Flagstar Reports Third Quarter 2013 Net Income of $12.8 million or $0.16 per Diluted Share

PR Newswire

TROY, Mich., Oct. 22, 2013 /PRNewswire/ --

Results demonstrate the Company's continued progress reducing risk, improving credit performance and disposing of legacy assets

Non-performing loans declined by 46 percent, TDRs decreased by 21 percent, while allowance coverage ratio increased to 153 percent

Purchase mortgage originations increased 17 percent, reflecting industry shift to more purchase-driven market

Executing initiatives to optimize cost structure; non-interest expense decreased by $16 million during quarter, with further savings anticipated

Flagstar Bancorp, Inc. ( FBC ) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported third quarter 2013 net income applicable to common stockholders of $12.8 million, or $0.16 per share (diluted), as compared to $65.8 million, or $1.10 per share (diluted), in the second quarter 2013 and $79.7 million, or $1.36 per share (diluted), in the third quarter 2012.  Book value per common share increased to $17.96 at September 30, 2013, as compared to $17.66 at June 30, 2013.

"As expected, mortgage-related revenues were lower this quarter, with higher interest rates driving a significant decline in refinance volume," said Sandro DiNello, the Company's President and Chief Executive Officer.  "The 17 percent increase in purchase mortgage originations, along with improved credit performance and decreased fixed and variable expenses, helped to partially offset the reduction in refinance activity." 

DiNello continued, "Mortgage banking continues to be a key component of Flagstar's overall strategy, and we are adapting to a shift in the mortgage industry from a primarily refinance-driven market to a purchase market by further reducing our cost structure and focusing our efforts on appropriate growth opportunities.  We also have worked to reduce various risks in the organization.  At the same time, we increased our capital and liquidity position, and improved our reserve coverage, to provide Flagstar with the ability to capitalize on growth opportunities and deliver improved shareholder returns despite a weaker mortgage environment."       

"Our third quarter results demonstrate significant progress in our ongoing efforts to optimize Flagstar's cost structure, improve the Company's risk profile and dispose of legacy assets," said Lee Smith, the Company's Chief Operating Officer.  "During the third quarter, we executed a series of company-wide expense cutting initiatives, leading to a reduction in non-interest expense by almost $16 million from the prior quarter.  We sold approximately $167 million (unpaid principle balance) of non-performing loans and troubled debt restructurings, which significantly improved asset quality ratios and contributed to lower credit costs.  Total non-performing loans decreased to the lowest level since 2007, and our allowance increased to over 150 percent coverage of non-performing loans."

Smith added, "We have made great progress in addressing Flagstar's legacy issues and believe our actions have significantly improved the Company's financial performance and have placed Flagstar in a position to drive diversified and sustainable long-term revenue growth.  We are also working to create a sub-servicing platform which we believe will give us the ability to further diversify and increase revenues in the future."

Third Quarter 2013 Highlights:

  • Net income applicable to common stockholders decreased to $12.8 million, as compared to $65.8 million in the prior quarter (which included the benefit of $44.1 million in income arising from the settlement agreements).
    • Gain on loan sales decreased by $69.7 million from the prior quarter.
    • Net interest income decreased by $4.4 million from the prior quarter.
    • Total credit-related costs decreased by $59.7 million from the prior quarter.
    • Non-interest expense decreased by $15.9 million from the prior quarter.
  • Book value per common share increased to $17.96, compared to $17.66 in the prior quarter.
  • Tier 1 leverage ratio increased by 98 basis points from the prior quarter to 11.98 percent.
  • Total mortgage originations decreased by 28.9 percent from the prior quarter to $7.7 billion, driven by a decline in refinance mortgage originations.
    • Purchase mortgage originations increased by 17.0 percent from the prior quarter, partially offsetting the decline in refinance mortgage originations.
  • Credit performance continued to improve:
    • Sold $167.2 million in unpaid principal balance of residential first mortgage non-performing loans and total troubled debt restructuring loans ("TDRs"), resulting in a net gain (after broker fees) of $1.6 million.
    • Total non-performing loans decreased by 46.2 percent to $138.8 million.
    • Total TDRs decreased by 20.9 percent to $432.7 million, of which $387.9 million were performing.
    • Ratio of allowance for loan losses to non-performing loans held-for-investment increased to 152.6 percent.
    • Net charge-offs decreased to $40.1 million, as compared to $78.6 million in the prior quarter.

Net Interest Income

Third quarter 2013 net interest income decreased to $42.7 million, as compared to $47.1 million for the second quarter 2013 and $73.1 million for the third quarter 2012.  The decrease from the prior quarter is in-line with expectations and largely due to a decrease in the average balance of interest-earning assets, primarily within the residential first mortgage loan (both available-for-sale and held-for-investment) and warehouse loan portfolios.  These decreases in average balances were partially offset by an increase in the yield earned on residential first mortgage loans held-for-sale and an improvement in the Bank's deposit mix.  Net interest margin for the Bank decreased to 1.68 percent for third quarter 2013, as compared to 1.72 percent for the second quarter 2013 and 2.21 percent for the third quarter 2012. 

The average cost of funds for the third quarter 2013 was 1.58 percent, unchanged from the second quarter 2013 and decreased from 1.73 percent for the third quarter 2012.  While the average cost of funds was flat from the prior quarter, the average cost of total deposits decreased to 0.67 percent for the third quarter 2013, as compared to 0.75 percent for the second quarter 2013 and 1.02 percent for the third quarter 2012.  The decrease from the prior quarter was driven primarily by a reduction in higher-cost retail certificates of deposit and a decrease in the average rate paid on retail savings accounts.

