Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - FLAGSTAR BANCORP INC | q414ecdeckfbcfinal.htm |
| 8-K - 8-K - FLAGSTAR BANCORP INC | a8-kearningsrelease4q2014.htm |
EXHIBIT 99.1
NEWS RELEASE
For more information, contact:
David L. Urban
david.urban@flagstar.com
(248) 312-5970
Flagstar Reports Fourth Quarter 2014 Net Income of $11.1 million, or $0.07 per Diluted Share
Profitable results led by revenue growth and continued expense discipline
Key Q4 Highlights
• | Increased profitability with no unusual items |
• | Noninterest income up modestly |
• | Noninterest expense down slightly |
• | Lower net charge-offs and provision expense |
• | Tier 1 leverage ratio increased |
TROY, Mich. Jan 22, 2015 - Flagstar Bancorp, Inc. (NYSE:FBC) ("the Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported fourth quarter 2014 net income of $11.1 million, or $0.07 per diluted share, as compared to a net loss of $27.6 million in the third quarter 2014, or $(0.61) per diluted share, and net income of $161.9 million in the fourth quarter 2013, or $2.77 per diluted share. The full year 2014 net loss was $69.5 million, or $(1.72) per diluted share, as compared to a full year 2013 net income of $267.0 million, or $4.37 per diluted share.
Alessandro P. DiNello, president and chief executive officer, said, "I am pleased that this quarter's earnings are the result of core operations. We have been working tirelessly for the last two years to de-risk the balance sheet, settle major legal matters, right size operating expenses, upgrade our management talent, build a strong risk management organization and focus our business strategies. These efforts have begun to bear fruit and we will continue to build on this foundation going forward."
1
Fourth Quarter 2014 Highlights:
Income Statement Highlights | |||||||||||||||||||
Three Months Ended | % Change | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | |||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Consolidated Statements of Operations | |||||||||||||||||||
Net interest income | $ | 61,302 | $ | 64,363 | $ | 62,425 | $ | 58,201 | $ | 41,203 | (4.8 | )% | 48.8 | % | |||||
Provision for loan losses | 4,986 | 8,097 | 6,150 | 112,321 | 14,112 | (38.4 | )% | (64.7 | )% | ||||||||||
Noninterest income | 98,441 | 85,188 | 102,484 | 74,953 | 113,146 | 15.6 | % | (13.0 | )% | ||||||||||
Noninterest expense | 139,253 | 179,389 | 121,353 | 139,252 | 388,693 | (22.4 | )% | (64.2 | )% | ||||||||||
Income (loss) before income taxes | 15,504 | (37,935 | ) | 37,406 | (118,419 | ) | (248,456 | ) | N/M | N/M | |||||||||
Provision (benefit) for income taxes | 4,428 | (10,303 | ) | 11,892 | (39,996 | ) | (410,362 | ) | N/M | N/M | |||||||||
Net income (loss) | $ | 11,076 | $ | (27,632 | ) | $ | 25,514 | $ | (78,423 | ) | $ | 161,906 | N/M | (93.2 | )% | ||||
Earnings (Loss) Per Share (1) | $ | 0.07 | (0.61 | ) | 0.33 | (1.51 | ) | 2.77 | N/M | (97.5 | )% | ||||||||
N/M - Not meaningful
(1) | Fully diluted earnings (loss) per share, except where securities would be anti-dilutive. Includes the preferred stock dividend, including the accretion and cumulative deferred. |
Key Ratios | ||||||||||||||
Three Months Ended | Change (bps) | |||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | ||||||||
Net interest margin (consolidated) | 2.80 | % | 2.91 | % | 2.98 | % | 2.97 | % | 1.73 | % | (11 | ) | 107 | |
Efficiency ratio (adjusted) (1) | 90.6 | % | 86.8 | % | 71.3 | % | 91.3 | % | 108.1 | % | 380 | N/M | ||
Return (loss) on average assets | 0.44 | % | (1.08 | )% | 1.04 | % | (3.39 | )% | 5.70 | % | 152 | (526 | ) | |
Return (loss) on average equity | 3.18 | % | (7.88 | )% | 7.38 | % | (21.85 | )% | 50.39 | % | N/M | N/M | ||
N/M - Not meaningful
(1) | See non-GAAP reconciliation. |
Balance Sheet Highlights | |||||||||||||||||||
Three Months Ended | % Change | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | |||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Average Balance Sheet | |||||||||||||||||||
Average interest-earning assets | $ | 8,724,037 | $ | 8,814,714 | $ | 8,366,703 | $ | 7,829,814 | $ | 9,607,376 | (1.0 | )% | (9.2 | )% | |||||
Average loans held-for-investment | 4,030,525 | 4,087,862 | 3,902,871 | 3,864,110 | 3,927,537 | (1.4 | )% | 2.6 | % | ||||||||||
Average interest-bearing deposits | 5,897,543 | 5,788,388 | 5,445,734 | 5,230,154 | 5,339,165 | 1.9 | % | 10.5 | % | ||||||||||
2
Net Interest Income
Fourth quarter 2014 net interest income fell to $61.3 million, as compared to $64.4 million for the third quarter 2014. The decrease in net interest income was attributable to lower interest income from the Company’s Ginnie Mae early buy-outs, due to a reduction in the average interest rate earned in accordance with the terms of loans with government guarantees, as well as jumbo residential first mortgage loan sales. The full year 2014 net interest income was $246.3 million, as compared to $186.7 million for the full year 2013, which primarily resulted from the prepayment of long-term Federal Home Loan Bank advances at the end of 2013.
Net interest margin decreased to 2.80 percent for the fourth quarter 2014, as compared to 2.91 percent for the third quarter 2014. The decrease from the prior quarter was driven primarily by a lower yield from the loans that were included in the early buy-outs, as described above, and a 21 basis point reduction in the yield on loans held-for-sale.
Provision for Loan Losses
Provision for loan losses totaled $5.0 million for the fourth quarter 2014, as compared to $8.1 million for the third quarter 2014. The decrease from the prior quarter was primarily attributable to lower net charge-offs. Net charge offs in the fourth quarter 2014 were $9.0 million, or 0.91 percent of applicable loans, compared to $13.1 million, or 1.36 percent of applicable loans in the prior quarter. The fourth quarter 2014 amount included $3.0 million of net charge-offs associated with the sale of $24 million of lower performing loans during the quarter. The net charge-offs associated with these loan sales accounted for 31 basis points of the fourth quarter's net charge-off rate.
Noninterest Income
Fourth quarter 2014 noninterest income was $98.4 million, as compared to noninterest income of $85.2 million for the third quarter 2014. The third quarter of 2014 included a $10.4 million charge related to certain Federal Housing Administration indemnifications. Net of this adjustment, noninterest income rose $2.8 million, or 3 percent from the prior quarter.
Adjustments to Noninterest Income | |||||||||||||||
Three Months Ended | |||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | |||||||||||
(Dollars in thousands) | |||||||||||||||
Noninterest income | $ | 98,441 | $ | 85,188 | $ | 102,484 | $ | 74,953 | $ | 113,146 | |||||
Adjusting items | |||||||||||||||
Loan fees and charges (1) | — | — | (10,000 | ) | — | — | |||||||||
Representation and warranty provision (2) | — | 10,375 | — | — | (24,900 | ) | |||||||||
Other noninterest income (3) | — | — | — | 21,056 | — | ||||||||||
Adjusted noninterest income (4) | $ | 98,441 | $ | 95,563 | $ | 92,484 | $ | 96,009 | $ | 88,246 | |||||
(1) | Reverse benefit for contract renegotiation. |
(2) | Add back reserve increase related to indemnifications claims on government insured loans and reduce for the settlement with Fannie Mae and Freddie Mac, respectively. |
(3) | Adjust for a negative fair value adjustment related to performing loans repurchased. |
(4) | Non-GAAP number. |
Fourth quarter 2014 deposit fees and charges increased to $6.0 million, as compared to $5.6 million for the third quarter 2014. The increase from the prior quarter reflects continued growth in demand deposit balances and seasonality.
3
Mortgage Metrics | |||||||||||||||||||
Three Months Ended | % Change | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | |||||||||||||
(Dollars in millions) | |||||||||||||||||||
GOS margin (change in bps) (3) | 0.87 | % | 0.83 | % | 0.82 | % | 0.93 | % | 0.85 | % | 4 | 2 | |||||||
Gain on loans sales | $ | 54 | $ | 52 | $ | 55 | $ | 45 | $ | 45 | 3.8 | % | 20.0 | % | |||||
Mortgage rate lock commitments (fall-out adjusted) (1) | 6,156 | 6,304 | 6,693 | 4,854 | 5,299 | (2.3 | )% | 16.2 | % | ||||||||||
Residential loans serviced (2) | 76,672 | 78,135 | 73,732 | 74,302 | 71,824 | (1.9 | )% | 6.7 | % | ||||||||||
(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. |
(2) | Includes serviced and subserviced loans. |
(3) | Gain on sale margin is based on net gain on loan sales to fall-out adjusted mortgage rate lock commitments. |
Loan fees and charges decreased to $16.8 million for the fourth quarter 2014, as compared to $18.7 million in the third quarter 2014. The decrease of $1.9 million, or 10 percent, was primarily related to an 8 percent decrease in mortgage originations in the fourth quarter 2014.
Fourth quarter 2014 net gain on loan sales increased to $53.5 million, as compared to $52.2 million for the third quarter 2014. The increase from the prior quarter reflects higher refinance volume driven by lower rates in October and early December, offsetting the seasonal decline in purchase origination volume. Fallout-adjusted locks were $6.2 billion for the fourth quarter 2014, as compared to $6.3 billion for the third quarter 2014. The net gain on loan sale margin increased to 0.87 percent for the fourth quarter 2014, as compared to 0.83 percent for the third quarter 2014.
Loan administration income remained relatively flat at $5.5 million for the fourth quarter 2014, as compared to the third quarter 2014.
Net return on the mortgage servicing asset (including off-balance sheet hedges of mortgage servicing rights) increased to $1.6 million for the fourth quarter 2014, as compared to $1.3 million for the third quarter 2014. The gross return on the mortgage servicing rights asset was 7.4 percent in the 2014 fourth quarter, a slight decrease from the third quarter 2014 as a result of higher prepayments of serviced loans. Additionally, the Company had $3.5 million of lower revenue as a result of the transaction costs and losses associated with $70 million of mortgage servicing rights sold during the quarter.
