Flagstar Announces Return to Profitability in Second Quarter 2012 Reports second quarter 2012 net income of $86.0 million, or $0.15 per share, and year-to-date 2012 net income of $77.3 million, or $0.13 per share; Continuing improvements in consumer credit quality

TROY, Mich., July 17, 2012 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) (the "Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today announced its return to profitability, reporting second quarter 2012 net income applicable to common stockholders of $86.0 million, or $0.15 per share, as compared to a first quarter 2012 net loss of $(8.7) million, or $(0.02) per share and a second quarter 2011 net loss of $(74.9) million, or $(0.14) per share.  For the six months ended June 30, 2012, net income applicable to common stockholders totaled $77.3 million, or $0.13 per share, as compared to a net loss of $(106.6) million, or $(0.19) per share during the same period in 2011.

"I am very pleased to report strong net income for the second quarter and for the first six months of 2012," said Joseph P. Campanelli, Chairman of the Board, President and CEO.  "Returning to profitability following an extended period of losses marks a major milestone for our bank, and is the culmination of countless hours of hard work and dedication by our employees.  While we are excited about reaching this significant milestone, we recognize that we still have a great deal of work ahead of us.  We have made great progress in transforming Flagstar into a diversified super-community bank, and we remain committed to delivering diversified products and exceptional service to our customers and generating value for our shareholders." 

Campanelli continued, "Our second quarter performance reflects the earnings power of our industry-leading mortgage banking franchise and a continued focus on risk management and controlling credit costs, while at the same time, adding reserves to the balance sheet.  We also continued to see improvements in our consumer loan credit quality, with total delinquent consumer loans decreasing for the third consecutive quarter."                         

Second Quarter Highlights:

  • Gain on loan sale income increased to $212.7 million, reflecting a margin of 1.66 percent, as compared to $204.9 million, reflecting a margin of 1.89 percent, in the prior quarter.
  • Bank net interest margin remained relatively flat at 2.37 percent, as compared to 2.41 percent in the prior quarter.
  • Tier 1 capital ratio (to adjusted total assets) increased to 9.07 percent and total risk-based capital ratio (to risk-weighted assets) increased to 17.03 percent.
  • Significant liquidity at quarter-end, with cash on hand and interest-earning deposits of $1.3 billion, in addition to over $600 million in unused borrowing capacity at the Federal Home Loan Bank of Indianapolis (FHLB).
  • Total reserves increased by $25.0 million from the prior quarter, with the allowance for loan losses increasing to $287.0 million and the representation and warranty reserve increasing to $161.0 million.
  • Total delinquent loans (i.e., 30 days or more past due) held-for-investment decreased slightly from the prior quarter. 

Second quarter 2012 net income of $0.15 per share (diluted) was based on average shares outstanding of 561,821,000, as compared to a first quarter 2012 net loss of $(0.02) per share (diluted) based on average shares outstanding of 556,623,000 and a  second quarter 2011 net loss of $(0.14) per share (diluted) based on average shares outstanding of 553,946,000.

For the six months ended June 30, 2012, the net income of $0.13 per share (diluted) was based on average shares outstanding of 560,082,000, as compared to the net loss of $(0.19) per share (diluted) based on average shares of 553,752,000 during the same period 2011.

Net Interest Income
Second quarter 2012 net interest income was generally unchanged at $75.5 million, as compared to $74.7 million for the first quarter 2012.  Net interest margin for the Bank compressed slightly to 2.37 percent for the second quarter 2012, from 2.41 percent for the first quarter 2012.  The slight decrease in net interest margin for the Bank primarily reflects the lower interest rate environment during the second quarter 2012.  Yields on interest-earning assets declined at a greater rate than the rates paid on interest-bearing liabilities, partially offset by an increase in average interest-earning assets. 

Average interest-earning assets increased to $12.9 billion in the second quarter 2012, as compared to $12.6 billion for the first quarter 2012.  This increase was primarily driven by an increase in the average balance of available for sale mortgage loans due to the increase in mortgage originations during the quarter, and an increase in commercial loans held-for-investment driven by new commercial relationships.

The Company's average cost of funds for the second quarter 2012 decreased to 1.72 percent, an improvement from the prior quarter of 1.76 percent.  This decline was driven primarily by an increase in lower-cost retail core deposits from prior quarter.  The average cost of total retail deposits declined during the second quarter 2012 to 0.98 percent, as compared to 1.06 percent during the first quarter 2012.

Non-interest Income
Second quarter 2012 non-interest income increased to $240.3 million, as compared to $221.4 million for the first quarter 2012.  Excluding the provision related to the representation and warranty reserve (discussed in Credit-Related Costs and Asset Quality below), non-interest income increased to $286.4 million for the second quarter 2012, as compared to $281.9 million for the first quarter 2012.  The increase was primarily due to higher net gain on loan sales, which was reflective of strong consumer demand for the refinancing of residential mortgage loans in a declining interest rate environment.  Additionally, the Company believes it has been able to strategically take advantage of opportunities given the current displacement in the mortgage market.