Non-interest Income

Third quarter 2013 non-interest income decreased to $134.3 million, as compared to $220.0 million for the second quarter 2013 and $273.7 million for the third quarter 2012.  The decrease from the prior quarter was driven by a decrease in net gain on loan sales, partially offset by a decrease in representation and warranty provision - change in estimate (discussed in Credit-Related Costs and Asset Quality, below).  The Company's non-interest income in the prior quarter included $36.8 million of the $44.1 million in total income related to settlement agreements with Assured and MBIA.   

Third quarter 2013 net gain on loan sales decreased to $75.1 million, as compared to $144.8 million for the second quarter 2013 and $334.4 million for the third quarter 2012.  The decrease from the prior quarter reflects both a lower level of mortgage rate lock commitments (given the rising interest rate environment) and a decrease in gain on loan sale margin.  Fallout adjusted mortgage rate lock commitments were $6.6 billion for the third quarter 2013, a 32.9 percent decrease from the prior quarter.

Mortgage originations also decreased to $7.7 billion for the third quarter 2013, as compared to $10.9 billion for second quarter 2013 and $14.5 billion for the third quarter 2012.  The decrease from the prior quarter was driven by a decline in refinance originations, consistent with the increase in mortgage interest rate levels as compared to prior quarter.  The decrease in refinance originations was partially offset by an increase in purchase mortgage originations, which increased by 17.0 percent from the prior quarter.  Purchase originations comprised 47.6 percent of the Company's overall residential first mortgage originations in the third quarter 2013, an increase from 28.9 percent in the prior quarter, consistent with the industry shift to a more purchase-driven market.   

Gain on loan sale margin (based on the amount of rate lock commitments net of estimated cancellations, or "fallout-adjusted locks") decreased to 1.14 percent for the third quarter 2013, as compared to 1.47 percent for the second quarter 2013 and 2.39 percent for the third quarter 2012.  The decrease from the prior quarter was driven by a number of factors, principally due to lower hedge performance.   

Loan fees and charges decreased to $20.9 million for the third quarter 2013, as compared to $29.9 million for the second quarter 2013 and $37.4 million for the third quarter 2012.  Loan fees and charges are driven by mortgage loan originations, and the decline from the prior quarter was consistent with the decline in mortgage originations during the third quarter 2013.

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 $30.4 million for the third quarter 2013, as compared to $36.2 million for the second quarter 2013 and $11.3 million for the third quarter 2012.  The decrease from the prior quarter was primarily attributable to higher income in the second quarter 2013 resulting from bulk sales of mortgage servicing rights. There were no bulk sales of mortgage servicing rights during the third quarter 2013.

Non-interest Expense

Non-interest expense was $158.4 million for the third quarter 2013, as compared to $174.4 million for the second quarter 2013 and $233.5 million for the third quarter 2012.  Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality, below), non-interest expense would have totaled $142.1 million for the third quarter 2013, as compared to $158.5 million for the second quarter 2013 and $221.0 million for the third quarter 2012.  The decrease from the prior quarter reflected lower variable expenses related to the decrease in mortgage originations from the prior quarter, as well as reduced fixed costs as a result of the Company's ongoing initiatives to optimize its cost structure in light of the changing mortgage origination market. 

Compensation and benefits decreased to $61.6 million for the third quarter 2013, as compared to $70.9 million for the second quarter 2013 and $67.4 million for the third quarter 2012.  The decrease from the prior quarter was driven by a reduction in annual incentive compensation and a decrease in both headcount and contract employees, both consistent with the Company's ongoing efforts to optimize its cost structure and manage expenses more in line with revenues.  Full-time equivalent employees plus loan officers and account executives decreased by 331 from the prior quarter, and the number of long-term subcontract employees decreased by 155 from the prior quarter.  

Commission expense decreased to $12.1 million for the third quarter 2013, as compared to $15.4 million for the second quarter 2013 and $19.9 million for the third quarter 2012.  Loan processing expense also decreased to $10.9 million for the third quarter 2013, as compared to $15.4 million for the second quarter 2013 and $15.7 million for the third quarter 2012.  Commissions and loan processing expense are both related to mortgage originations, and the decreases were consistent with the decrease in mortgage originations during the third quarter 2013. 

Third quarter 2013 occupancy and equipment expense decreased to $18.6 million, as compared to $22.2 million for the second quarter 2013 and $18.8 million for the third quarter 2012. The decrease from the prior quarter was primarily due to a reduction in capitalized projects, as a result of the Company's ongoing cost reduction initiatives.  

Third quarter 2013 legal and professional expenses increased to $19.6 million, as compared to $16.4 million for the second quarter 2013, and decreased from $57.2 million for the third quarter 2012.  The prior quarter included a $10.0 million release of reserves for pending and threatened litigation associated with the settlement agreements with Assured and MBIA.  Excluding the $10.0 million release of reserves in the prior quarter, legal and professional expenses would have decreased by $6.8 million from the prior quarter, driven largely by a reduction in third party legal expenses as a result of the resolution of the Assured and MBIA litigation, as well as and lower expenses related to the Company's vendor management and procurement initiatives. 

Credit-Related Costs and Asset Quality

For the third quarter 2013, total credit-related costs (see non-GAAP reconciliation) decreased to $25.6 million, as compared to $85.2 million for the second quarter 2013 and $189.7 million for the third quarter 2012.  The decrease from the prior quarter was primarily driven by decreases in the provision for loan losses and the representation and warranty reserve - change in estimate.

At September 30, 2013, the Company's allowance for loan losses decreased to $207.0 million, as compared to $243.0 million at June 30, 2013 and $305.0 million at September 30, 2012.  The decrease from the prior quarter was primarily the result of a release of reserves associated with the non-performing loans and TDRs sold during the quarter, as well as decreased reserves from normal loan run-off.  At September 30, 2013, the ratio of the allowance for loan losses to non-performing loans held-for-investment increased to 152.6 percent, as compared to 94.2 percent at June 30, 2013 and 76.5 percent at September 30, 2012.