Net gain on sales of assets fell $3.2 million in the fourth quarter 2014, compared to the prior quarter. The Company sold $24 million of lower performing mortgage loans during the fourth quarter 2014, resulting in a net gain of $1.7 million. In the third quarter 2014, the Company sold $48 million of performing jumbo residential first mortgage loans and $33 million of lower performing loans, producing a net gain of $4.9 million.
Representation and warranty provision improved to income of $6.1 million for the fourth quarter 2014, as compared to an expense of $12.5 million reported for the third quarter 2014. The change from the prior quarter was primarily due to a $10.4 million charge in the prior quarter related to certain indemnifications made by the Company. Additionally, during the fourth quarter 2014, the Company received recoveries of prior expenses and recorded a downward adjustment in the anticipated level of loss rates on claims from Fannie Mae and Freddie Mac, as the overall level of the representation and warranty reserve declined to $53.0 million at December 31, 2014 from $57.0 million at September 30, 2014.
The fourth quarter 2014 other noninterest income was $7.3 million, as compared to $9.5 million for the third quarter 2014. The decrease from the prior quarter primarily resulted from lower gains on the sale of investment securities and lower fair value adjustments on mortgage loans.
4
Noninterest Expense
Noninterest expense was $139.3 million for the fourth quarter 2014, as compared to $179.4 million for the third quarter 2014. The third quarter 2014 included a $37.5 million litigation settlement expense with the Consumer Financial Protection Bureau ("CFPB"), as well as $1.1 million in related legal expenses. After making these adjustments, noninterest expense in the third quarter 2014 was $140.8 million.
Adjustments to Noninterest expense | |||||||||||||||
Three Months Ended | |||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | |||||||||||
(Dollars in thousands) | |||||||||||||||
Noninterest expense | $ | 139,253 | $ | 179,389 | $ | 121,353 | $ | 139,252 | $ | 388,693 | |||||
Adjusting items | |||||||||||||||
Loss on extinguishment of debt (1) | — | — | — | — | (177,556 | ) | |||||||||
Legal and professional expense (2) | — | (1,116 | ) | (2,879 | ) | — | — | ||||||||
Other noninterest expense (3) | — | (37,500 | ) | 10,000 | — | (61,000 | ) | ||||||||
Adjusted noninterest expense (4) | $ | 139,253 | $ | 140,773 | $ | 128,474 | $ | 139,252 | $ | 150,137 | |||||
(1) | Adjust prepayment of long-term FHLB advances. |
(2) | Adjust for legal expenses related to CFPB litigation settlements during the respective periods. |
(3) | Adjust CFPB litigation settlement expense and an additional accrual for the DOJ litigation, respectively. |
(4) | Non-GAAP number. |
Compensation and benefits increased to $59.0 million for the fourth quarter 2014, as compared to $53.5 million for the third quarter 2014. The increase from the prior quarter was primarily due to higher levels of incentive compensation and $2.6 million in severance.
Fourth quarter 2014 asset resolution expense decreased to $13.4 million, as compared to $13.7 million for the third quarter 2014. The decrease was primarily due to process improvements and lower levels of problem assets, partially offset by a $2.0 million provision for expenses related to prior loss recoveries.
Legal and professional expenses were $10.8 million for the fourth quarter 2014, as compared to $15.0 million for the third quarter 2014. The $4.2 million decrease in the fourth quarter was primarily attributable to a decrease in consulting expenses, as well as legal expenses related to the Company’s CFPB settlement experienced in the prior quarter.
Other noninterest expenses for the fourth quarter 2014 totaled $10.8 million, as compared to $50.3 million for the third quarter 2014. The decrease of $39.2 million from the prior quarter, included the third quarter 2014 adjusting item of $37.5 million related to the CFPB settlement.
Income Taxes
The fourth quarter 2014 provision for income taxes totaled $4.4 million, as compared to a tax benefit of $10.3 million in the third quarter 2014. The effective tax rate in the fourth quarter 2014 was 28.6 percent, as compared to 27.2 percent in the third quarter 2014.
The full year 2014 income tax benefit was $34.0 million, as compared to a benefit of $416.3 million for the full year 2013, primarily due to the reversal of the deferred tax asset valuation allowance during the fourth quarter 2013. The Company reversed 100 percent of the valuation allowance on its federal deferred tax asset ("DTA") and a portion of its state DTA, which had been previously established as of September 30, 2009, which resulted in a $355.8 million DTA valuation allowance reversal, or $6.29 per diluted share.
5
Asset Quality
Credit Quality Ratios | |||||||||||||||||||
Three Months Ended | Change (bps) | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | |||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Charge-offs, net of recoveries | $ | 8,986 | $ | 13,097 | $ | 7,150 | $ | 12,321 | $ | 14,110 | (31.4 | )% | (36.3 | )% | |||||
Total nonperforming loans held-for-investment | $ | 120,491 | $ | 106,944 | $ | 120,162 | $ | 110,749 | $ | 145,685 | 12.7 | % | (17.3 | )% | |||||
Net charge-off ratio (annualized) | 0.91 | % | 1.36 | % | 0.78 | % | 1.36 | % | 1.53 | % | (45 | ) | (62 | ) | |||||
Nonperforming loans ratio to LHFI | 2.71 | % | 2.56 | % | 2.76 | % | 2.76 | % | 3.59 | % | 15 | (88 | ) | ||||||
Allowance for loan loss to LHFI | 7.01 | % | 7.60 | % | 7.41 | % | 8.11 | % | 5.42 | % | (59 | ) | 159 | ||||||
Fourth quarter 2014 net charge-offs were $9.0 million, representing 0.91 percent of associated loans, excluding loans carried under a fair value option. This represented a decrease of $4.1 million from the third quarter 2014 net charge-offs of $13.1 million, or 1.36 percent, of associated loans. Excluding loan sales in both quarters, net charge-offs in the fourth quarter were $6.0 million or 0.60 percent, compared to $6.8 million or 0.70 percent in the prior quarter.
Nonperforming loans increased to $120.5 million at December 31, 2014 from $106.9 million at September 30, 2014. The increase was driven by higher non-accrual TDRs, which increased to $28.7 million from $17.5 million in the third quarter 2014. The ratio of nonperforming loans to loans held-for-investment increased to 2.71 percent at December 31, 2014 from 2.56 percent at September 30, 2014.
The allowance for loan losses was $297.0 million at December 31, 2014, covering 7.01 percent of total loans held-for-investment, excluding loans carried under a fair value option. The allowance for loan losses was $301.0 million at September 30, 2014, covering 7.60 percent of total loans held-for-investment. The decrease in the coverage ratio during the fourth quarter of 2014 was primarily due to an increase in higher quality commercial warehouse loans at quarter end.
Capital
Capital Ratios (Bancorp) | Three Months Ended | Change (bps) | |||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | Seq | Yr/Yr | |||||||||||||
Total capital | 24.1 | % | 24.4 | % | 25.2 | % | 25.3 | % | 28.6 | % | (23 | ) | (443 | ) | |||||
Tier 1 capital | 22.8 | % | 23.0 | % | 23.9 | % | 24.0 | % | 27.3 | % | (22 | ) | (444 | ) | |||||
Tier 1 leverage | 12.6 | % | 12.5 | % | 12.6 | % | 12.6 | % | 14.2 | % | 9 | (162 | ) | ||||||
Mortgage servicing rights to Tier 1 capital (1) | 21.8 | % | 24.9 | % | 24.2 | % | 27.6 | % | 22.2 | % | (312 | ) | (45 | ) | |||||
Book value per common share (change in percent) | $ | 19.64 | $ | 19.28 | $ | 19.90 | $ | 19.29 | $ | 20.66 | 1.9 | % | (4.9 | )% | |||||
(1) | See non-GAAP reconciliation. |
The Company's regulatory capital ratios remain well above current regulatory quantitative guidelines for "well-capitalized" institutions. At December 31, 2014, the Company had a Tier 1 leverage ratio of 12.6 percent, as compared to 12.5 percent at September 30, 2014. At December 31, 2014, the Company had a common equity-to-assets ratio of 11.24 percent.
As of January 2015, the Company and the Bank are subject, on a phased-in basis, to the Basel III regulatory capital requirements that replace the current capital requirements. Assuming that the Basel III requirements were fully applicable at December 31, 2014, the Company’s pro forma Basel III Tier 1 leverage ratio would have been 10.2 percent at December 31, 2014 (see Non-GAAP reconciliation).
6
Earnings Conference Call
As previously announced, the Company's fourth quarter 2014 earnings call will be held on Thursday, January 22, 2015 at 11 a.m. (Eastern).
To join the call, please dial (888) 206-4916 toll free or (913) 312-0722, and use passcode: 1627539. Please call at least 10 minutes before the conference 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: 1627539.
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 accompanying the conference call will also be posted on the site.
About Flagstar
Flagstar Bancorp, Inc. (NYSE: FBC) is a $9.8 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, the largest bank headquartered in Michigan, provides commercial, small business, and consumer banking services through 107 branches in the state. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as through 26 retail centers in 15 states. Flagstar is the ninth largest national originator of mortgage loans and a top 20 mortgage servicer, handling payments and recordkeeping for over $75 billion of home loans for nearly 400,000 borrowers. For more information, please visit flagstar.com.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this press release includes non-GAAP financial measures such as an adjusted efficiency ratio, adjusted earnings, the ratio of total nonperforming assets to Tier 1 capital (to adjusted total assets) and estimated Basel III ratios. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the underlying performance and trends of Flagstar.
Non-GAAP financial measures have inherent limitations, which are not required to be uniformly applied and are not audited. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To mitigate these limitations, there are practices in place to ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and to ensure that the Company's performance is properly reflected to facilitate consistent period-to-period comparisons. Although the Company believes the non-GAAP financial measures disclosed in this report enhance investors' understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for those financial measures prepared in accordance with GAAP.
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 earnings release, conference call slides, or the Form 8-K related to this press release. Additional discussion of the use of non-GAAP measures can also be found in Flagstar Bancorp, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2013, and Quarterly Report on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014. All of which can be found on the Company’s website at flagstar.com.