Second quarter 2012 net gain on loan sales increased to $212.7 million, as compared to $204.9 million for the first quarter 2012.  This increase from the prior quarter was a result of increases in both residential first mortgage rate lock commitments and sales of residential first mortgage loans. 

Gain on loan sale margin is calculated based on residential first mortgage rate lock commitments and actual sales of residential first mortgage loans, and is net of sales expenses, hedging costs and provisions related to the representation and warranty reserve (i.e., the portion of the reserve established at the time of sale).  Gain on loan sale margin declined to 1.66 percent for the second quarter 2012, as compared to 1.89 percent for the first quarter 2012, due to increased hedging costs resulting from a more rapid declining rate market during second quarter 2012, as compared to the first quarter 2012.  Residential first mortgage rate lock commitments increased 17.9 percent to $17.5 billion for the second quarter 2012, as compared to $14.9 billion for the first quarter 2012.  Loan sales of residential first mortgage loans also increased for the second quarter 2012 to $12.8 billion, as compared to $10.8 billion for the first quarter 2012. 

Residential first mortgage loan originations, which are principally comprised of agency-eligible residential first mortgage loans, increased to $12.5 billion for the second quarter 2012, as compared to $11.2 billion for the first quarter 2012.

Loan fees and charges increased to $34.8 million for the second quarter 2012, as compared to $30.0 million for the first quarter 2012, reflecting the increase in residential first mortgage loan originations during the quarter.

Net servicing revenue, which is the combination of net loan administration income (including the economic hedges of mortgage servicing rights) and the gain (loss) on trading securities (i.e., the on-balance sheet hedges of mortgage servicing rights), decreased to $28.7 million for the second quarter 2012, as compared to $32.9 million for the first quarter 2012.  This decrease from the prior quarter reflects a lower value of mortgage servicing rights in the second quarter 2012, principally as a result of an increase in prepayment speeds due to the refinancing of consumer mortgages from the decline in interest rates during the quarter.  This decline in value was substantially offset by income generated from both the economic hedges (e.g., U.S. Treasury and Eurodollar futures, swap futures, and "to be announced" forwards) and the on-balance sheet hedges. 

Non-interest Expense
Second quarter 2012 non-interest expense declined to $169.5 million, as compared to $188.7 million for the first quarter 2012.  The 10.2 percent decrease in non-interest expense from prior quarter was primarily driven by decreases in asset resolution expense, warrant expense, and general and administrative expense.  Excluding asset resolution expense (discussed in Credit-Related Costs and Asset Quality below), non-interest expense declined to $148.6 million for the second quarter 2012, as compared to $152.0 million for the first quarter 2012.  The efficiency ratio, as adjusted to exclude credit-related costs, improved to 41.2 percent for the second quarter 2012, as compared to 42.6 percent for the first quarter 2012 (see non-GAAP reconciliation).

Compensation and benefits were $65.4 million for the second quarter 2012, relatively flat as compared to $66.0 million for the first quarter 2012.  Commission expense increased to $17.8 million for the second quarter 2012, as compared to $15.5 million for the first quarter 2012, as a result of the 12.3 percent increase in residential first mortgage loan originations during the quarter. 

Warrant income for the second quarter 2012 was $(0.6) million, as compared to an expense of $2.5 million in the first quarter 2012, reflecting the decrease in the quarterly valuation of the outstanding warrant liability arising from the decrease in the market price of the Company's common stock at June 30, 2012, as compared to March 31, 2012.

Balance Sheet and Funding
Total assets at June 30, 2012 were $14.4 billion, as compared to $14.0 billion at March 31, 2012.  The increase from the prior quarter was primarily the result of a $512.4 million increase in cash and cash equivalents arising from a short-term, period-end increase in company-controlled deposits.      

Loans are primarily funded with deposits obtained through banking centers in Michigan and from public units, as well as from deposits obtained in prior years from investment banking firms and not yet matured.  Funds are also obtained through loan repayments and sales of loans and securities in the ordinary course of business, advances from the FHLB in varying maturities depending on current needs, customer escrow accounts and security repurchase agreements.  Several of these sources are relied on at different times to address daily and forecasted liquidity needs for operational requirements and policy levels while managing overall net interest costs and interest-rate risk. 

At June 30, 2012, the Bank had approximately $1.3 billion of cash on hand and interest-earning deposits, as compared to $757.9 million at March 31, 2012.  The Bank also 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 June 30, 2012, the Bank's outstanding long-term borrowings on the FHLB line of credit were approximately $3.4 billion, with no short-term borrowings outstanding.  At June 30, 2012, the Bank also had approximately $650 million of collateralized borrowing capacity available. 