Net charge-offs for the third quarter were $40.1 million, a decrease of $38.5 million as compared to $78.6 million for the prior quarter, and a slight increase from $34.6 million for the third quarter 2012.  Provision for loan losses decreased to $4.1 million for the third quarter 2013, as compared to $31.6 million for the prior quarter and $52.6 million for the third quarter 2012. The decrease from the prior quarter reflects the lower level of allowance for loan losses and the decrease in net charge-offs.

Total non-performing loans held-for-investment were $138.8 million at September 30, 2013, a decrease as compared to $257.9 million at June 30, 2013 and $398.9 million at September 30, 2012.  The decrease from the prior quarter was driven by lower consumer non-performing loans reflecting the sales completed during the quarter, as well as lower commercial non-performing loans driven by discounted pay-offs and note sales.  The ratio of non-performing loans held-for-investment to loans held-for-investment also decreased to 3.46 percent at September 30, 2013, from 5.74 percent at June 30, 2013 and 6.09 percent at September 30, 2012.

Real estate-owned and other non-performing assets decreased to $66.5 million at September 30, 2013, as compared to $86.4 million at June 30, 2013 and $119.5 million at September 30, 2012.  The decrease from the prior quarter was driven by sales of commercial real estate-owned properties and normal run-off in the consumer real estate-owned portfolio.

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 September 30, 2013, the representation and warranty reserve was $174.0 million, as compared to $185.0 million at June 30, 2013 and $202.0 million at September 30, 2012.  The decrease from the prior quarter was consistent with a $14.1 million decrease in net charge-offs of loan repurchases from the prior quarter.  As a result, provisions related to the representation and warranty reserve - change in estimate decreased to $5.2 million for the third quarter 2013, as compared to $28.9 million for the second quarter 2013 and $124.5 million for the third quarter 2012. 

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 $16.3 million for the third quarter 2013, relatively flat as compared to $15.9 million for the second quarter 2013 and increased from $12.5 million for the third quarter 2012. 

Balance Sheet and Funding

Total assets decreased to $11.8 billion at September 30, 2013, as compared to $12.7 billion at June 30, 2013, driven primarily by decreases in the Company's loan portfolios, as a result of reduced mortgage production and the sales of non-performing loans and TDRs.  These decreases were partially offset by a $402.5 million increase in investment securities available-for-sale, as the Company invested a portion of its excess cash.

Loans repurchased with government guarantees decreased to $1.2 billion at September 30, 2013, as compared to $1.5 billion at June 30, 2013 and $1.9 billion at September 30, 2012.  This portfolio represents delinquent loans which have been repurchased from Ginnie Mae pools that are insured or guaranteed by the Federal Housing Administration.  The balance of this portfolio has continued to decrease, driven primarily by normal pay-downs, re-sales and accelerated dispositions.      

Total deposits decreased to $6.6 billion at September 30, 2013, as compared to $7.5 billion at June 30, 2013, due to lower funding needs resulting from a reduction in mortgage originations.  This decrease was primarily driven by a reduction in higher-cost retail certificates of deposit.

At September 30, 2013, the Company had $2.6 billion of cash on hand and interest-earning deposits, as compared to $2.7 billion at June 30, 2013.  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 September 30, 2013, the Bank had medium-term outstanding borrowings from the FHLB of $2.9 billion and an additional $0.4 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 September 30, 2013, the Bank had a Tier 1 leverage ratio of 11.98 percent, as compared to 11.00 percent at June 30, 2013.  At September 30, 2013, the Company had an equity-to-assets ratio of 10.78 percent.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, October 23, 2013 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 (800) 768-6563 toll free or (785) 830-7991, and use passcode: 9201691.  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: 9201691.

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 $11.8 billion in total assets at September 30, 2013, Flagstar is the largest bank headquartered in Michigan.  Flagstar operates 111 banking centers, all of which are located in Michigan and 45 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 outsourcing its non-core default 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)



September 30,
2013


June 30,
2013


December 31,
2012


September 30,
2012

Assets

(Unaudited)


(Unaudited)




(Unaudited)

Cash and cash equivalents








Cash and cash items

$

68,228



$

51,252



$

38,070



$

53,883


Interest-earning deposits

2,482,882



2,653,191



914,723



949,514


Total cash and cash equivalents

2,551,110



2,704,443



952,793



1,003,397


Trading securities

50,053



50,039



170,086



170,073


Investment securities available-for-sale

495,423



92,930



184,445



198,861


Loans held-for-sale

1,879,290



2,331,458



3,939,720



3,251,936


Loans repurchased with government guarantees

1,231,765



1,509,365



1,841,342



1,931,163


Loans, net








Loans held-for-investment

4,013,507



4,491,153



5,438,101



6,552,399


Less: allowance for loan losses

(207,000)



(243,000)



(305,000)



(305,000)


Total loans held-for-investment, net

3,806,507



4,248,153



5,133,101



6,247,399


Mortgage servicing rights

797,029



729,019



710,791



686,799


Repossessed assets, net

66,530



86,382



120,732



119,468


Federal Home Loan Bank stock

301,737



301,737



301,737



301,737


Premises and equipment, net

229,117



227,771



219,059



211,981


Other assets

399,254



453,720



508,206



776,408


Total assets

$

11,807,815



$

12,735,017



$

14,082,012



$

14,899,222


Liabilities and Stockholders' Equity








Deposits








Non-interest bearing

$

1,002,472



$

1,182,204



$

1,309,649



$

2,504,873


Interest bearing

5,646,813



6,287,863



6,984,646



6,984,296


Total deposits

6,649,285



7,470,067



8,294,295



9,489,169


Federal Home Loan Bank advances

2,907,598



2,900,000



3,180,000



3,088,000


Long-term debt

360,389



367,415



247,435



248,560


Representation and warranty reserve

174,000



185,000



193,000



202,000


Other liabilities

444,188



558,800



1,007,920



620,894


Total liabilities

10,535,460



11,481,282



12,922,650



13,648,623


Stockholders' Equity








Preferred stock

264,726



263,277



260,390



258,973


Common stock

561



561



559



558


Additional paid in capital

1,478,391



1,477,484



1,476,569



1,475,380


Accumulated other comprehensive income (loss)