7
Forward Looking Statements
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause the Company's actual results to differ materially from those described in the forward-looking statements can be found in Flagstar Bancorp Annual Report on Form 10-K for the year ended December 31, 2013, and Quarterly Report on Form 10-Q for the quarters ended March 31, 2014, June 30, 2014 and September 30, 2014, which have been filed with the Securities and Exchange Commission and are available on the Company’s website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
8
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in thousands)
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
(Unaudited) | (Unaudited) | ||||||||||
Assets | |||||||||||
Cash and cash equivalents | $ | 136,014 | $ | 106,840 | $ | 280,505 | |||||
Investment securities available-for-sale or trading | 1,672,179 | 1,378,093 | 1,045,548 | ||||||||
Loans held-for-sale | 1,243,792 | 1,468,668 | 1,480,418 | ||||||||
Loans with repurchased government guarantees | 1,128,359 | 1,191,826 | 1,273,690 | ||||||||
Loans held-for-investment, net | |||||||||||
Loans held-for-investment | 4,447,554 | 4,184,624 | 4,055,756 | ||||||||
Less: allowance for loan losses | (297,000 | ) | (301,000 | ) | (207,000 | ) | |||||
Total loans held-for-investment, net | 4,150,554 | 3,883,624 | 3,848,756 | ||||||||
Mortgage servicing rights | 257,827 | 285,386 | 284,678 | ||||||||
Federal Home Loan Bank stock | 155,443 | 209,737 | 209,737 | ||||||||
Premises and equipment, net | 237,942 | 238,261 | 231,350 | ||||||||
Net deferred tax asset | 442,349 | 449,575 | 414,681 | ||||||||
Other assets | 415,392 | 413,400 | 337,938 | ||||||||
Total assets | $ | 9,839,851 | $ | 9,625,410 | $ | 9,407,301 | |||||
Liabilities and Stockholders' Equity | |||||||||||
Deposits | |||||||||||
Noninterest bearing | $ | 1,209,275 | $ | 1,299,405 | $ | 930,060 | |||||
Interest bearing | 5,859,331 | 5,934,991 | 5,210,266 | ||||||||
Total deposits | 7,068,606 | 7,234,396 | 6,140,326 | ||||||||
Federal Home Loan Bank advances | 514,000 | 150,000 | 988,000 | ||||||||
Long-term debt | 331,194 | 339,575 | 353,248 | ||||||||
Representation and warranty reserve | 53,000 | 57,000 | 54,000 | ||||||||
Other liabilities | 500,230 | 492,834 | 445,853 | ||||||||
Total liabilities | 8,467,030 | 8,273,805 | 7,981,427 | ||||||||
Stockholders' Equity | |||||||||||
Preferred stock | 266,657 | 266,657 | 266,174 | ||||||||
Common stock | 563 | 563 | 561 | ||||||||
Additional paid in capital | 1,482,465 | 1,480,955 | 1,479,265 | ||||||||
Accumulated other comprehensive income (loss) | 8,380 | (250 | ) | (4,831 | ) | ||||||
Accumulated deficit | (385,244 | ) | (396,320 | ) | (315,295 | ) | |||||
Total stockholders' equity | 1,372,821 | 1,351,605 | 1,425,874 | ||||||||
Total liabilities and stockholders' equity | $ | 9,839,851 | $ | 9,625,410 | $ | 9,407,301 | |||||
9
Flagstar Bancorp, Inc. Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) | |||||||||||||||||||
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||
Total interest income | $ | 72,203 | $ | 75,094 | $ | 71,833 | $ | 285,561 | $ | 330,687 | |||||||||
Total interest expense | 10,901 | 10,731 | 30,630 | 39,271 | 144,036 | ||||||||||||||
Net interest income | 61,302 | 64,363 | 41,203 | 246,290 | 186,651 | ||||||||||||||
Provision for loan losses | 4,986 | 8,097 | 14,112 | 131,553 | 70,142 | ||||||||||||||
Net interest income after provision for loan losses | 56,316 | 56,266 | 27,091 | 114,737 | 116,509 | ||||||||||||||
Noninterest Income | |||||||||||||||||||
Loan fees and charges | 16,760 | 18,661 | 19,349 | 73,033 | 103,501 | ||||||||||||||
Deposit fees and charges | 5,964 | 5,618 | 5,193 | 21,625 | 20,942 | ||||||||||||||
Net gain on loan sales | 53,528 | 52,175 | 44,790 | 205,803 | 402,193 | ||||||||||||||
Loan administration income | 5,478 | 5,599 | 3,284 | 24,304 | 6,035 | ||||||||||||||
Net return on the mortgage servicing asset | 1,607 | 1,346 | 16,659 | 24,082 | 90,609 | ||||||||||||||
Net gain on sale of assets | 1,735 | 4,874 | 51 | 12,361 | 2,172 | ||||||||||||||
Net impairment losses | — | — | — | — | (8,789 | ) | |||||||||||||
Representation and warranty provision | 6,080 | (12,538 | ) | 15,424 | (10,011 | ) | (36,116 | ) | |||||||||||
Other noninterest income | 7,289 | 9,453 | 8,396 | 9,868 | 71,796 | ||||||||||||||
Total noninterest income | 98,441 | 85,188 | 113,146 | 361,065 | 652,343 | ||||||||||||||
Noninterest Expense | |||||||||||||||||||
Compensation and benefits | 58,967 | 53,503 | 69,572 | 233,185 | 279,268 | ||||||||||||||
Commissions | 9,309 | 10,346 | 9,444 | 35,480 | 54,407 | ||||||||||||||
Occupancy and equipment | 20,122 | 20,471 | 19,824 | 80,386 | 80,042 | ||||||||||||||
Asset resolution | 13,378 | 13,666 | 3,372 | 56,486 | 52,033 | ||||||||||||||
Federal insurance premiums | 5,314 | 5,633 | 7,932 | 22,716 | 34,873 | ||||||||||||||
Loss on extinguishment of debt | — | — | 177,556 | — | 177,556 | ||||||||||||||
Loan processing expense | 10,590 | 10,472 | 8,833 | 36,996 | 52,223 | ||||||||||||||
Legal and professional expense | 10,777 | 15,044 | 14,600 | 50,603 | 77,742 | ||||||||||||||
Other noninterest expense | 10,796 | 50,254 | 77,560 | 63,394 | 109,971 | ||||||||||||||
Total noninterest expense | 139,253 | 179,389 | 388,693 | 579,246 | 918,115 | ||||||||||||||
(Loss) income before income taxes | 15,504 | (37,935 | ) | (248,456 | ) | (103,444 | ) | (149,263 | ) | ||||||||||
(Benefit) provision for income taxes | 4,428 | (10,303 | ) | (410,362 | ) | (33,979 | ) | (416,250 | ) | ||||||||||
Net (loss) income | 11,076 | (27,632 | ) | 161,906 | (69,465 | ) | 266,987 | ||||||||||||
Preferred stock dividend/accretion | — | — | (1,449 | ) | (483 | ) | (5,784 | ) | |||||||||||
Net (loss) income applicable to common stockholders | $ | 11,076 | $ | (27,632 | ) | $ | 160,457 | $ | (69,948 | ) | $ | 261,203 | |||||||
(Loss) earnings per share | |||||||||||||||||||
Basic | $ | 0.07 | $ | (0.61 | ) | $ | 2.79 | $ | (1.72 | ) | $ | 4.40 | |||||||
Diluted | $ | 0.07 | $ | (0.61 | ) | $ | 2.77 | $ | (1.72 | ) | $ | 4.37 | |||||||
10
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, 2014 | September 30, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||
Mortgage loans originated (1) | $ | 6,603,413 | $ | 7,186,856 | $ | 6,439,242 | $ | 24,607,550 | $ | 37,481,877 | |||||||||
Other loans originated | 102,858 | 84,084 | 64,973 | 490,849 | 300,823 | ||||||||||||||
Mortgage loans sold and securitized | 6,830,552 | 7,072,398 | 6,783,212 | 24,407,054 | 39,074,649 | ||||||||||||||
Interest rate spread - consolidated (2) | 2.67 | % | 2.79 | % | 1.54 | % | 2.80 | % | 1.50 | % | |||||||||
Net interest margin - consolidated (3) | 2.80 | % | 2.91 | % | 1.73 | % | 2.91 | % | 1.72 | % | |||||||||
Average common shares outstanding | 56,310,858 | 56,249,300 | 56,126,895 | 56,246,528 | 56,063,282 | ||||||||||||||
Average fully diluted shares outstanding | 56,792,751 | 56,249,300 | 56,694,096 | 56,246,528 | 56,518,181 | ||||||||||||||
Average interest-earning assets | $ | 8,724,037 | $ | 8,814,714 | $ | 9,607,376 | $ | 8,440,413 | $ | 10,881,618 | |||||||||
Average interest paying liabilities | 6,917,685 | 7,034,094 | 8,341,976 | 6,780,341 | 9,337,936 | ||||||||||||||
Average stockholders' equity | 1,395,347 | 1,402,165 | 1,273,763 | 1,406,038 | 1,238,550 | ||||||||||||||
(Loss) return on average assets | 0.44 | % | (1.08 | )% | 5.70 | % | (0.71 | )% | 2.08 | % | |||||||||
(Loss) return on average equity | 3.18 | % | (7.88 | )% | 50.39 | % | (4.97 | )% | 21.09 | % | |||||||||
Efficiency ratio | 87.2 | % | 120.0 | % | 251.8 | % | 95.4 | % | 109.4 | % | |||||||||
Efficiency ratio (adjusted) (4) | 90.6 | % | 86.8 | % | 108.1 | % | 87.1 | % | 81.4 | % | |||||||||
Equity-to-assets ratio (average for the period) | 13.74 | % | 13.68 | % | 11.32 | % | 14.22 | % | 9.87 | % | |||||||||
Charge-offs to average LHFI (5) | 0.91 | % | 1.36 | % | 1.53 | % | 1.07 | % | 4.00 | % | |||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
Book value per common share | $ | 19.64 | $ | 19.28 | $ | 20.66 | |||||
Number of common shares outstanding | 56,332,307 | 56,261,652 | 56,138,074 | ||||||||
Mortgage loans subserviced for others | $ | 46,723,713 | $ | 46,695,465 | $ | 40,431,865 | |||||
Mortgage loans serviced for others | 25,426,768 | 26,377,572 | 25,743,396 | ||||||||
Weighted average service fee (basis points) | 27.2 | 26.8 | 28.7 | ||||||||
Capitalized value of mortgage servicing rights | 1.01 | % | 1.08 | % | 1.11 | % | |||||
Mortgage servicing rights to Tier 1 capital (4) | 22.1 | % | 25.2 | % | 22.6 | % | |||||
Ratio of allowance for loan losses to non-performing LHFI (5) | 255.7 | % | 295.4 | % | 145.9 | % | |||||
Ratio of allowance for loan losses to LHFI (5) | 7.01 | % | 7.60 | % | 5.42 | % | |||||
Ratio of non-performing assets to total assets (bank only) | 1.42 | % | 1.40 | % | 1.95 | % | |||||
Equity-to-assets ratio | 13.95 | % | 14.04 | % | 15.16 | % | |||||
Common equity-to-assets ratio | 11.24 | % | 11.27 | % | 12.33 | % | |||||
Number of bank branches | 107 | 106 | 111 | ||||||||
Number of loan origination centers | 26 | 32 | 39 | ||||||||
Number of FTE employees (excluding loan officers and account executives) | 2,530 | 2,492 | 2,894 | ||||||||
Number of loan officers and account executives | 209 | 233 | 359 | ||||||||
(1) | Includes residential first mortgage and second mortgage loans. |
(2) | Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized 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) | See Non-GAAP reconciliation. |
(5) | Excludes loans carried under the fair value option. |
11
Flagstar Bancorp, Inc.