Credit-Related Costs and Asset Quality
For the second quarter 2012, total credit-related costs decreased to $127.6 million, as compared to $213.6 million for the first quarter 2012 (see non-GAAP reconciliation).  

The allowance for loan losses at June 30, 2012 increased to $287.0 million, as compared to $281.0 million at March 31, 2012.  The increase from prior quarter was primarily attributable to an increase in residential first mortgage loan modifications (also referred to as troubled debt restructurings) and an increase in historical loss rates, which are updated quarterly.  These increases were partially offset by a decrease in commercial allowance for loan losses, as older loans (originated prior to 2009) with higher loss rates paid off and were partially replaced by new originations with lower loss rates. 

At June 30, 2012, the ratio of the allowance for loan losses to loans held-for-investment was 4.4 percent and the ratio of the allowance for loan losses to non-performing loans held-for-investment was 66.5 percent, as compared to 4.2 percent and 69.1 percent, respectively, at March 31, 2012. 

The provision for loan losses in the second quarter 2012 decreased to $58.4 million, as compared to $114.7 million for the first quarter 2012.  The decline in second quarter 2012 provision for loan losses primarily reflects a lower level of net charge-offs for the second quarter 2012.  In the prior quarter, the Company wrote-off its specific valuation allowances related to residential and commercial loans over 180 days past due, and no longer carries such allowances.

Total non-performing loans increased to $431.6 million at June 30, 2012, as compared to $406.6 million at March 31, 2012.  The increase from the prior quarter was driven by a $45.8 million increase in non-performing commercial loans, substantially all of which was related to commercial real estate loans originated prior to 2009.  Non-performing consumer loans decreased by $20.8 million from the prior quarter, partially offsetting the increase in non-performing commercial loans.

Total delinquent loans decreased to $522.5 million at June 30, 2012, as compared to $533.4 million at March 31, 2012, primarily due to decreases in the 30-59 days past due and the 60-89 days past due loans. 

The Company maintains a representation and warranty reserve on the balance sheet, which reflects its estimate of probable losses that it may incur on loans that have been sold or securitized into the secondary market, primarily to the government sponsored entities ("GSEs").  At June 30, 2012, the representation and warranty reserve was $161.0 million, a 13.4 percent increase, as compared to $142.0 million at March 31, 2012.  The representation and warranty reserve reflects an increase in pending loan demands from the GSEs and changes in loss severity rates.  In the second quarter 2012, provisions related to the representation and warranty reserve, other than as included in our gain on sale computations, were $46.0 million, as compared to $60.5 million for the first 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 we file claims with the U.S. Department of Housing and Urban Development) decreased to $20.9 million for the second quarter 2012, as compared to $36.8 million for the first quarter 2012.  This decrease from the prior quarter was primarily attributable to a reduction in expected losses from loans repurchased with government guarantees, a reduction in foreclosure costs, and an improvement in recoveries.

Capital
The Bank was considered "well-capitalized" for regulatory purposes at June 30, 2012, and had regulatory capital ratios of 9.07 percent for the Tier 1 capital ratio (to adjusted total assets) and 17.03 percent for the total risk-based capital ratio (to risk-weighted assets).  At June 30, 2012, the Company had a Tier 1 common capital ratio (to risk-weighted assets) of 9.60 percent and an equity-to-assets ratio of 8.20 percent.

Earnings Conference Call
As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, July 18, 2012 from 11 a.m. until noon (Eastern).

Questions for discussion at the conference call may be submitted in advance by e-mail to investors@flagstar.com or asked live during the conference call.

The conference call and accompanying slide presentation will be webcast live on the Investor Relations section of the Company's website, www.flagstar.com, with replays available at that site for at least 10 days.

To listen by telephone, please call at least 10 minutes prior to the start of the conference call at (800) 344-6491 toll free or (785) 830-7988 and use passcode: 4797176.

About Flagstar
Flagstar Bancorp, Inc. is a full-service financial services company, offering a range of products and services to consumers, businesses, and homeowners.  With $14.4 billion in total assets at June 30, 2012, Flagstar is the largest publicly held savings bank headquartered in the Midwest.  As of June 30, 2012, Flagstar operated 111 branches in Michigan, 30 home loan centers in 13 states, and a total of four commercial banking offices in Massachusetts, Connecticut, and Rhode Island.  Flagstar originates loans nationwide and 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 results of operations, current expectations, plans or forecasts of core business drivers, credit related costs, asset quality, capital adequacy and liquidity, the implementation of the Company's business plan and growth strategies, 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 Forms 10-K and 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; our ability to control credit related costs and forecast the adequacy of reserves; and the imposition of regulatory enforcement actions against us.  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
(In thousands, except share data)










June 30, 2012


March 31, 2012


December 31, 2011


June 30, 2011

Assets

(Unaudited)


(Unaudited)




(Unaudited)