4,429



988



(1,658)



(2,042)


Accumulated deficit

(475,752)



(488,575)



(576,498)



(482,270)


Total stockholders' equity

1,272,355



1,253,735



1,159,362



1,250,599


Total liabilities and stockholders' equity

$

11,807,815



$

12,735,017



$

14,082,012



$

14,899,222


 


Flagstar Bancorp, Inc.

 Consolidated Statements of Operations

 (Dollars in thousands, except per share data)



Three Months Ended


Nine Months Ended


September 30,
2013


June 30,
2013


September 30,
2012


September 30,
2013


September 30,
2012


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)

Interest Income










Loans

$

75,633



$

81,731



$

114,158



$

249,312



$

343,677


Investment securities available-for-sale or trading

1,465



1,838



4,912



5,397



20,333


Interest-earning deposits and other

1,709



1,489



672



4,145



1,546


  Total interest income

78,807



85,058



119,742



258,854



365,556


Interest Expense










Deposits

10,023



12,148



17,819



35,680



55,126


Federal Home Loan Bank advances

24,434



24,171



27,091



72,766



81,870


Other

1,665



1,643



1,753



4,960



5,270


  Total interest expense

36,122



37,962



46,663



113,406



142,266


Net interest income

42,685



47,096



73,079



145,448



223,290


Provision for loan losses

4,053



31,563



52,595



56,030



225,696


Net interest income (expense) after provision for loan losses

38,632



15,533



20,484



89,418



(2,406)


Non-Interest Income










Loan fees and charges

20,876



29,916



37,359



84,152



102,116


Deposit fees and charges

5,410



5,193



5,255



15,749



15,216


Loan administration

30,434



36,157



11,099



86,947



74,997


Gain (loss) on trading securities

13



21



237



85



(2,023)


Net gain on loan sales

75,073



144,791



334,427



357,404



751,945


Net transactions costs on sales of mortgage servicing rights

(1,763)



(4,264)



(1,332)



(10,246)



(4,631)


Net gain on investment securities available-for-sale





2,616





2,946


Total other-than-temporary impairment (loss) gain



(8,789)





(8,789)



2,810


Gain (loss) recognized in other comprehensive income before taxes









(5,002)


Net impairment losses recognized in earnings



(8,789)





(8,789)



(2,192)


Representation and warranty reserve - change in estimate

(5,205)



(28,940)



(124,492)



(51,541)



(231,058)


Other non-interest income

9,458



45,874



8,568



65,437



28,132


  Total non-interest income

134,296



219,959



273,737



539,198



735,448


Non-Interest Expense










Compensation and benefits

61,552



70,935



67,386



209,696



198,776


Commissions

12,099



15,402



19,888



44,962



53,193


Occupancy and equipment

18,644



22,198



18,833



60,218



54,490


Asset resolution

16,295



15,921



12,487



48,661



70,108


Federal deposit insurance premiums

7,910



7,791



12,643



26,941



37,071


Loss on extinguishment of debt





15,246





15,246


Loan processing expense

10,890



15,389



15,662



43,390



37,480


Legal and professional expense

19,593



16,390



57,209



64,822



87,110


Other non-interest expense

11,453



10,371



14,137



30,732



38,261


  Total non-interest expense

158,436



174,397



233,491



529,422



591,735


Income before federal income taxes

14,492



61,095



60,730



99,194



141,307


(Benefit) provision for federal income taxes

220



(6,108)



(20,380)



(5,888)



(19,880)


Net income

14,272



67,203



81,110



105,082



161,187


Preferred stock dividend/accretion

(1,449)



(1,449)



(1,417)



(4,336)



(4,241)


Net income applicable to common stockholders

$

12,823



$

65,754



$

79,693



$

100,746



$

156,946


Income per share










     Basic

$

0.16



$

1.11



$

1.37



$

1.61



$

2.63


     Diluted

$

0.16



$

1.10



$

1.36



$

1.59



$

2.61


 

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in thousands, except per share data)

(Unaudited)



Three Months Ended


Nine Months Ended


September 30,

2013


June 30,
2013


September 30,
2012


September 30,
2013


September 30,
2012

Return on average assets

0.42

%


2.03

%


2.10

%


1.03

%


1.43

%

Return on average equity

4.05

%


21.23

%


25.78

%


10.95

%


18.04

%

Efficiency ratio

89.5

%


65.3

%


67.3

%


77.3

%


61.7

%

Efficiency ratio (credit-adjusted) (1)

78.0

%


53.5

%


46.9

%


65.3

%


43.8

%

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

10.26

%


9.56

%


8.16

%


9.44

%


7.93

%

Mortgage loans originated (2)

$

7,737,143



$

10,882,129



$

14,513,635



$

31,042,635



$

38,230,061


Other loans originated

$

93,347



$

67,763



$

165,668



$

235,850



$

640,697


Mortgage loans sold and securitized

$

8,344,737



$

11,123,821



$

13,876,626



$

32,291,437



$

37,483,736


Interest rate spread - bank only (3)

1.42

%


1.46

%


1.84

%


1.51

%


2.02

%

Net interest margin - bank only (4)

1.68

%


1.72

%


2.21

%


1.77

%


2.33

%

Interest rate spread - consolidated (3)