Earnings Per Share
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||
Net (loss) income | $ | 11,076 | $ | (27,632 | ) | $ | 161,906 | $ | (69,465 | ) | $ | 266,987 | |||||||
Less: preferred stock dividend/accretion | — | — | (1,449 | ) | (483 | ) | (5,784 | ) | |||||||||||
Net (loss) income from continuing operations | 11,076 | (27,632 | ) | 160,457 | (69,948 | ) | 261,203 | ||||||||||||
Deferred cumulative preferred stock dividends | (7,104 | ) | (6,948 | ) | (3,659 | ) | (26,539 | ) | (14,366 | ) | |||||||||
Net (loss) income applicable to Common Stockholders | $ | 3,972 | $ | (34,580 | ) | $ | 156,798 | $ | (96,487 | ) | $ | 246,837 | |||||||
Weighted Average Shares | |||||||||||||||||||
Weighted average common shares outstanding | 56,311 | 56,249 | 56,127 | 56,247 | 56,063 | ||||||||||||||
Effect of dilutive securities | |||||||||||||||||||
Warrants | 248 | — | 279 | — | 237 | ||||||||||||||
Stock-based awards | 234 | — | 288 | — | 218 | ||||||||||||||
Weighted average diluted common shares | 56,793 | 56,249 | 56,694 | 56,247 | 56,518 | ||||||||||||||
(Loss) earnings per common share | |||||||||||||||||||
Net (loss) income applicable to Common Stockholders | $ | 0.07 | $ | (0.61 | ) | $ | 2.79 | $ | (1.72 | ) | $ | 4.40 | |||||||
Effect of dilutive securities | |||||||||||||||||||
Warrants | — | — | (0.01 | ) | — | (0.02 | ) | ||||||||||||
Stock-based awards | — | — | (0.01 | ) | — | (0.01 | ) | ||||||||||||
Diluted (loss) earnings per share | $ | 0.07 | $ | (0.61 | ) | $ | 2.77 | $ | (1.72 | ) | $ | 4.37 | |||||||
12
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Three Months Ended | ||||||||||||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | ||||||||||||||||||||||||
Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | ||||||||||||||||||
Interest-Earning Assets | ||||||||||||||||||||||||||
Loans held-for-sale | $ | 1,686,534 | $ | 17,702 | 4.20 | % | $ | 1,628,874 | $ | 17,949 | 4.41 | % | $ | 1,617,817 | $ | 17,309 | 4.28 | % | ||||||||
Loans with repurchased government guarantees | 1,140,851 | 5,596 | 1.96 | % | 1,215,357 | 7,589 | 2.50 | % | 1,234,383 | 7,599 | 2.46 | % | ||||||||||||||
Loans held-for-investment | ||||||||||||||||||||||||||
Consumer loans (1) | 2,509,506 | 23,889 | 3.81 | % | 2,634,498 | 24,830 | 3.77 | % | 2,950,887 | 29,189 | 3.96 | % | ||||||||||||||
Commercial loans (1) | 1,521,019 | 14,081 | 3.62 | % | 1,453,364 | 13,692 | 3.69 | % | 976,650 | 10,068 | 4.03 | % | ||||||||||||||
Total loans held-for-investment | 4,030,525 | 37,970 | 3.74 | % | 4,087,862 | 38,522 | 3.74 | % | 3,927,537 | 39,257 | 3.97 | % | ||||||||||||||
Investment securities available-for-sale or trading | 1,621,242 | 10,794 | 2.66 | % | 1,642,071 | 10,880 | 2.65 | % | 1,006,801 | 6,515 | 2.59 | % | ||||||||||||||
Interest-earning deposits and other | 244,885 | 141 | 0.23 | % | 240,550 | 154 | 0.25 | % | 1,820,838 | 1,153 | 0.25 | % | ||||||||||||||
Total interest-earning assets | 8,724,037 | $ | 72,203 | 3.30 | % | 8,814,714 | $ | 75,094 | 3.39 | % | 9,607,376 | $ | 71,833 | 2.98 | % | |||||||||||
Other assets | 1,429,919 | 1,437,898 | 1,648,399 | |||||||||||||||||||||||
Total assets | $ | 10,153,956 | $ | 10,252,612 | $ | 11,255,775 | ||||||||||||||||||||
Interest-Bearing Liabilities | ||||||||||||||||||||||||||
Retail deposits | ||||||||||||||||||||||||||
Demand deposits | $ | 420,869 | $ | 148 | 0.14 | % | $ | 421,062 | $ | 147 | 0.14 | % | $ | 410,147 | $ | 142 | 0.14 | % | ||||||||
Savings deposits | 3,393,950 | 5,837 | 0.68 | % | 3,274,268 | 5,482 | 0.66 | % | 2,906,271 | 3,623 | 0.49 | % | ||||||||||||||
Money market deposits | 256,505 | 142 | 0.22 | % | 261,740 | 134 | 0.20 | % | 293,192 | 127 | 0.17 | % | ||||||||||||||
Certificate of deposits | 837,039 | 1,442 | 0.68 | % | 891,308 | 1,682 | 0.75 | % | 1,168,992 | 2,335 | 0.79 | % | ||||||||||||||
Total retail deposits | 4,908,363 | 7,569 | 0.61 | % | 4,848,378 | 7,445 | 0.61 | % | 4,778,602 | 6,227 | 0.52 | % | ||||||||||||||
Government deposits | ||||||||||||||||||||||||||
Demand deposits | 229,658 | 227 | 0.39 | % | 217,862 | 213 | 0.39 | % | 115,980 | 83 | 0.28 | % | ||||||||||||||
Savings deposits | 386,062 | 510 | 0.52 | % | 378,013 | 504 | 0.53 | % | 172,886 | 116 | 0.27 | % | ||||||||||||||
Certificate of deposits | 373,460 | 340 | 0.36 | % | 344,135 | 299 | 0.35 | % | 256,274 | 116 | 0.18 | % | ||||||||||||||
Total government deposits | 989,180 | 1,077 | 0.43 | % | 940,010 | 1,016 | 0.43 | % | 545,140 | 315 | 0.23 | % | ||||||||||||||
Wholesale deposits | — | — | — | % | — | — | — | % | 15,423 | 171 | 4.40 | % | ||||||||||||||
Total deposits | 5,897,543 | 8,646 | 0.58 | % | 5,788,388 | 8,461 | 0.58 | % | 5,339,165 | 6,713 | 0.50 | % | ||||||||||||||
Federal Home Loan Bank advances | 772,707 | 481 | 0.24 | % | 998,272 | 591 | 0.23 | % | 2,755,375 | 22,257 | 3.16 | % | ||||||||||||||
Other | 247,435 | 1,774 | 2.84 | % | 247,435 | 1,679 | 2.69 | % | 247,435 | 1,660 | 2.66 | % | ||||||||||||||
Total interest-bearing liabilities | 6,917,685 | 10,901 | 0.62 | % | 7,034,095 | 10,731 | 0.60 | % | 8,341,975 | 30,630 | 1.44 | % | ||||||||||||||
Noninterest-bearing deposits | 1,247,461 | 1,258,864 | 1,064,660 | |||||||||||||||||||||||
Other liabilities (2) | 593,463 | 557,488 | 575,377 | |||||||||||||||||||||||
Stockholders' equity | 1,395,347 | 1,402,165 | 1,273,763 | |||||||||||||||||||||||
Total liabilities and stockholder's equity | $ | 10,153,956 | $ | 10,252,612 | $ | 11,255,775 | ||||||||||||||||||||
Net interest-earning assets | $ | 1,806,352 | $ | 1,780,619 | $ | 1,265,401 | ||||||||||||||||||||
Net interest income | $ | 61,302 | $ | 64,363 | $ | 41,203 | ||||||||||||||||||||
Interest rate spread (3) | 2.67 | % | 2.79 | % | 1.54 | % | ||||||||||||||||||||
Net interest margin (4) | 2.80 | % | 2.91 | % | 1.73 | % | ||||||||||||||||||||
Ratio of average interest-earning assets to interest-bearing liabilities | 126.1 | % | 125.3 | % | 115.2 | % | ||||||||||||||||||||
Total average deposits | $ | 7,145,004 | $ | 7,047,252 | $ | 6,403,825 | ||||||||||||||||||||
(1) | Consumer loans include: residential first mortgage, second mortgage, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, commercial lease financing and warehouse lending loans. |
(2) | Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest. |
(3) | Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities. |
(4) | Net interest margin is net interest income divided by average interest-earning assets. |
13
Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)
Year Ended | |||||||||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||||||||
Average Balance | Interest | Annualized Yield/Rate | Average Balance | Interest | Annualized Yield/Rate | ||||||||||||
Interest-Earning Assets | |||||||||||||||||
Loans held-for-sale | $ | 1,533,666 | $ | 65,087 | 4.24 | % | $ | 2,498,893 | $ | 88,666 | 3.55 | % | |||||
Loans with repurchased government guarantees | 1,215,516 | 29,099 | 2.39 | % | 1,476,801 | 48,131 | 3.26 | % | |||||||||
Loans held-for-investment | |||||||||||||||||
Consumer loans (1) | 2,681,456 | 103,129 | 3.85 | % | 3,113,183 | 122,899 | 3.95 | % | |||||||||
Commercial loans (1) | 1,293,775 | 48,592 | 3.70 | % | 1,214,994 | 53,781 | 4.37 | % | |||||||||
Total loans held-for-investment | 3,975,231 | 151,721 | 3.80 | % | 4,328,177 | 176,680 | 4.07 | % | |||||||||
Investment securities available-for-sale or trading | 1,496,090 | 39,097 | 2.61 | % | 474,205 | 11,912 | 2.51 | % | |||||||||