Cash and cash items

$

71,184



$

46,946



$

49,715



$

56,031


Interest-earning deposits

1,199,205



711,002



681,343



701,852


Cash and cash equivalents

1,270,389



757,948



731,058



757,883


Securities classified as trading

169,834



307,355



313,383



292,438


Securities classified as available-for-sale

424,765



448,147



481,352



551,173


Loans held-for-sale ($2,195,679, $2,132,842, $1,629,618, and

$1,870,499 at fair value at June 30, 2012, March 31, 2012,

December 31, 2011, and June 30, 2011, respectively)

2,459,482



2,492,855



1,800,885



2,002,888


Loans repurchased with government guarantees

1,999,110



2,002,999



1,899,267



1,711,591


Loans held-for-investment ($20,231, $20,365, $22,651, and

$21,514 at fair value at June 30, 2012, March 31, 2012,

December 31, 2011, and June 30, 2011, respectively)

6,550,257



6,659,538



7,038,587



5,975,134


Less: allowance for loan losses

(287,000)



(281,000)



(318,000)



(274,000)


Loans held-for-investment, net

6,263,257



6,378,538



6,720,587



5,701,134


Total interest-earning assets

12,515,653



12,340,896



11,896,817



10,961,076


Accrued interest receivable

103,985



108,143



105,200



91,527


Repossessed assets, net

107,235



108,686



114,715



110,050


Federal Home Loan Bank stock

301,737



301,737



301,737



301,737


Premises and equipment, net

209,126



206,573



203,578



244,565


Mortgage servicing rights

638,865



596,830



510,475



577,401


Other assets

420,661



332,538



455,236



320,425


Total assets

$

14,368,446



$

14,042,349



$

13,637,473



$

12,662,812


Liabilities and Stockholders' Equity








Deposits

$

8,922,847



$

8,599,153



$

7,689,988



$

7,405,027


Federal Home Loan Bank advances

3,400,000



3,591,000



3,953,000



3,406,571


Long-term debt

248,585



248,585



248,585



248,610


Total interest-bearing liabilities

12,571,432



12,438,738



11,891,573



11,060,208


Accrued interest payable

12,271



10,124



8,723



10,935


Representation and warranty reserve

161,000



142,000



120,000



79,400


Other liabilities ($19,100, $19,100, $18,300, and $0 at fair

value at June 30, 2012, March 31, 2012, December 31, 2011,

and June 30, 2011, respectively)

445,394



364,066



537,461



337,829


Total liabilities

13,190,097



12,954,928



12,557,757



11,488,372


Stockholders' Equity








Preferred stock $0.01 par value, liquidation value $1,000 per

share, 25,000,000 shares authorized; 266,657 issued and

outstanding and outstanding at June 30, 2012, March 31,

2012, December 31, 2011, and June 30, 2011, respectively

257,556



256,139



254,732



251,959


Common stock $0.01 par value, 700,000,000 shares

authorized; 557,722,618, 557,132,814, 555,775,639, and

554,163,337 shares issued and outstanding at June 30, 2012,

March 31, 2012, December 31, 2011, and June 30, 2011,

respectively

5,577



5,571



5,558



5,542


Additional paid in capital

1,468,905



1,467,476



1,466,461



1,464,131


Accumulated other comprehensive income (loss)

8,274



6,167



(7,819)



(356)


Accumulated deficit

(561,963)



(647,932)



(639,216)



(546,836)


Total stockholders' equity

1,178,349



1,087,421



1,079,716



1,174,440


Total liabilities and stockholders' equity

$

14,368,446



$

14,042,349



$

13,637,473



$

12,662,812



 

Flagstar Bancorp, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


For the Three Months Ended


For the Six Months Ended


June 30,
2012


March 31,
2012


June 30,
2011


June 30,
2012


June 30,
2011

Interest Income










Loans

$

115,611



$

113,908



$

98,155



$

229,519



$

200,269


Securities classified as available-for-sale

or trading

6,850



8,571



8,949



15,421



17,046


Interest-earning deposits and other

462



412



957



874



1,925


Total interest income

122,923



122,891



108,061



245,814



219,240


Interest Expense










Deposits

18,321



18,986



24,902



37,307



51,924


FHLB advances

27,386



27,394



30,218



54,779



60,196


Other

1,738



1,778



1,617



3,517



3,223


Total interest expense

47,445



48,158



56,737



95,603



115,343


Net interest income

75,478



74,733



51,324



150,211



103,897


Provision for loan losses

58,428



114,673



48,384



173,101



76,693


Net interest income (loss) after provision for

loan losses

17,050



(39,940)



2,940



(22,890)



27,204


Non-Interest Income










Loan fees and charges

34,783



29,973



14,712



64,757



30,850


Deposit fees and charges

5,039



4,923



7,845



9,961



15,345


Loan administration

25,012



38,885



30,450



63,898



69,786


Gain (loss) on trading securities

3,711



(5,971)