1.39

%


1.43

%


1.81

%


1.48

%


2.00

%

Net interest margin - consolidated (4)

1.62

%


1.66

%


2.16

%


1.71

%


2.28

%

Average common shares outstanding

56,096,376



56,053,922



55,801,692



56,041,844



55,735,095


Average fully diluted shares outstanding

56,541,089



56,419,163



56,233,165



56,458,898



56,083,757


Average interest-earning assets

$

10,564,417



$

11,311,945



$

13,476,917



$

11,311,033



$

13,021,941


Average interest paying liabilities

$

9,054,952



$

9,642,543



$

10,737,734



$

9,673,571



$

10,943,347


Average stockholder's equity

$

1,266,267



$

1,238,787



$

1,236,411



$

1,226,683



$

1,160,031


Charge-offs to average LHFI (5)

3.96

%


6.96

%


2.12

%


4.60

%


4.83

%

Charge-offs, to average LHFI adjusted (5)(6)

1.30

%


3.56

%


2.12

%


2.65

%


4.83

%

 


September 30,
2013


June 30,
2013


December 31,
2012


September 30,
2012

Equity-to-assets ratio

10.78

%


9.84

%


8.23

%


8.39

%

Book value per common share

$

17.96



$

17.66



$

16.12



$

17.76


Number of common shares outstanding

56,114,572



56,077,528



55,863,053



55,828,470


Mortgage loans serviced for others

$

74,200,317



$

68,320,534



$

76,821,222



$

82,414,799


Weighted average service fee (basis points)

29.3



29.5



29.2



30.1


Capitalized value of mortgage servicing rights

1.07

%


1.07

%


0.93

%


0.83

%

Ratio of allowance for loan losses to non-performing LHFI (7)

152.6

%


94.2

%


76.3

%


76.5

%

Ratio of allowance for loan losses to LHFI (5) (7)

5.50

%


5.75

%


5.61

%


4.65

%

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

1.74

%


2.71

%


3.70

%


3.48

%

Number of bank branches

111



111



111



111


Number of loan origination centers

45



40



31



31


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

3,069



3,418



3,328



3,240


Number of loan officers and account executives

359



341



334



336



(1) See Non-GAAP reconciliation.

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

(3) 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.

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

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

(6) Excludes charge-offs of $26.8 million and $38.3 million related to the sale of non-performing loans and TDRs, during the three months ended September 30, 2013 and June 30, 2013, respectively, and $65.1 million during the nine months ended September 30, 2013.

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

 


Regulatory Capital

(Dollars in thousands)

(Unaudited)



September 30, 2013


June 30, 2013


December 31, 2012


September 30, 2012


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

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

$

1,402,423


11.98

%


$

1,390,582


11.00

%


$

1,295,841


9.26

%


$

1,379,701


9.31

%

Total adjusted tangible asset base

$

11,708,635




$

12,646,776




$

13,999,636




$

14,819,100



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

$

1,402,423


26.57

%


$

1,390,582


23.73

%


$

1,295,841


15.90

%


$

1,379,701


16.31

%

Total capital (to risk weighted assets) (1)

1,470,060


27.85

%


1,465,860


25.01

%


1,400,126


17.18

%


1,487,851


17.58

%

Risk weighted asset base

$

5,278,254




$

5,861,221




$

8,146,771




$

8,461,130




(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


September 30, 2013


June 30, 2013


September 30, 2012

Consumer loans









    Mortgage (1)

$

7,737,142


98.8

%


$

10,882,129


99.4

%


$

14,513,635


98.8

%

    Other consumer (2)

24,811


0.3

%


11,659


0.1

%


8,489


0.1

%

Total consumer loans

7,761,953


99.1

%


10,893,788


99.5

%


14,522,124


98.9

%

Commercial loans (3)

68,537


0.9

%


56,104


0.5

%


157,179


1.1

%

Total loan originations

$

7,830,490


100.0

%


$

10,949,892


100.0

%


$

14,679,303


100.0

%
















Nine Months Ended









September 30, 2013



September 30, 2012


Consumer loans












    Mortgage (1)







$

31,042,635


99.3

%


$

38,230,061


98.3

%

    Other consumer (2)







45,023


0.1

%


19,469


0.1

%

Total consumer loans







31,087,658


99.4

%


38,249,530


98.4

%

Commercial loans (3)







190,827


0.6

%


621,228


1.6

%

Total loan originations







$

31,278,485


100.0

%


$

38,870,758


100.0

%


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

(2) Other consumer loans include: warehouse lending, 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)



September 30, 2013


June 30, 2013


December 31, 2012


September 30, 2012


Consumer loans












Residential first mortgage

$

2,478,599


61.8

%


$

2,627,979


58.5

%


$

3,009,251


55.3

%


$

3,086,096


47.1

%

Second mortgage

174,383


4.3

%


180,802


4.0

%


114,885


2.1

%


122,286


1.9

%

Warehouse lending

390,348


9.7

%


676,454


15.1

%


1,347,727


24.8

%


1,307,292


20.0

%

HELOC

307,552


7.7

%


321,576


7.2

%


179,447


3.3

%


192,117


2.9

%

Other

39,043


1.0

%


42,293


0.9

%


49,611


0.9

%


53,188


0.8

%

Total consumer loans

3,389,925


84.5

%


3,849,104


85.7

%


4,700,921


86.4

%


4,760,979


72.7

%

Commercial loans












Commercial real estate

420,879


10.4

%


476,500


10.6

%


640,315


11.8

%


1,005,498


15.3

%

Commercial and industrial

187,639


4.7

%


160,259


3.6

%


90,565


1.7

%


597,273


9.1

%

Commercial lease financing

15,064


0.4

%


5,290


0.1

%


6,300


0.1

%


188,649


2.9

%

Total commercial loans

623,582


15.5

%


642,049


14.3

%


737,180


13.6

%


1,791,420


27.3

%

Total loans held-for-investment

$

4,013,507


100.0

%


$

4,491,153


100.0

%


$

5,438,101


100.0

%


$

6,552,399


100.0

%

 


Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)



Three Months Ended


Nine Months Ended


September 30, 2013


June 30,
2013


September 30, 2012


September 30, 2013


September 30, 2012

Beginning balance

$

243,000



$

290,000



$

287,000



$

305,000



$

318,000


Provision for loan losses

4,053



31,563



52,595



56,030



225,696


Charge-offs










Consumer loans










Residential first mortgage

(34,666)



(63,099)



(23,999)



(123,456)



(142,001)


Second mortgage

(1,534)



(2,033)



(3,990)



(5,522)



(13,330)


Warehouse lending

(45)







(45)




HELOC

(872)



(812)



(1,483)



(3,745)



(12,159)


Other

(1,341)



(587)



(892)



(2,627)



(2,810)


Total consumer loans

(38,458)



(66,531)



(30,364)



(135,395)



(170,300)


Commercial loans










Commercial real estate

(8,419)



(21,350)



(15,532)



(42,931)



(91,842)


Commercial and industrial

(302)





(12)



(302)



(1,616)


Total commercial loans

(8,721)



(21,350)



(15,544)



(43,233)



(93,458)


Total charge-offs

(47,179)



(87,881)



(45,908)



(178,628)



(263,758)


Recoveries










Consumer loans










Residential first mortgage

2,256



6,687



5,899



14,296



13,031


Second mortgage

348



87



428



825



1,716


HELOC

143



457



44



705



394


Other

470



(80)



448



844



1,055


Total consumer loans

3,217



7,151



6,819



16,670



16,196


Commercial loans










Commercial real estate

3,860



2,159



4,461



7,862



8,797


Commercial and industrial

49



8



33



66



69


Total commercial loans

3,909



2,167



4,494



7,928



8,866


Total recoveries

7,126



9,318



11,313



24,598



25,062


Charge-offs, net of recoveries

(40,053... )



(78,563)



(34,595)



(154,030)



(238,696)


Ending balance

$

207,000



$

243,000



$

305,000



$

207,000



$

305,000


Net charge-off ratio (annualized) (1)

3.96

%


6.96

%


2.12

%


4.60

%


4.83

%

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

1.30

%


3.56

%


2.12

%


2.65

%


4.83

%


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

(2) Excludes charge-offs of $26.8 million and $38.3 million related to the sale of non-performing loans and TDRs, during the three months ended September 30, 2013 and June 30, 2013, respectively, and $65.1 million during the nine months ended September 30, 2013.

 


Representation and Warranty Reserve

(Dollars in thousands)

(Unaudited)




Three Months Ended


Nine Months Ended


September 30,
2013


June 30,
2013


September 30,
2012


September 30,
2013


September 30,
2012

Balance, beginning of period

$

185,000



$

185,000



$

161,000



$

193,000



$

120,000


Provision











Charged to gain on sale for current loan sales

3,719



5,052



6,432



14,588



17,126



Charged to representation and warranty reserve - change in estimate

5,205



28,941



124,492



51,541



231,058



Total

8,923



33,993



130,924



66,129



248,184


Charge-offs, net

(19,924)



(33,993)



(89,924)



(85,129)



(166,184)


Balance, end of period

$

174,000



$

185,000



$

202,000



$

174,000



$

202,000
























 


Composition of Allowance for Loan Losses

 (Dollars in thousands)

(Unaudited)


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








June 30, 2013

Collectively Evaluated
Reserves


Individually Evaluated
Reserves


Total

Consumer loans






Residential first mortgage

$

67,264



$

110,070



$

177,334


Second mortgage

10,870



7,969



18,839


Warehouse lending 

721





721


HELOC

11,735



3,133



14,868


Other

1,780





1,780


Total consumer loans

92,370



121,172



213,542


Commercial loans






Commercial real estate

27,253



69



27,322


Commercial and industrial

2,052



84



2,136


Commercial lease financing 






Total commercial loans

29,305



153



29,458


Total allowance for loan losses

$

121,675



$

121,325



$

243,000


 


Non-Performing Loans and Assets

(Dollars in thousands)

(Unaudited)



September 30,
2013


June 30,
2013


December 31,
2012


September 30,
2012

Non-performing loans

$

94,062



$

161,725



$

254,582



$

289,468


Non-performing TDRs

21,104



24,025



60,516



55,396


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

23,638



72,186



84,728



54,084


Total non-performing loans held-for-investment

138,804



257,936



399,826



398,948


Real estate and other non-performing assets, net

66,530



86,382



120,732



119,468


Non-performing assets held-for-investment, net

205,334



344,318



520,558



518,416


Non-performing loans held-for-sale

3,099



3,351



1,835



2,086


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

$

208,433



$

347,669



$

522,393



$

520,502


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

1.74

%


2.71

%


3.70

%


3.48

%

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

3.46

%


5.74

%


7.35

%


6.09

%

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

5.03

%


7.52

%


9.36

%


7.77

%

 

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

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


June 30, 2013






Consumer loans

$

60,872


$

13,421


$

194,151


$

268,444


$

3,849,104


Commercial loans

188


22,736


63,785


86,709


642,049


Total loans

$

61,060


$

36,157


$

257,936


$

355,153


$

4,491,153


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


September 30, 2012






Consumer loans

$

53,919


$

26,697


$

276,319


$

356,935


$

4,760,979


Commercial loans

9,563


432


122,629


132,624


1,791,420


Total loans

$

63,482


$

27,129


$

398,948


$

489,559


$

6,552,399


 


Troubled Debt Restructurings

(Dollars in thousands)