Interest-earning deposits and other | 219,911 | 557 | 0.25 | % | 2,103,542 | 5,298 | 0.25 | % | |||||||||
Total interest-earning assets | 8,440,414 | $ | 285,561 | 3.38 | % | 10,881,618 | $ | 330,687 | 3.03 | % | |||||||
Other assets | 1,445,973 | 1,673,298 | |||||||||||||||
Total assets | $ | 9,886,387 | $ | 12,554,916 | |||||||||||||
Interest-Bearing Liabilities | |||||||||||||||||
Retail deposits | |||||||||||||||||
Demand deposits | $ | 421,839 | $ | 586 | 0.14 | % | $ | 397,094 | $ | 769 | 0.19 | % | |||||
Savings deposits | 3,139,106 | 19,047 | 0.61 | % | 2,668,571 | 16,924 | 0.63 | % | |||||||||
Money market deposits | 265,819 | 525 | 0.20 | % | 334,945 | 824 | 0.25 | % | |||||||||
Certificate of deposits | 914,823 | 6,682 | 0.73 | % | 2,054,834 | 18,249 | 0.89 | % | |||||||||
Total retail deposits | 4,741,587 | 26,840 | 0.57 | % | 5,455,444 | 36,766 | 0.67 | % | |||||||||
Government deposits | |||||||||||||||||
Demand deposits | 181,779 | 695 | 0.38 | % | 96,112 | 409 | 0.43 | % | |||||||||
Savings deposits | 319,887 | 1,621 | 0.51 | % | 203,191 | 707 | 0.35 | % | |||||||||
Certificate of deposits | 349,265 | 1,147 | 0.33 | % | 360,406 | 1,489 | 0.41 | % | |||||||||
Total government deposits | 850,931 | 3,463 | 0.41 | % | 659,709 | 2,605 | 0.39 | % | |||||||||
Wholesale deposits | 831 | 31 | 3.76 | % | 60,711 | 3,021 | 4.98 | % | |||||||||
Total deposits | 5,593,349 | 30,334 | 0.54 | % | 6,175,864 | 42,392 | 0.69 | % | |||||||||
FHLB advances | 939,173 | 2,206 | 0.23 | % | 2,914,637 | 95,024 | 3.22 | % | |||||||||
Other | 247,819 | 6,731 | 2.72 | % | 247,435 | 6,620 | 2.68 | % | |||||||||
Total interest-bearing liabilities | 6,780,341 | 39,271 | 0.58 | % | 9,337,936 | 144,036 | 1.53 | % | |||||||||
Noninterest-bearing deposits | 1,140,758 | 1,197,000 | |||||||||||||||
Other liabilities (2) | 559,250 | 781,430 | |||||||||||||||
Stockholders' equity | 1,406,038 | 1,238,550 | |||||||||||||||
Total liabilities and stockholder's equity | $ | 9,886,387 | $ | 12,554,916 | |||||||||||||
Net interest-earning assets | $ | 1,660,073 | $ | 1,543,682 | |||||||||||||
Net interest income | $ | 246,290 | $ | 186,651 | |||||||||||||
Interest rate spread (3) | 2.80 | % | 1.50 | % | |||||||||||||
Net interest margin (4) | 2.91 | % | 1.72 | % | |||||||||||||
Ratio of average interest-earning assets to interest-bearing liabilities | 124.5 | % | 116.5 | % | |||||||||||||
Total average deposits | $ | 6,734,107 | $ | 7,372,864 | |||||||||||||
(1) | Consumer loans include: residential first mortgage, second mortgage, HELOC and other consumer loans. Commercial loans include: commercial real estate, commercial and industrial, commercial lease financing and warehouse lending loans. |
(2) | Includes company controlled deposits that arise due to the servicing of loans for others, which do not bear interest. |
(3) | Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities. |
(4) | Net interest margin is net interest income divided by average interest-earning assets. |
14
Gain on Loan Sales
(Dollars in thousands)
(Unaudited)
Three Months Ended | |||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||||||||
Description | |||||||||||||||||
Valuation gain (loss) | |||||||||||||||||
Value of interest rate locks | $ | 4,037 | 0.06 | % | $ | (24,294 | ) | (0.34 | )% | $ | (53,542 | ) | (0.79 | )% | |||
Value of forward sales | (7,668 | ) | (0.11 | )% | 23,145 | 0.33 | % | 89,330 | 1.31 | % | |||||||
Fair value of loans held-for-sale | 132,044 | 1.93 | % | 79,867 | 1.13 | % | 68,938 | 1.02 | % | ||||||||
Total valuation gains | 128,413 | 1.88 | % | 78,718 | 1.12 | % | 104,726 | 1.54 | % | ||||||||
Sales losses | |||||||||||||||||
Marketing losses, net of adjustments | (10,891 | ) | (0.16 | )% | (2,392 | ) | (0.04 | )% | (3,313 | ) | (0.05 | )% | |||||
Pair-off losses | (62,065 | ) | (0.91 | )% | (22,190 | ) | (0.31 | )% | (53,605 | ) | (0.79 | )% | |||||
Provision for representation and warranty reserve | (1,929 | ) | (0.03 | )% | (1,961 | ) | (0.03 | )% | (3,018 | ) | (0.04 | )% | |||||
Total sales losses | (74,885 | ) | (1.10 | )% | (26,543 | ) | (0.38 | )% | (59,936 | ) | (0.88 | )% | |||||
Total gain on loan sales | $ | 53,528 | $ | 52,175 | $ | 44,790 | |||||||||||
Total mortgage rate lock commitments (gross) | $ | 7,604,879 | $ | 7,713,074 | $ | 6,481,782 | |||||||||||
Total loan sales and securitizations | $ | 6,830,552 | 0.78 | % | $ | 7,072,398 | 0.74 | % | $ | 6,783,212 | 0.66 | % | |||||
Total mortgage rate lock commitments (fallout-adjusted) (1) | $ | 6,155,532 | 0.87 | % | $ | 6,304,425 | 0.83 | % | $ | 5,298,728 | 0.85 | % | |||||
Year Ended | |||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||
Description | |||||||||||
Valuation gain (loss) | |||||||||||
Value of interest rate locks | $ | 20,465 | 0.08 | % | $ | (75,948 | ) | (0.19 | )% | ||
Value of forward sales | (32,683 | ) | (0.13 | )% | 33,945 | 0.09 | % | ||||
Fair value of loans held-for-sale | 401,313 | 1.64 | % | 200,639 | 0.50 | % | |||||
Total valuation gains | 389,095 | 1.59 | % | 156,839 | 0.40 | % | |||||
Sales (losses) gains | |||||||||||
Marketing gains, net of adjustments | (7,009 | ) | (0.03 | )% | (822 | ) | — | % | |||
Pair-off gains (losses) | (169,429 | ) | (0.69 | )% | 263,782 | 0.68 | % | ||||
Provision for representation and warranty reserve | (6,854 | ) | (0.03 | )% | (17,606 | ) | (0.05 | )% | |||
Total sales (losses) gains | (183,292 | ) | (0.75 | )% | 245,354 | 0.63 | % | ||||
Total gain on loan sales | $ | 205,803 | $ | 402,193 | |||||||
Total mortgage rate lock commitments (gross) | $ | 29,545,705 | $ | 39,316,782 | |||||||
Total loan sales and securitizations | $ | 24,407,054 | 0.84 | % | $ | 39,074,649 | 1.03 | % | |||
Total mortgage rate lock commitments (fallout-adjusted) (1) | $ | 24,006,960 | 0.86 | % | $ | 31,590,150 | 1.27 | % | |||
(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. |
15
Regulatory Capital - Bank
(Dollars in thousands)
(Unaudited)
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||
Tier 1 leverage (to adjusted tangible assets) (1) | $ | 1,167,422 | 12.43 | % | $ | 1,134,429 | 12.38 | % | $ | 1,257,608 | 13.97 | % | |||||
Total adjusted tangible asset base | $ | 9,392,178 | $ | 9,162,342 | $ | 9,004,904 | |||||||||||
Tier 1 capital (to risk weighted assets) (1) | $ | 1,167,422 | 22.54 | % | $ | 1,134,429 | 22.84 | % | $ | 1,257,608 | 26.82 | % | |||||
Total capital (to risk weighted assets) (1) | 1,234,958 | 23.85 | % | 1,199,410 | 24.14 | % | 1,317,964 | 28.11 | % | ||||||||
Risk weighted asset base | $ | 5,178,781 | $ | 4,967,755 | $ | 4,688,545 | |||||||||||
(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. |
Regulatory Capital - Bancorp
(Dollars in thousands)
(Unaudited)
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | |||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||
Tier 1 leverage (to adjusted tangible assets) (1) | $ | 1,183,625 | 12.59 | % | $ | 1,146,187 | 12.50 | % | $ | 1,195,494 | 12.59 | % | $ | 1,158,532 | 12.63 | % | $ | 1,280,532 | 14.21 | % | |||||||||
Total adjusted tangible asset base | $ | 9,403,219 | $ | 9,172,557 | $ | 9,495,500 | $ | 9,171,170 | $ | 9,014,524 | |||||||||||||||||||
Tier 1 capital (to risk weighted assets) (1) | $ | 1,183,625 | 22.81 | % | $ | 1,146,187 | 23.03 | % | $ | 1,195,494 | 23.87 | % | $ | 1,158,532 | 23.96 | % | $ | 1,280,532 | 27.25 | % | |||||||||