102



(2,260)



28


Loss on transferors' interest

(1,244)



(409)



(2,258)



(1,653)



(4,640)


Net gain on loan sales

212,666



204,853



39,827



417,518



90,012


Net loss on sales of mortgage servicing rights

(983)



(2,317)



(2,381)



(3,299)



(2,493)


Net gain on securities available-for-sale

20



310





330




Net (loss) gain on sale of assets

(26)



27



1,293





256


Total other-than-temporary impairment

(loss) gain

(1,707)



3,872



39,725



2,810



39,725


Gain (loss) recognized in other

comprehensive income before taxes

690



(5,047)



(55,309)



(5,002)



(55,309)


Net impairment losses recognized in

earnings

(1,017)



(1,175)



(15,584)



(2,192)



(15,584)


Representation and warranty reserve -

change in estimate

(46,028)



(60,538)



(21,364)



(106,566)



(41,791)


Other fees and charges, net

8,401



12,816



5,436



21,216



12,575


Total non-interest income

240,334



221,377



58,078



461,710



154,344


Non-Interest Expense










Compensation and benefits

65,402



65,989



53,719



131,390



109,459


Commissions

17,838



15,466



7,437



33,305



15,005


Occupancy and equipment

18,706



16,950



16,969



35,656



33,587


Asset resolution

20,851



36,770



23,282



57,621



61,391


Federal insurance premiums

12,104



12,324



10,789



24,428



19,515


Other taxes

370



946



667



1,327



1,533


Warrant (income) expense

(551)



2,549



(1,998)



1,998



(2,825)


General and administrative

34,777



37,752



20,057



72,518



40,488


Total non-interest expense

169,497



188,746



130,922



358,243



278,153


Income (loss) before federal income taxes

87,887



(7,309)



(69,904)



80,577



(96,605)


Provision for federal income taxes

500





264



500



528


Net income (loss)

87,387



(7,309)



(70,168)



80,077



(97,133)


Preferred stock dividend/accretion

(1,417)



(1,407)



(4,720)



(2,824)



(9,429)


Net income (loss) applicable to common

stockholders

$

85,970



$

(8,716)



$

(74,888)



$

77,253



$

(106,562)


Income (loss) per share










Basic

$

0.15



$

(0.02)



$

(0.14)



$

0.13



$

(0.19)


Diluted

$

0.15



$

(0.02)



$

(0.14)



$

0.13



$

(0.19)


(1)

The preferred stock dividend/accretion for the three months ended June 30, 2012 and March 31, 2012 and six months ended June 30, 2012, respectively, represents only the accretion. As of December 31, 2011, the Company elected the deferral of dividend and interest payments on preferred stock.

 

 

Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in thousands, except per share data)
(Unaudited)


For the Three Months Ended


For the Six Months Ended

Summary of Consolidated

Statements of Operations

June 30, 2012


March 31, 2012


June 30, 2011


June 30, 2012


June 30, 2011

Return on average assets

2.37

%


(0.25)

%


(2.32)

%


1.08

%


(1.64)

%

Return on average equity

31.09

%


(3.07)

%


(24.87)

%


13.78

%


(17.40)

%

Efficiency ratio (1)

53.7

%


63.7

%


119.7

%


58.5

%


107.7

%

Efficiency ratio (credit-adjusted) (1)

41.2

%


42.6

%


82.3

%


41.8

%


72.2

%
















Equity/assets ratio (average for the period)

7.62

%


8.00

%


9.33

%


7.81

%


9.40

%

Mortgage loans originated (2)

$

12,547,017



$

11,169,409



$

4,642,864



$

23,716,426



$

9,499,248


Other loans originated

$

203,584



$

271,445



$

152,408



$

475,029



$

183,698


Mortgage loans sold and securitized

$

12,777,311



$

10,829,798



$

4,362,518



$

23,607,109



$

10,192,026


Interest rate spread - Bank only (3)

2.10

%


2.15

%


1.62

%


2.12

%


1.62

%

Net interest margin - Bank only (4)

2.37

%


2.41

%


1.86

%


2.39

%


1.87

%

Interest rate spread - Consolidated (3)

2.08

%


2.13

%


1.61

%


2.10

%


1.61

%

Net interest margin - Consolidated (4)

2.32

%


2.35

%


1.81

%


2.34

%


1.81

%

Average common shares outstanding

557,405,579



556,623,046



553,946,138



557,014,312



553,751,593


Average fully diluted shares outstanding

561,821,303



556,623,046



553,946,138



560,082,317



553,751,593


Average interest earning assets

$

12,943,237



$

12,640,668



$

11,297,984



$

12,791,952



$

11,385,031


Average interest paying liabilities

$

11,100,307



$

10,994,258



$

10,301,159



$

11,047,283



$

10,380,371


Average stockholder's equity

$

1,106,224



$

1,136,618



$

1,204,652



$

1,121,421



$

1,224,829


Charge-offs to average investment loans (annualized)