(Unaudited)



TDRs


Performing


Non-performing


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


Total

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


June 30, 2013








Consumer loans

$

451,097



$

24,025



$

71,951



$

547,073


Commercial loans





235



235


Total TDRs

$

451,097



$

24,025



$

72,186



$

547,308


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


September 30, 2012








Consumer loans

$

612,956



$

55,222



$

51,028



$

719,206


Commercial loans

1,329



173



3,057



4,559


Total TDRs

$

614,285



$

55,395



$

54,085



$

723,765


 

Gain on Loan Sales and Securitizations

(Dollars in thousands)

(Unaudited)



Three Months Ended


September 30, 2013


June 30, 2013


September 30, 2012

Description









Valuation gain (loss)









Value of interest rate locks

$

87,961


1.05

%


$

(75,040)


(0.68)

%


$

97,176


0.73

%

Value of forward sales

(217,987)


(2.61)

%


166,941


1.51

%


(91,329)


(0.68)

%

Fair value of loans held-for-sale

63,394


0.76

%


(19,336)


(0.17)

%


273,270


1.98

%

LOCOM adjustments on loans held-for-investment


%



%



%

Total valuation gains

(66,632)


(0.80)%



72,565


0.66

%


279,117


2.03

%










Sales gains (losses)









Marketing gains, net of adjustments

(52,120)


(0.63)

%


28,753


0.25

%


218,262


1.57

%

Pair-off (losses) gains

197,544


2.37

%


48,525


0.44

%


(156,520)


(1.13)

%

Provision for representation and warranty reserve

(3,719)


(0.04)

%


(5,052)


(0.05)

%


(6,432)


(0.05)

%

Total sales gains

141,705


1.70

%


72,226


0.64

%


55,310


0.39

%

Total gain on loan sales and securitizations

$

75,073




$

144,791




$

334,427



Total mortgage rate lock commitments (gross)

$

8,340,000




$

12,359,000




$

18,089,000



Total loan sales and securitizations

$

8,344,737


0.90

%


$

11,123,821


1.30

%


$

13,876,627


2.42

%

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

$

6,605,432


1.14

%


$

9,837,573


1.47

%


$

13,972,922


2.39

%

















Nine Months Ended








September 30, 2013


September 30, 2012

Description












Valuation gain (loss)












Value of interest rate locks







$

(22,406)


(0.07)

%


$

158,599


0.86

%

Value of forward sales







(55,385)


(0.17)

%


(94,645)


(0.68)

%

Fair value of loans held-for-sale







131,702


0.41

%


571,075


1.52

%

LOCOM adjustments on loans held-for-investment







(1,797)


(0.01)

%


(21)


%

Total valuation gains







52,114


0.16

%


635,008


1.70

%













Sales gains (losses)












Marketing gains, net of adjustments







2,491


0.02

%


530,466


1.42

%

Pair-off gains (losses)







317,387


0.98

%


(396,403)


(1.06)

%

Provision for representation and warranty reserve







(14,588)


(0.05)

%


(17,126)


(0.05)

%

Total sales gains







305,290


0.95

%


116,937


0.31

%

Total gain on loan sales and securitizations







$

357,404




$

751,945



Total mortgage rate lock commitments volume







$

32,835,000




$

50,489,000



Total loan sales and securitizations







$

32,291,437


1.11

%


$

37,483,736


2.01

%

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







$

26,291,422


1.36

%


$

38,045,108


1.98

%








(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


September 30, 2013


June 30, 2013


September 30, 2012


Average
Balance

Annualized

Yield/Rate


Average
Balance

Annualized

Yield/Rate


Average
Balance

Annualized

Yield/Rate

Interest-Earning Assets



Loans held-for-sale

$

2,156,966


4.14

%


$

2,630,309


3.38

%


$

3,301,860


3.70

%

Loans repurchased with government guarantees

1,364,949


3.61

%


1,540,798


3.43

%


2,070,813


2.98

%

Loans held-for-investment









Consumer loans (1) (2)

3,412,909


4.06

%


3,845,503


4.08

%


4,717,672


4.32

%

Commercial loans (1)

637,711


3.85

%


669,253


4.18

%


1,815,897


3.67

%

Total loans held-for-investment

4,050,620


4.03

%


4,514,756


4.10

%


6,533,569


4.14

%

Investment securities available-for-sale or trading

295,923


1.98

%


240,296


3.06

%


505,361


3.89

%

Interest-earning deposits and other

2,695,959


0.25

%


2,385,786


0.25

%


1,065,314


0.25

%

Total interest-earning assets

10,564,417


2.98

%


11,311,945


3.01

%


13,476,917


3.54

%

Other assets

1,775,102




1,649,000




1,680,208



Total assets

$

12,339,519




$

12,960,945




$

15,157,125



Interest-Bearing Liabilities









Retail deposits









Demand deposits

$

394,418


0.18

%


$

395,137


0.21

%


$

364,612


0.27

%

Savings deposits

2,815,893


0.60

%


2,627,166


0.73

%


1,768,897


0.65

%

Money market deposits

314,459


0.18

%


345,694


0.26

%


457,425


0.46

%

Certificate of deposits

1,787,318


0.90

%


2,353,775


0.91

%


3,227,201


1.21

%

Total retail deposits

5,312,088


0.65

%


5,721,772


0.74

%


5,818,135


0.92

%

Government deposits









Demand deposits

55,571


0.76

%


114,707


0.40

%


107,944


0.48

%

Savings deposits

163,869


0.27

%


169,122


0.29

%


291,046


0.55

%

Certificate of deposits

303,329


0.29

%


413,177


0.44

%


375,922


0.64

%

Total government deposits

522,769


0.33

%


697,006


0.40

%


774,912


0.58

%

Wholesale deposits

72,141


5.06

%


73,910


5.07

%


334,595


3.77

%

Total deposits

5,906,998


0.67

%


6,492,688


0.75

%


6,927,642


1.02

%

Federal Home Loan Bank advances

2,900,519


3.34

%


2,901,102


3.34

%


3,561,532


3.03

%

Other

247,435


2.67

%


248,753


2.65

%


248,560


2.81

%

Total interest-bearing liabilities

9,054,952


1.58

%


9,642,543


1.58

%


10,737,734


1.73

%

Other liabilities (3)