Total capital (to risk weighted assets) (1) | 1,251,916 | 24.12 | % | 1,211,976 | 24.35 | % | 1,261,799 | 25.19 | % | 1,222,581 | 25.28 | % | 1,341,616 | 28.55 | % | ||||||||||||||
Risk weighted asset base | $ | 5,189,822 | $ | 4,977,969 | $ | 5,008,866 | $ | 4,836,270 | $ | 4,698,580 | |||||||||||||||||||
(1) | Based on adjusted total assets for purposes of core capital and risk-weighted assets for purposes of total risk-based capital. |
Loan Originations (Dollars in thousands) (Unaudited) | |||||||||||||||||
Three Months Ended | |||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||||||||
Consumer loans | |||||||||||||||||
Mortgage (1) | $ | 6,603,413 | 98.5 | % | $ | 7,186,856 | 98.8 | % | $ | 6,439,242 | 99.0 | % | |||||
Other consumer (2) | 26,506 | 0.4 | % | 28,678 | 0.4 | % | 16,295 | 0.3 | % | ||||||||
Total consumer loans | 6,629,919 | 98.9 | % | 7,215,534 | 99.2 | % | 6,455,537 | 99.3 | % | ||||||||
Commercial loans (3) | 76,352 | 1.1 | % | 55,406 | 0.8 | % | 48,678 | 0.7 | % | ||||||||
Total loan originations | $ | 6,706,271 | 100.0 | % | $ | 7,270,940 | 100.0 | % | $ | 6,504,215 | 100.0 | % | |||||
Year Ended | |||||||||||
December 31, 2014 | December 31, 2013 | ||||||||||
Consumer loans | |||||||||||
Mortgage (1) | $ | 24,607,550 | 98.0 | % | $ | 37,481,877 | 99.2 | % | |||
Other consumer (2) | 93,046 | 0.4 | % | 61,318 | 0.2 | % | |||||
Total consumer loans | 24,700,596 | 98.4 | % | 37,543,195 | 99.4 | % | |||||
Commercial loans (3) | 397,803 | 1.6 | % | 239,505 | 0.6 | % | |||||
Total loan originations | $ | 25,098,399 | 100.0 | % | $ | 37,782,700 | 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. |
16
Loans Held-for-Investment
(Dollars in thousands)
(Unaudited)
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||||||||
Consumer loans | |||||||||||||||||
Residential first mortgage | $ | 2,193,252 | 49.3 | % | $ | 2,224,734 | 53.2 | % | $ | 2,508,968 | 61.9 | % | |||||
Second mortgage | 149,032 | 3.4 | % | 153,891 | 3.7 | % | 169,525 | 4.2 | % | ||||||||
HELOC | 256,318 | 5.8 | % | 261,826 | 6.3 | % | 289,880 | 7.1 | % | ||||||||
Other | 31,108 | 0.7 | % | 31,612 | 0.8 | % | 37,468 | 0.9 | % | ||||||||
Total consumer loans | 2,629,710 | 59.1 | % | 2,672,063 | 63.9 | % | 3,005,841 | 74.1 | % | ||||||||
Commercial loans | |||||||||||||||||
Commercial real estate | 620,014 | 13.9 | % | 566,870 | 13.5 | % | 408,870 | 10.1 | % | ||||||||
Commercial and industrial | 419,499 | 9.4 | % | 341,312 | 8.2 | % | 207,187 | 5.1 | % | ||||||||
Commercial lease financing | 9,687 | 0.2 | % | 9,853 | 0.2 | % | 10,341 | 0.3 | % | ||||||||
Warehouse lending | 768,644 | 17.3 | % | 594,526 | 14.2 | % | 423,517 | 10.4 | % | ||||||||
Total commercial loans | 1,817,844 | 40.9 | % | 1,512,561 | 36.1 | % | 1,049,915 | 25.9 | % | ||||||||
Total loans held-for-investment | $ | 4,447,554 | 100.0 | % | $ | 4,184,624 | 100.0 | % | $ | 4,055,756 | 100.0 | % | |||||
Residential Loans Serviced
(Dollars in thousands)
(Unaudited)
December 31, 2014 | September 30, 2014 | December 31, 2013 | ||||||||||||||||
Unpaid Principal Balance | Number of accounts | Unpaid Principal Balance | Number of accounts | Unpaid Principal Balance | Number of accounts | |||||||||||||
Serviced for own loan portfolio (1) | $ | 4,521,125 | 26,268 | $ | 5,061,943 | 26,671 | $ | 5,648,699 | $ | 34,099 | ||||||||
Serviced for others | 25,426,768 | 117,881 | 26,377,572 | 122,788 | 25,743,396 | 131,413 | ||||||||||||
Subserviced for others (2) | 46,723,713 | 238,498 | 46,695,465 | 238,425 | 40,431,867 | 198,256 | ||||||||||||
Total residential loans serviced | $ | 76,671,606 | 382,647 | $ | 78,134,980 | 387,884 | $ | 71,823,962 | 363,768 | |||||||||
(1) | Includes loans held-for-investment (residential first mortgage, second mortgage and HELOC), loans-held-for-sale (residential first mortgage), loans with repurchased government guarantees (residential first mortgage) and repossessed assets. |
(2) | Does not include temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets. |
17
Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||
Beginning balance | $ | 301,000 | $ | 306,000 | $ | 207,000 | $ | 207,000 | $ | 305,000 | |||||||||
Provision for loan losses | 4,986 | 8,097 | 14,110 | 131,553 | 70,142 | ||||||||||||||
Charge-offs | |||||||||||||||||||
Consumer loans | |||||||||||||||||||
Residential first mortgage | (8,799 | ) | (12,320 | ) | (9,868 | ) | (37,584 | ) | (133,326 | ) | |||||||||
Second mortgage | (353 | ) | (645 | ) | (730 | ) | (3,211 | ) | (6,252 | ) | |||||||||
HELOC | (758 | ) | (1,355 | ) | (1,728 | ) | (5,857 | ) | (5,473 | ) | |||||||||
Other | (418 | ) | (565 | ) | (995 | ) | (1,923 | ) | (3,622 | ) | |||||||||
Total consumer loans | (10,328 | ) | (14,885 | ) | (13,321 | ) | (48,575 | ) | (148,673 | ) | |||||||||
Commercial loans | |||||||||||||||||||
Commercial real estate | (2 | ) | (672 | ) | (5,051 | ) | (2,463 | ) | (47,982 | ) | |||||||||
Commercial and industrial | — | — | (48 | ) | — | (350 | ) | ||||||||||||
Commercial lease financing | — | — | (1,299 | ) | — | (1,299 | ) | ||||||||||||
Warehouse lending | — | (74 | ) | — | (74 | ) | (45 | ) | |||||||||||
Total commercial loans | (2 | ) | (746 | ) | (6,398 | ) | (2,537 | ) | (49,676 | ) | |||||||||
Total charge-offs | (10,330 | ) | (15,631 | ) | (19,719 | ) | (51,112 | ) | (198,349 | ) | |||||||||
Recoveries | |||||||||||||||||||
Consumer loans | |||||||||||||||||||
Residential first mortgage | 208 | 1,267 | 1,033 | 3,049 | 15,329 | ||||||||||||||
Second mortgage | 94 | 204 | 353 | 477 | 1,178 | ||||||||||||||
HELOC | 27 | 45 | 315 | 183 | 1,020 | ||||||||||||||
Other | 853 | 768 | 1,235 | 2,311 | 2,079 | ||||||||||||||
Total consumer loans | 1,182 | 2,284 | 2,936 | 6,020 | 19,606 | ||||||||||||||
Commercial loans | |||||||||||||||||||
Commercial real estate | 125 | 183 | 2,300 | 3,319 | 10,162 | ||||||||||||||
Commercial and industrial | 33 | 9 | 85 | 111 | 151 | ||||||||||||||
Commercial lease financing | — | — | 288 | 47 | 288 | ||||||||||||||
Warehouse lending | 4 | 58 | — | 62 | — | ||||||||||||||
Total commercial loans | 162 | 250 | 2,673 | 3,539 | 10,601 | ||||||||||||||
Total recoveries | 1,344 | 2,534 | 5,609 | 9,559 | 30,207 | ||||||||||||||
Charge-offs, net of recoveries | (8,986 | ) | (13,097 | ) | (14,110 | ) | (41,553 | ) | (168,142 | ) | |||||||||
Ending balance | $ | 297,000 | $ | 301,000 | $ | 207,000 | $ | 297,000 | $ | 207,000 | |||||||||
Net charge-off ratio (annualized) (1) | 0.91 | % | 1.36 | % | 1.53 | % | 1.07 | % | 4.00 | % | |||||||||
Net charge-off ratio, adjusted (annualized) (1)(2) | 0.60 | % | 0.70 | % | 1.53 | % | 0.77 | % | 2.45 | % | |||||||||
Net charge-off ratio (annualized) also by loan type (1) | |||||||||||||||||||
Residential first mortgage | 1.58 | % | 1.92 | % | 1.37 | % | 1.47 | % | 4.29 | % | |||||||||
Second mortgage | 1.07 | 1.78 | 1.42 | 2.73 | 4.66 | ||||||||||||||
HELOC and consumer | 0.78 | 47.03 | 2.62 | 3.39 | 3.03 | ||||||||||||||
Commercial real estate | 0.08 | 0.36 | 2.66 | 0.16 | 7.53 | ||||||||||||||
Commercial and industrial and lease financing | 0.03 | (0.01 | ) | 1.80 | 0.05 | 3.09 | |||||||||||||
Warehouse | — | 0.01 | — | — | 0.01 | ||||||||||||||
(1) | Excludes loans carried under the fair value option. |
(2) | Excludes charge-offs of $3.0 million and $6.3 million related to the sale loans during the three months ended December 31, 2014 and September 30, 2014, respectively. Excludes charge-offs of $11.4 million and $65.1 million related to loan sales during the years ended December 31, 2014 and 2013 respectively. |
