

%


637,711


3.85

%


1,722,609


3.78

%

Total loans held-for-investment

3,927,537


3.97

%


4,050,620


4.03

%


6,330,702


4.14

%

Investment securities available-for-sale or trading

1,006,801


2.59

%


295,923


1.98

%


362,819


2.51

%

Interest-earning deposits and other

1,820,838


0.25

%


2,695,959


0.25

%


1,110,354


0.24

%

Total interest-earning assets

9,607,376


2.98

%


10,564,417


2.98

%


13,349,991


3.44

%

Other assets

1,648,399




1,775,102




1,670,359



Total assets

$

11,255,775




$

12,339,519




$

15,020,350



Interest-Bearing Liabilities









Retail deposits









Demand deposits

$

410,147


0.14

%


$

394,418


0.18

%


$

379,721


0.28

%

Savings deposits

2,906,271


0.49

%


2,815,893


0.60

%


1,891,901


0.68

%

Money market deposits

293,192


0.17

%


314,459


0.18

%


427,792


0.43

%

Certificate of deposits

1,168,992


0.79

%


1,787,318


0.90

%


3,253,647


1.02

%

Total retail deposits

4,778,602


0.52

%


5,312,088


0.65

%


5,953,061


0.82

%

Government deposits









Demand deposits

115,980


0.28

%


55,571


0.76

%


81,555


0.44

%

Savings deposits

172,886


0.27

%


163,869


0.27

%


287,289


0.51

%

Certificate of deposits

256,274


0.18

%


303,329


0.29

%


444,668


0.62

%

Total government deposits

545,140


0.23

%


522,769


0.33

%


813,512


0.56

%

Wholesale deposits

15,423


4.40

%


72,141


5.06

%


157,960


4.04

%

Total deposits

5,339,165


0.50

%


5,906,998


0.67

%


6,924,533


0.86

%

Federal Home Loan Bank advances

2,755,375


3.16

%


2,900,519


3.34

%


3,145,341


3.13

%

Other

247,435


2.66

%


247,435


2.67

%


248,511


2.72

%

Total interest-bearing liabilities

8,341,975


1.44

%


9,054,952


1.58

%


10,318,385


1.60

%

Other liabilities (3)

1,640,037




2,018,300




3,413,633



Stockholders' equity

1,273,763




1,266,267




1,288,332



Total liabilities and stockholder's equity

$

11,255,775




$

12,339,519




$

15,020,350


















(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.

(2) Includes loans that are consolidated variable interest entities and carried at fair value.

(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

 

 


Average Balances, Yields and Rates


(Dollars in thousands)


(Unaudited)






Year Ended



December 31, 2013



December 31, 2012



Average Balance

Annualized

Yield/Rate


Average Balance

Annualized

Yield/Rate




Interest-Earning Assets






Loans held-for-sale

$

2,498,893


3.55

%


$

3,078,690


3.75

%

Loans repurchased with government guarantees

1,476,801


3.26

%


2,018,079


3.22

%

Loans held-for-investment






Consumer loans (1) (2)

3,669,373


4.07

%


4,737,553


4.33

%

Commercial loans (1)

658,804


4.04

%


1,782,507


3.91

%

Total loans held-for-investment

4,328,177


4.07

%


6,520,060


4.21

%

Investment securities available-for-sale or trading

474,205


2.51

%


573,445


3.94

%

Interest-earning deposits and other

2,103,542


0.25

%


914,127


0.24

%

Total interest-earning assets

10,881,618


3.03

%


13,104,401


3.66

%

Other assets

1,673,298




1,622,369



Total assets

$

12,554,916




$

14,726,770



Interest-Bearing Liabilities






Retail deposits






Demand deposits

$

397,094


0.19

%


$

363,247


0.26

%

Savings deposits

2,668,571


0.63

%


1,775,449


0.72

%

Money market deposits

334,945


0.25

%


463,490


0.48

%

Certificate of deposits

2,054,834


0.89

%


3,170,103


1.21

%

Total retail deposits

5,455,444


0.67

%


5,772,289


0.94

%

Government deposits






Demand deposits

96,112


0.43

%


96,000


0.48

%

Savings deposits

203,191


0.35

%


280,313


0.55

%

Certificate of deposits

360,406


0.41

%


393,731


0.64

%

Total government deposits

659,709


0.39

%


770,044


0.59

%

Wholesale deposits

60,711


4.98

%


296,997


3.80

%

Total deposits

6,175,864


0.69

%


6,839,330


1.03

%

FHLB advances

2,914,637


3.22

%


3,698,362


2.88

%

Other

247,435


2.68

%


248,561


2.80

%

Total interest-bearing liabilities

9,337,936


1.53

%


10,786,253


1.70

%

Other liabilities (3)