2,018,300




2,079,615




3,182,980



Stockholder's equity

1,266,267




1,238,787




1,236,411



Total liabilities and stockholder's equity

$

12,339,519




$

12,960,945




$

15,157,125




(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 (VIEs) 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)



Nine Months Ended


September 30, 2013


September 30, 2012


Average
Balance

Annualized

Yield/Rate


Average
Balance

Annualized

Yield/Rate




Interest-Earning Assets






Loans held-for-sale

$

2,795,812


3.40

%


$

2,892,439


3.87

%

Loans repurchased with government guarantees

1,558,495


3.47

%


2,053,455


3.24

%

Loans held-for-investment






Consumer loans (1) (2)

3,795,003


4.10

%


4,781,021


4.35

%

Commercial loans (1)

668,189


4.10

%


1,802,619


3.95

%

Total loans held-for-investment

4,463,192


4.10

%


6,583,640


4.24

%

Investment securities available-for-sale or trading

294,722


2.44

%


644,166


4.21

%

Interest-earning deposits and other

2,198,812


0.25

%


848,241


0.24

%

Total interest-earning assets

11,311,033


3.05

%


13,021,941


3.74

%

Other assets

1,681,689




1,606,255



Total assets

$

12,992,722




$

14,628,196



Interest-Bearing Liabilities






Retail deposits






Demand deposits

$

392,695


0.21

%


$

357,715


0.26

%

Savings deposits

2,588,468


0.69

%


1,736,348


0.74

%

Money market deposits

349,016


0.27

%


475,477


0.50

%

Certificate of deposits

2,353,359


0.90

%


3,142,051


1.28

%

Total retail deposits

5,683,538


0.72

%


5,711,591


0.98

%

Government deposits






Demand deposits

89,416


0.49

%


100,850


0.49

%

Savings deposits

213,403


0.37

%


277,970


0.56

%

Certificate of deposits

395,499


0.46

%


376,628


0.65

%

Total government deposits

698,318


0.44

%


755,448


0.60

%

Wholesale deposits

75,973


5.01

%


343,682


3.77

%

Total deposits

6,457,829


0.74

%


6,810,721


1.08

%

FHLB advances

2,968,308


3.28

%


3,884,049


2.82

%

Other

247,435


2.68

%


248,577


2.83

%

Total interest-bearing liabilities

9,673,572


1.57

%


10,943,347


1.74

%

Other liabilities (3)

2,092,467




2,524,818



Stockholder's equity

1,226,683




1,160,031



Total liabilities and stockholder's equity

$

12,992,722




$

14,628,196




(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 (VIEs) 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


Nine Months Ended


September 30,
2013


June 30,
2013


September 30,
2012


September 30,
2013


September 30,
2012

Pre-tax, pre-credit-cost revenue










Income before tax provision

$

14,492



$

61,095



$

60,730



$

99,194



$

141,307


Add back










Provision for loan losses

4,053



31,563



52,595



56,030



225,696


Asset resolution

16,295



15,921



12,487



48,661



70,108


Other than temporary impairment on AFS investments



8,789





8,789



2,192


Representation and warranty reserve - change in estimate

5,205



28,940



124,492



51,541



231,058


Write down of transferor interest





118



174



1,771


Total credit-related costs

25,553



85,213



189,692



165,195



530,825


Pre-tax, pre-credit-cost net revenue

$

40,045



$

146,308



$

250,422



$

264,389



$

672,132












Efficiency ratio (credit-adjusted)










Net interest income (a)

$

42,685



$

47,096



$

73,079



$

145,448



$

223,290


Non-interest income (b)

134,296



219,959



273,737



539,198



735,448


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

5,205



28,940



124,492



51,541



231,058


Adjusted income

182,186



295,995



471,308



736,187



1,189,796


Non-interest expense (c)

158,436



174,397



233,491



529,422



591,735


Less: Asset resolution expense (e)

(16,295)



(15,921)



(12,487)



(48,661)



(70,108)


Adjusted non-interest expense

$

142,141



$

158,476



$

221,004



$

480,761



$

521,627


Efficiency ratio (c/(a+b))

89.5

%


65.3

%


67.3

%


77.3

%


61.7

%

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

78.0

%


53.5

%


46.9

%


65.3

%


43.8

%

 


September 30,
2013


June 30,
2013


December 31,
2012


September 30,
2012

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








Non-performing assets

$

205,334



$

344,318



$

520,558



$

518,416


Tier 1 capital (1)

1,402,423



1,390,582



1,295,841



1,379,701


Allowance for loan losses

207,000



243,000



305,000



305,000


Tier 1 capital + allowance for loan losses

$

1,609,423



$

1,633,582



$

1,600,841



$

1,684,701


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

12.8

%


21.1

%


32.5

%


30.8

%

 

Mortgage servicing rights to Tier 1 capital ratio

September 30,
2013


June 30,
2013


March 31,
2013


December 31,
2012


September 30,
2012

Mortgage servicing rights

797,029



729,019



727,207



710,791



686,799


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

1,402,423



1,390,582



1,318,770



1,295,841



1,379,701


Mortgage servicing rights to Tier 1 capital ratio

56.8

%


52.4

%


55.1

%


54.9

%


49.8

%









(1) Represents Tier 1 Capital for the Bank.

 

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