18
Representation and Warranty Reserve
(Dollars in thousands)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, 2014 | September 30, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||||
Balance, beginning of period | $ | 57,000 | $ | 50,000 | $ | 174,000 | $ | 54,000 | $ | 193,000 | |||||||||||
Provision | |||||||||||||||||||||
Charged to gain on sale for current loan sales | 1,929 | 1,981 | 3,018 | 6,854 | 17,606 | ||||||||||||||||
Charged to representation and warranty provision | (6,080 | ) | 12,538 | (15,425 | ) | 10,011 | 36,116 | ||||||||||||||
Total | (4,151 | ) | 14,519 | (12,407 | ) | 16,865 | 53,722 | ||||||||||||||
Charge-offs, net | 151 | (7,519 | ) | (107,593 | ) | (17,865 | ) | (192,722 | ) | ||||||||||||
Balance, end of period | $ | 53,000 | $ | 57,000 | $ | 54,000 | $ | 53,000 | $ | 54,000 | |||||||||||
Composition of Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)
December 31, 2014 | Collectively Evaluated Reserves | Individually Evaluated Reserves | Total | ||||||||
Consumer loans | |||||||||||
Residential first mortgage | $ | 152,446 | $ | 81,842 | $ | 234,288 | |||||
Second mortgage | 6,791 | 5,633 | 12,424 | ||||||||
HELOC | 17,674 | 1,049 | 18,723 | ||||||||
Other | 645 | 121 | 766 | ||||||||
Total consumer loans | 177,556 | 88,645 | 266,201 | ||||||||
Commercial loans | |||||||||||
Commercial real estate | 17,359 | — | 17,359 | ||||||||
Commercial and industrial | 10,581 | — | 10,581 | ||||||||
Commercial lease financing | 131 | — | 131 | ||||||||
Warehouse lending | 2,728 | — | 2,728 | ||||||||
Total commercial loans | 30,799 | — | 30,799 | ||||||||
Total allowance for loan losses | $ | 208,355 | $ | 88,645 | $ | 297,000 | |||||
September 30, 2014 | Collectively Evaluated Reserves | Individually Evaluated Reserves | Total | ||||||||
Consumer loans | |||||||||||
Residential first mortgage | $ | 157,198 | $ | 82,858 | $ | 240,056 | |||||
Second mortgage | 7,089 | 5,514 | 12,603 | ||||||||
HELOC | 17,453 | 1,179 | 18,632 | ||||||||
Other | 1,545 | — | 1,545 | ||||||||
Total consumer loans | 183,285 | 89,551 | 272,836 | ||||||||
Commercial loans | |||||||||||
Commercial real estate | 20,584 | — | 20,584 | ||||||||
Commercial and industrial | 5,202 | — | 5,202 | ||||||||
Commercial lease financing | 144 | — | 144 | ||||||||
Warehouse lending | 2,234 | — | 2,234 | ||||||||
Total commercial loans | 28,164 | — | 28,164 | ||||||||
Total allowance for loan losses | $ | 211,449 | $ | 89,551 | $ | 301,000 | |||||
19
Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
Non-performing loans | $ | 74,839 | $ | 72,361 | $ | 98,976 | |||||
Non-performing TDRs | 28,687 | 17,507 | 25,808 | ||||||||
Non-performing TDRs at inception but performing for less than six months | 16,965 | 17,076 | 20,901 | ||||||||
Total non-performing loans held-for-investment | 120,491 | 106,944 | 145,685 | ||||||||
Real estate and other non-performing assets, net | 18,693 | 27,149 | 36,636 | ||||||||
Non-performing assets held-for-investment, net (1) | $ | 139,184 | $ | 134,093 | $ | 182,321 | |||||
Ratio of non-performing assets to total assets (Bank only) | 1.42 | % | 1.40 | % | 1.95 | % | |||||
Ratio of non-performing loans held-for-investment to loans held-for-investment | 2.71 | % | 2.56 | % | 3.59 | % | |||||
Ratio of non-performing assets to loans held-for-investment and repossessed assets | 3.12 | % | 3.18 | % | 4.46 | % | |||||
(1) | Does not include non-performing loans held-for-sale of $14.8 million, $18.0 million and $0.8 million at December 31, 2014, September 30, 2014 and December 31, 2013, respectively. |
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, 2014 | |||||||||||||||
Consumer loans | $ | 34,005 | $ | 9,894 | $ | 120,491 | $ | 164,390 | $ | 2,629,710 | |||||
Commercial loans | — | — | — | — | 1,817,844 | ||||||||||
Total loans | $ | 34,005 | $ | 9,894 | $ | 120,491 | $ | 164,390 | $ | 4,447,554 | |||||
September 30, 2014 | |||||||||||||||
Consumer loans | $ | 40,188 | $ | 12,139 | $ | 106,944 | $ | 159,271 | $ | 2,672,063 | |||||
Commercial loans | 5,489 | — | — | 5,489 | 1,512,561 | ||||||||||
Total loans | $ | 45,677 | $ | 12,139 | $ | 106,944 | $ | 164,760 | $ | 4,184,624 | |||||
December 31, 2013 | |||||||||||||||
Consumer loans | $ | 41,013 | $ | 20,732 | $ | 144,185 | $ | 205,930 | $ | 3,005,841 | |||||
Commercial loans | — | — | 1,500 | 1,500 | 1,049,915 | ||||||||||
Total loans | $ | 41,013 | $ | 20,732 | $ | 145,685 | $ | 207,430 | $ | 4,055,756 | |||||
20
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, 2014 | |||||||||||||||
Consumer loans | $ | 361,450 | $ | 28,687 | $ | 16,965 | $ | 407,102 | |||||||
Commercial loans | 403 | — | — | 403 | |||||||||||
Total TDRs | $ | 361,853 | $ | 28,687 | $ | 16,965 | $ | 407,505 | |||||||
September 30, 2014 | |||||||||||||||
Consumer loans | $ | 365,553 | $ | 17,507 | $ | 17,076 | $ | 400,136 | |||||||
Commercial loans | 418 | — | — | 418 | |||||||||||
Total TDRs | $ | 365,971 | $ | 17,507 | $ | 17,076 | $ | 400,554 | |||||||
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 | |||||||
Efficiency ratio and efficiency ratio (adjusted). The efficiency ratio, which generally measures the productivity of a bank, is calculated as non-interest expense divided by total operating income. Total operating income includes net-interest income and total non-interest income. Management utilizes the efficiency ratio to monitor its own productivity and believes the ratio provides investors with a meaningful tool to monitor period-to-period productivity trends. The efficiency ratio (adjusted), excludes from non-interest expense and non-interest income (GAAP) certain adjusting items, that have been described in the table below. As the provision for loan losses is already excluded by the ratio's own definition, we believe that the exclusion of representation and warranty provision provides investors with a more complete picture of our productivity and ability to generate operating income. The efficiency ratio (adjusted) provides investors with a meaningful base for period to period comparisons, which management believes will assist investors in analyzing our operating results and predicting future performance. These non-GAAP financial measures are also utilized internally by management to assess the performance of our own business.
Our calculations of the efficiency ratio may differ from the calculation of similar measures used by other bank and thrift holding companies, and should be used to determine and evaluate period to period trends in our performance, rather than in comparison to other similar non-GAAP measurements utilized by other companies. In addition, investors should keep in mind that certain items excluded from income and expenses in the efficiency ratio (adjusted) are recurring and integral expenses to our operations, and that these expenses will still accrue under similar GAAP measures.
Adjusted income and adjusted earnings per share. In addition to analyzing the Company’s results on a reported basis, management reviews the Company’s results and the results on an adjusted basis. These non-GAAP measures reflect the adjustment of the reported U.S. GAAP results for significant items that management does not believe are reflective of the Company’s current and ongoing operations.
The following table provides a reconciliation of non-GAAP financial measures utilized in the adjusted efficiency ratio and adjusted earnings per share.