1,978,430




2,748,236



Stockholders' equity

1,238,550




1,192,281



Total liabilities and stockholder's equity

$

12,554,916




$

14,726,770













(1) Consumer loans include: residential first mortgage, second mortgage, warehouse lending, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, and commercial lease financing loans.

(2) Excludes loans that are consolidated variable interest entities and carried at fair value.

(3) Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest.

 

 

Non-GAAP Reconciliation

 (Dollars in thousands)

(Unaudited)






Three Months Ended


Year Ended


December 31,
2013


September 30,
2013


December 31,
2012


December 31,
2013


December 31,
2012

Pre-tax, pre-credit-cost (loss) income










Income before tax provision

$

(248,456)



$

14,492



$

(88,577)



$

(149,263)



$

52,731


Add back










Provision for loan losses

14,112



4,053



50,351



70,142



276,047


Asset resolution

3,372



16,295



21,241



52,033



91,349


Other than temporary impairment on AFS investments







8,789



2,192


Representation and warranty reserve - change in estimate

(15,424)



5,205



25,231



36,116



256,289


Write down of transferor interest





780



174



2,552


Total credit-related costs

2,060



25,553



97,603



167,254



628,429


Pre-tax, pre-credit-cost net income

$

(246,396)



$

40,045



$

9,026



$

17,991



$

681,160












Efficiency ratio (credit-adjusted)










Net interest income (a)

$

41,203



$

42,685



$

73,941



$

186,651



$

297,231


Non-interest income (b)

113,146



134,296



285,795



652,343



1,021,242


Add:  Representation and warranty reserve - change in estimate (d)

(15,424)



5,205



25,231



36,116



256,289


Adjusted income

138,925



182,186



384,967



875,110



1,574,762


Non-interest expense (c)

388,693



158,436



397,962



918,115



989,695


Less: Asset resolution expense (e)

(3,372)



(16,295)



(21,241)



(52,033)



(91,349)


Adjusted non-interest expense

$

385,321



$

142,141



$

376,721



$

866,082



$

898,346


Efficiency ratio (c/(a+b)) (1)

251.8

%


89.5

%


110.6

%


109.4

%


75.1

%

Efficiency ratio (credit-adjusted) ((c-e)/((a+b)+d))) (1)

277.4

%


78.0

%


97.9

%


99.0

%


57.0

%
























December 31,
2013


September 30,
2013


December 31,
2012

Non-performing assets / Tier 1 capital + allowance for loan losses














Non-performing assets









$

182,321



$

205,334



$

520,558


Tier 1 capital (2)









1,257,608



1,402,423



1,295,841


Allowance for loan losses









207,000



207,000



305,000


Tier 1 capital + allowance for loan losses









$

1,464,608



$

1,609,423



$

1,600,841


Non-performing assets / Tier 1 capital + allowance for loan losses









12.4

%


12.8

%


32.5

%















Mortgage servicing rights to Tier 1 capital ratio









December 31,
2013


September 30,
2013


December 31,
2012

Mortgage servicing rights









$

284,678



$

797,029



$

710,791


Tier 1 capital (to adjusted total assets) (2)









1,257,608



1,402,423



1,295,841


Mortgage servicing rights to Tier 1 capital ratio









22.6

%


56.8

%


54.9

%















(1) Ratios include $177.6 million and $61.0 million related to the prepayment of FHLB advances and the DOJ litigation, respectively, during the three months and year ended December 31, 2013, excluding these expenses the efficiency ratio would have been 97.3 percent and 81.0 percent for the three months and year ended December 31, 2013, respectively.

(2) Represents Tier 1 capital for Bank.

 

 

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