21
Non-GAAP Reconciliation
(Dollars in thousands)
(Unaudited)
Three Months Ended | Year Ended | ||||||||||||||||||||
December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||||
Net interest income (a) | $ | 61,302 | $ | 64,363 | $ | 62,425 | $ | 58,201 | $ | 41,203 | $ | 246,291 | $ | 186,651 | |||||||
Noninterest income (b) | 98,441 | 85,188 | 102,484 | 74,953 | 113,146 | 361,065 | 652,343 | ||||||||||||||
Less provisions: | |||||||||||||||||||||
Representation and warranty provision | (6,080 | ) | 2,163 | 5,226 | (1,672 | ) | 9,476 | 364 | 61,016 | ||||||||||||
Adjusting items: | |||||||||||||||||||||
Loan fees and charges (1) | — | — | (10,000 | ) | — | — | (10,000 | ) | — | ||||||||||||
Net impairment loss (2) | — | — | — | — | — | — | 8,789 | ||||||||||||||
Representation and warranty provision (3) | — | 10,375 | — | — | (24,900 | ) | 10,375 | (24,900 | ) | ||||||||||||
Other noninterest income (4) | — | — | — | 21,056 | — | 21,056 | (36,854 | ) | |||||||||||||
Adjusted noninterest income | $ | 98,441 | $ | 95,563 | $ | 92,484 | $ | 96,009 | $ | 88,246 | $ | 382,496 | $ | 599,378 | |||||||
Adjusted income (c) | $ | 153,663 | $ | 162,089 | $ | 160,135 | $ | 152,538 | $ | 138,925 | $ | 629,151 | $ | 847,045 | |||||||
Noninterest expense (d) | $ | 139,253 | $ | 179,389 | $ | 121,353 | $ | 139,252 | $ | 388,693 | $ | 579,246 | $ | 918,115 | |||||||
Adjusting items: | |||||||||||||||||||||
Loss on extinguishment of debt (5) | — | — | — | — | (177,556 | ) | — | (177,556 | ) | ||||||||||||
Legal and professional expense (6) | — | (1,116 | ) | (2,879 | ) | — | — | (3,995 | ) | — | |||||||||||
Other noninterest expense (7) | — | (37,500 | ) | 10,000 | — | (61,000 | ) | (27,500 | ) | (51,000 | ) | ||||||||||
Adjusted noninterest expense (e) | $ | 139,253 | $ | 140,773 | $ | 128,474 | $ | 139,252 | $ | 150,137 | $ | 547,751 | $ | 689,559 | |||||||
Efficiency ratio (d/(a+b)) | 87.2 | % | 120.0 | % | 73.6 | % | 104.6 | % | 251.8 | % | 95.4 | % | 109.4 | % | |||||||
Efficiency ratio (adjusted) (e/c) | 90.6 | % | 86.8 | % | 80.2 | % | 91.3 | % | 108.1 | % | 87.1 | % | 81.4 | % | |||||||
Net (loss) income applicable to common stockholders | $ | 11,076 | $ | (27,632 | ) | $ | 25,514 | $ | (78,906 | ) | $ | 160,457 | $ | (69,948 | ) | $ | 261,203 | ||||
Adjustment to remove adjusting items (1-7 above), net of tax | — | 48,991 | (17,121 | ) | 21,056 | 213,656 | 52,926 | 175,591 | |||||||||||||
Tax impact of adjusting items | — | (13,646 | ) | 5,992 | (7,370 | ) | (54,471 | ) | — | (60,579 | ) | ||||||||||
Adjusting tax item | — | — | — | — | (355,769 | ) | — | (355,769 | ) | ||||||||||||
Adjusted net (loss) income applicable to common stockholders | $ | 11,076 | $ | 7,713 | $ | 14,385 | $ | (65,220 | ) | $ | (36,127 | ) | $ | (17,022 | ) | $ | 20,446 | ||||
Diluted (loss) earnings per share | $ | 0.07 | $ | (0.61 | ) | $ | 0.33 | $ | (1.51 | ) | $ | 2.77 | $ | (1.72 | ) | $ | 4.37 | ||||
Adjustment to remove adjusting items | — | 0.86 | (0.31 | ) | 0.38 | 3.77 | 0.94 | 3.11 | |||||||||||||
Tax impact of adjusting items | — | (0.24 | ) | 0.11 | (0.13 | ) | (0.96 | ) | — | (1.07 | ) | ||||||||||
Adjusting tax item | — | — | — | — | (6.28 | ) | — | (6.30 | ) | ||||||||||||
Diluted adjusted (loss) earnings per share | $ | 0.07 | $ | 0.01 | $ | 0.13 | $ | (1.26 | ) | $ | (0.70 | ) | $ | (0.78 | ) | $ | 0.11 | ||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 56,310,858 | 56,249,300 | 56,230,458 | 56,194,184 | 56,126,895 | 56,246,528 | 56,063,282 | ||||||||||||||
Diluted | 56,792,751 | 56,249,300 | 56,822,102 | 56,194,184 | 56,694,096 | 56,246,528 | 56,518,181 | ||||||||||||||
(1) | Reverse benefit for contract renegotiation. |
(2) | Add back impairment charge related to the litigation settlement with MBIA. |
(3) | Add back reserve increase related to indemnifications claims on government insured loans. |
(4) | In 2014, negative fair value adjustment on repurchased performing loans and a benefit for contract renegotiation. In 2013, reversal of contingent liability reserve resulting from terms of settlement reached on a litigation settlement related to the HELOC securitization trusts. |
(5) | Loss on extinguishment of debt as a result of the prepayment of the higher cost long-term Federal Home Loan Bank advances. |
(6) | Adjust for legal expenses related to the litigation settlements during the respective periods. |
(7) | Adjust for CFPB litigation settlement expense. |
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Nonperforming assets / Tier 1 + allowance for Loan Losses. The ratio of nonperforming assets to Tier 1 and allowance for loan losses divides the total level of nonperforming assets held for investment by Tier 1 capital (to adjusted total assets), as defined by bank regulations, plus allowance for loan losses. We believe these measurements are meaningful measures of capital adequacy used by investors, regulators, management and others to evaluate the adequacy of capital in comparison to other companies within the industry.
December 31, 2014 | September 30, 2014 | December 31, 2013 | |||||||||
Non-performing assets / Tier 1 capital + allowance for loan losses | (Dollars in thousands) | ||||||||||
Non-performing assets | $ | 139,184 | $ | 134,093 | $ | 182,321 | |||||
Tier 1 capital (1) | 1,167,422 | 1,134,429 | 1,257,608 | ||||||||
Allowance for loan losses | 297,000 | 301,000 | 207,000 | ||||||||
Tier 1 capital + allowance for loan losses | $ | 1,464,422 | $ | 1,435,429 | $ | 1,464,608 | |||||
Non-performing assets / Tier 1 capital + allowance for loan losses | 9.5 | % | 9.3 | % | 12.4 | % | |||||
(1) | Represents Tier 1 capital for the Bank. |
Mortgage servicing rights to Tier 1 capital ratio. The ratio of mortgage servicing rights to Tier 1 capital divides the total mortgage servicing rights by Tier 1 capital, as defined by bank regulations. We believe these measurements are meaningful measures of capital adequacy, especially in relation to the level of our mortgage servicing rights. This ratio allows our investors, regulators, management and other parties to measure the adequacy and quality of our mortgage servicing rights and capital, in comparison to other companies within our industry.
Mortgage servicing rights to Tier 1 capital ratio | December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Mortgage servicing rights | $ | 257,827 | $ | 285,386 | $ | 289,185 | $ | 320,231 | $ | 284,678 | |||||||||
Tier 1 capital (to adjusted total assets) (1) | 1,167,422 | 1,134,429 | 1,188,936 | 1,139,810 | 1,257,608 | ||||||||||||||
Mortgage servicing rights to Tier 1 capital ratio | 22.1 | % | 25.2 | % | 24.3 | % | 28.1 | % | 22.6 | % | |||||||||
(1) | Represents Tier 1 capital for the Bank. |
Mortgage servicing rights to Tier 1 capital ratio | December 31, 2014 | September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | ||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Mortgage servicing rights | $ | 257,827 | $ | 285,386 | $ | 289,185 | $ | 320,231 | $ | 284,678 | |||||||||
Tier 1 capital (to adjusted total assets) (1) | 1,183,625 | 1,146,187 | 1,195,494 | 1,158,532 | 1,280,532 | ||||||||||||||
Mortgage servicing rights to Tier 1 capital ratio | 21.8 | % | 24.9 | % | 24.2 | % | 27.6 | % | 22.2 | % | |||||||||
(1) | Represents Tier 1 capital for the Company. |
Basel I to Basel III (fully phased-in) reconciliation. We currently calculate our risk-based capital ratios under guidelines adopted by the OCC based on the 1988 Capital Accord ("Basel I") of the Basel Committee on Banking Supervision (the "Basel Committee"). In December 2010, the Basel Committee released its final framework for Basel III, which will strengthen international capital and liquidity regulations. When fully phased-in, Basel III will increase capital requirements through higher minimum capital levels as well as through increases in risk-weights for certain exposures. Additionally, the final Basel III rules place greater emphasis on common equity. In October 2013, the OCC and Federal Reserve released final rules detailing the U.S. implementation of Basel III and the application of the risk-based and leverage capital rules to top-tier savings and loan holding companies. We have transitioned to the Basel III framework beginning in January 2015 and are subject to a phase-in period extending through January 2019. We are currently evaluating the impact of the final Basel III rules. Accordingly, the calculations provided below are estimates. These measures are considered to be non-GAAP financial measures because they are not formally defined by GAAP and the Basel III implementation regulations will not be fully phased-in until 2019. The regulations are subject to change as clarifying guidance becomes available and the calculations currently include our interpretations of the requirements including informal feedback received through the regulatory process. Other entities may calculate the Basel III ratios differently from ours based on their interpretation of the guidelines. Since analysts and banking regulators may assess our capital adequacy using the Basel III framework, we believe that it is useful to provide investors information enabling them to assess our capital adequacy on the same basis.
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December 31, 2014 | Common Equity Tier 1 (to Risk Weighted Assets) | Tier 1 Leverage (to Adjusted Tangible Assets) (1) | |||||
Flagstar Bank (the Bank) | |||||||
Regulatory capital – Basel I to Basel III (fully phased-in) (2) | |||||||
Basel I capital | $ | 1,167,422 | $ | 1,167,422 | |||
Increased deductions related to deferred tax assets, mortgage servicing assets, and other capital components | (117,406 | ) | (117,406 | ) | |||
Basel III (fully phased-in) capital (2) | $ | 1,050,016 | $ | 1,050,016 | |||
Risk-weighted assets – Basel I to Basel III (fully phased-in) (2) | |||||||
Basel I assets | $ | 5,178,781 | $ | 9,392,178 | |||
Net change in assets | 124,516 | 192,481 | |||||
Basel III (fully phased-in) assets (2) | $ | 5,303,297 | $ | 9,584,659 | |||
Capital ratios | |||||||
Basel I (3) | 22.54 | % | 12.43 | % | |||
Basel III (fully phased-in) (2) | 19.80 | % | 10.96 | % | |||
(1) | The definition of total assets used in the calculation of the Tier 1 Leverage ratio changed from ending total assets under Basel I to quarterly average total assets under Basel III. |
(2) | Basel III information is considered estimated and not final at this time as the Basel III rules continue to be subject to interpretation by U.S. Banking Regulators. |
(3) | As of December 31, 2014, the Bank was subject to the requirements of Basel I. |
December 31, 2014 | Common Equity Tier 1 (to Risk Weighted Assets) | Tier 1 Leverage (to Adjusted Tangible Assets) (1) | |||||
Flagstar Bank (the Company) | |||||||
Regulatory capital – Basel I to Basel III (fully phased-in) (2) | |||||||
Basel I capital | $ | 669,533 | $ | 1,183,624 | |||
Increased deductions related to deferred tax assets, mortgage servicing assets, and other capital components | (205,243 | ) | (209,028 | ) | |||
Basel III (fully phased-in) capital (2) | $ | 464,290 | $ | 974,596 | |||
Risk-weighted assets – Basel I to Basel III (fully phased-in) (2) | |||||||
Basel I assets | $ | 5,189,822 | $ | 9,403,220 | |||
Net change in assets | (97,735 | ) | 108,862 | ||||
Basel III (fully phased-in) assets (2) | $ | 5,092,087 | $ | 9,512,082 | |||
Capital ratios | |||||||
Basel I (3) | 12.90 | % | 12.59 | % | |||
Basel III (fully phased-in) (2) | 9.12 | % | 10.25 | % | |||
(1) | The definition of total assets used in the calculation of the Tier 1 Leverage ratio changed from ending total assets under Basel I to quarterly average total assets under Basel III. |
(2) | Basel III information is considered estimated and not final at this time as the Basel III rules continue to be subject to interpretation by U.S. Banking Regulators. |
(3) | As of December 31, 2014, the Bank was subject to the requirements of Basel I. |
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