3.24

%


8.99

%


3.15

%


6.18

%


2.64

%


June 30, 2012


March 31, 2012


December 31, 2011


June 30, 2011

Equity/assets ratio

8.20

%


7.74

%


7.92

%


9.27

%

Tier 1 capital ratio (to adjusted total assets) (5)

9.07

%


8.64

%


8.95

%


10.07

%

Total risk-based capital ratio (to risk-weighted assets) (5)

17.03

%


16.06

%


16.64

%


19.73

%

Book value per common share

$

1.65



$

1.49



$

1.48



$

1.66


Number of common shares outstanding

557,722,618



557,132,814



555,775,639



554,163,337


Mortgage loans serviced for others

$

76,192,099



$

68,207,554



$

63,770,676



$

57,087,989


Weighted average service fee (bps)

30.4



28.7



30.8



30.3


Capitalized value of mortgage servicing rights

0.84

%


0.88

%


0.80

%


1.01

%

Ratio of allowance for loan losses to non-performing loans held-for-investment (6)

66.5

%


69.1

%


65.1

%


67.9

%

Ratio of allowance for loan losses to loans held-for-investment (6)

4.38

%


4.22

%


4.52

%


4.59

%

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

3.75

%


3.67

%


4.43

%


4.10

%

Number of bank branches

111



113



113



162


Number of loan origination centers

30



28



27



30


Number of employees (excluding loan officers and account executives)

3,184



2,970



2,839



2,990


Number of loan officers and account executives

336



311



297



316


(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)

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.

(6)

Bank only and does not include non-performing loans held-for-sale.


 

Loan Originations

(Dollars in thousands)

(Unaudited)


For the Three Months Ended


June 30, 2012


March 31, 2012


June 30, 2011

Consumer loans:









Mortgage (1)

$

12,547,017


98.4

%


$

11,169,409


97.7

%


$

4,642,864


96.8

%

Other consumer (2)

6,501


0.1

%


4,479


%


2,526


0.1

%

Total consumer loans

12,553,518


98.5

%


11,173,888


97.7

%


4,645,390


96.9

%

Commercial loans (3)

197,083


1.5

%


266,966


2.3

%


149,882


3.1

%

Total loan originations

$

12,750,601


100.0

%


$

11,440,854


100.0

%


$

4,795,272


100.0

%


For the Six Months Ended


June 30, 2012


June 30, 2011

Consumer loans:






Mortgage (1)

$

23,716,426


98.1

%


$

9,499,248


98.1

%

Other consumer (2)

10,980


%


3,653


%

Total consumer loans

23,727,406


98.1

%


9,502,901


98.1

%

Commercial loans (3)

464,049


1.9

%


180,045


1.9

%

Total loan originations

$

24,191,455


100.0

%


$

9,682,946


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)


June 30, 2012


March 31, 2012


December 31, 2011


June 30, 2011

Consumer loans:












Residential first mortgage

$

3,102,137


47.4

%


$

3,304,889


49.7

%


$

3,749,821


53.1

%


$

3,745,240


62.7

%

Second mortgage

127,434


1.9

%


132,463


2.0

%


138,912


2.0

%


155,537


2.6

%

Warehouse lending

1,261,442


19.3

%


1,104,205


16.6

%


1,173,898


16.7

%


513,678


8.6

%

HELOC

198,228


3.0

%


209,228


3.1

%


221,986


3.2

%


241,396


4.0

%

Other

57,605


0.9

%


62,111


0.9

%


67,613


1.0

%


77,052


1.3

%

Total consumer loans

4,746,846


72.5

%


4,812,896


72.3

%


5,352,230


76.0

%


4,732,903


79.2

%

Commercial loans:












Commercial real estate

1,075,015


16.4

%


1,157,911


17.3

%


1,242,969


17.7

%


1,111,131


18.6

%

Commercial and industrial

569,288


8.7

%


544,481


8.2

%


328,879


4.7

%


106,943


1.8

%

Commercial lease financing

159,108


2.4

%


144,250


2.2

%


114,509


1.6

%


24,157


0.4

%

Total commercial loans

1,803,411


27.5

%


1,846,642


27.7

%


1,686,357


24.0

%


1,242,231


20.8

%

Total loans held-for-investment

$

6,550,257


100.0

%


$

6,659,538


100.0

%


$

7,038,587


100.0

%


$

5,975,134


100.0

%

 

Allowance for Loan Losses
(Dollars in thousands)
(Unaudited)


For the Three Months Ended


For the Six Months Ended


June 30, 2012


March 31, 2012


June 30, 2011


June 30, 2012


June 30, 2011

Beginning balance

$

281,000



$

318,000



$

271,000



$

318,000



$

274,000


Provision for loan losses

58,428



114,673



48,384



173,101



76,693


Charge-offs










Consumer loans:










Residential first mortgage

(22,570)



(95,432)



(9,441)



(118,002)



(12,543)


Second mortgage

(4,057)



(5,283)



(6,138)



(9,340)



(11,916)


Warehouse lending





(288)





(288)


HELOC

(4,257)



(6,419)



(4,925)



(10,676)



(9,988)


Other

(728)



(1,190)



(507)



(1,918)



(1,346)


Total consumer loans

(31,612)



(108,324)



(21,299)



(139,936)



(36,081)


Commercial loans:










Commercial real estate

(31,277)



(45,033)



(25,957)



(76,310)



(45,246)


Commercial and industrial

(23)



(1,581)



(9)



(1,604)



(57)


Total commercial loans

(31,300)



(46,614)



(25,966)



(77,914)



(45,303)


Total charge-offs

(62,912)



(154,938)



(47,265)



(217,850)



(81,384)


Recoveries










Consumer loans:










Residential first mortgage

6,582



550



342



7,132



827


Second mortgage

1,039



249



344



1,288



1,210


Warehouse lending









5


HELOC

93



257



443



350



929


Other

395



212



290



607



529


Total consumer loans

8,109



1,268



1,419



9,377



3,500


Commercial loans:










Commercial real estate

2,344



1,992



462



4,336



1,191


Commercial and industrial

31



5





36




Total commercial loans

2,375



1,997



462



4,372



1,191


Total recoveries

10,484



3,265



1,881



13,749



4,691


Charge-offs, net of recoveries

(52,428)



(151,673)



(45,384)



(204,101)



(76,693)


Ending balance

$

287,000



$

281,000



$

274,000



$

287,000



$

274,000


Net charge-off ratio

3.24

%


8.99

%


3.15

%


6.18

%


2.64

%

 

 

Composition of Allowance for Loan Losses
(In thousands)
(Unaudited)

June 30, 2012

Collectively Evaluated Reserves (1)


Individually Evaluated

Reserves (2)


Total

Consumer loans:






Residential first mortgage

$

75,887



$

99,829



$

175,716


Second mortgage

14,654



5,429



20,083


Warehouse lending

1,556





1,556


HELOC

15,073



2,780



17,853


Other

2,502



83



2,585


Total consumer loans

109,672



108,121



217,793


Commercial loans:






Commercial real estate

48,703



9,704



58,407


Commercial and industrial

8,485



23



8,508


Commercial lease financing

2,292





2,292


Total commercial loans

59,480



9,727



69,207


Total allowance for loan losses

$

169,152



$

117,848



$

287,000


March 31, 2012






Consumer loans:






Residential first mortgage

$

73,092



$

85,569



$

158,661


Second mortgage

15,724



3,343



19,067


Warehouse lending

1,824





1,824


HELOC

14,760



18



14,778


Other

2,593





2,593


Total consumer loans

107,993



88,930



196,923


Commercial loans:






Commercial real estate

52,410



19,060



71,470


Commercial and industrial

2,654





2,654


Commercial lease financing

9,953





9,953


Total commercial loans

65,017



19,060



84,077


Total allowance for loan losses

$

173,010



$

107,990



$

281,000


(1)

Represents loans collectively evaluated for impairment in accordance with ASC 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for unimpaired loans.

(2)

Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.


 

Non-Performing Loans and Assets
(Dollars in thousands)
(Unaudited)


June 30, 2012


March 31, 2012


December 31, 2011


June 30, 2011

Non-performing loans held-for-investment

$

431,599



$

406,583



$

488,367



$

403,381


Real estate and other non-performing assets, net

107,235



108,686



114,715



110,050


Non‑performing assets held-for-investment, net

538,834



515,269



603,082



513,431


Non-performing loans available-for-sale

2,430



2,842



4,573



5,341


Total non-performing assets including loans

available-for-sale

$

541,264



$

518,111



$

607,655



$

518,772


Ratio of non‑performing loans held-for-

investment to loans held-for-investment

6.59

%


6.11

%


6.94

%


6.75

%

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

3.75

%


3.67

%


4.43

%


4.10

%

 

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

June 30, 2012






Consumer loans (1)

$

62,123


$

24,762


$

293,474


$

380,359


$

4,746,846


Commercial loans (1)

1,719


2,345


138,125


142,189


1,803,411


Total loans

$

63,842


$

27,107


$

431,599


$

522,548


$

6,550,257


March 31, 2012






Consumer loans (1)

$

67,719


$

39,133


$

314,232


$

421,084


$

4,812,896


Commercial loans (1)

11,133


8,802


92,351


112,286


1,846,642


Total loans

$

78,852


$

47,935


$

406,583


$

533,370


$

6,659,538


December 31, 2011






Consumer loans (1)

$

83,670


$

41,602


$

387,362


$

512,634


$

5,352,230


Commercial loans (1)

7,464


12,385


101,005


120,854


1,686,357


Total loans

$

91,134


$

53,987


$

488,367


$

633,488


$

7,038,587


June 30, 2011






Consumer loans (1)

$

91,185


$

46,082


$

298,751


$

436,018


$

4,732,903


Commercial loans (1)

1,392


187


104,630


106,209


1,242,231


Total loans

$

92,577


$

46,269


$

403,381


$

542,227


$

5,975,134


(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.


Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)


For the Three Months Ended


June 30, 2012


March 31, 2012


June 30, 2011

Description

(000's)

bps


(000's)

bps


(000's)

bps

Valuation gain (loss):









Value of interest rate locks

$

64,123


50



$

(2,700)


(2)



$

(2,860)


(7)


Value of forward sales

(47,126)


(37)



43,810


40



(3,657)


(8)


Fair value of loans held-for-sale

176,741


138



121,066


112



82,760


190


LOCOM adjustments on loans held-for-investment




(21)




46



Total valuation gains

193,738


151



162,155


150



76,289


175











Sales gains (losses):









Marketing gains, net of adjustments

180,691


141



131,512


121



21,865


50


Pair-off (losses) gains

(156,120)


(122)



(83,763)


(77)



(56,952)


(131)


Provision for representation and warranty reserve

(5,643)


(4)



(5,051)


(5)



(1,375)


(3)


Total sales gains

18,928


15



42,698


39



(36,462)


(84)


Total gain on loan sales and securitizations

$

212,666


166



$

204,853


189



$

39,827


91


Total mortgage rate lock commitments

$

17,534,000




$

14,867,000




$

6,441,000



Total loan sales and securitizations

$

12,777,311




$

10,829,798




$

4,362,518



 

 

Gain on Loan Sales and Securitizations
(Dollars in thousands)
(Unaudited)


For the Six Months Ended


June 30, 2012


June 30, 2011

Description

(000's)

bps


(000's)

bps

Valuation gain (loss):






Value of interest rate locks

$

61,423


26



$

(3,476)


(3)


Value of forward sales

(3,316)


(1)



(44,018)


(43)


Fair value of loans held-for-sale

297,805


126



127,082


124


LOCOM adjustments on loans held-for-investment

(21)




16



Total valuation gains

355,891


151



79,604


78








Sales gains (losses):






Marketing gains, net of adjustments

312,203


133



22,616


22


Pair-off (losses) gains

(239,883)


(102)



(8,494)


(8)


Provision for representation and warranty reserve

(10,693)


(5)



(3,714)


(4)


Total sales gains

61,627


26



10,408


10


Total gain on loan sales and securitizations

$

417,518


177



$

90,012


88


Total mortgage rate lock commitments

$

32,401,000




$

11,956,000



Total loan sales and securitizations

$

23,607,109




$

10,192,026



 

 

Average Balances, Yields and Rates
(Dollars in thousands)
(Unaudited)


For the Three Months Ended


June 30, 2012


March 31, 2012


June 30, 2011


Average Balance

Annualized

Yield/Rate


Average Balance

Annualized

Yield/Rate


Average Balance

Annualized

Yield/Rate

Interest-Earning Assets:


Loans held-for-sale

$

2,977,233


3.91

%


$

2,393,725


4.05

%


$

1,509,692


4.72

%

Loans repurchased with government guarantees

2,067,022


3.36

%


2,022,338


3.38

%


1,752,817


3.03

%

Loans held-for-investment:









Consumer loans (1)

4,635,259


4.38

%


4,990,828


4.33

%


4,551,266


4.59

%

Commercial loans (1)

1,835,897


3.97

%


1,755,917


4.21

%


1,211,284


4.85

%

Loans held-for-investment

6,471,156


4.27

%


6,746,745


4.30

%


5,762,550


4.65

%

Securities classified as available-for-sale or trading

642,389


4.27

%


786,275


4.36

%


724,694


4.94

%

Interest-earning deposits and other

785,437


0.24

%


691,585


0.24

%


1,548,231


0.25

%

Total interest-earning assets

12,943,237


3.80

%


12,640,668


3.89

%


11,297,984


3.82

%

Other assets

1,571,239




1,566,508




1,612,293



Total assets

$

14,514,476




$

14,207,176




$

12,910,277



Interest-Bearing Liabilities:









Demand deposits

$

361,916


0.24

%


$

346,542


0.26

%


$

409,663


0.33

%

Savings deposits

1,829,592


0.75

%


1,610,197


0.83

%


1,182,145


0.79

%

Money market deposits

482,296


0.49

%


486,907


0.54

%


579,361


0.73

%

Certificate of deposits

3,113,134


1.27

%


3,084,884


1.35

%


3,002,363


1.81

%

Total retail deposits

5,786,938


0.98

%


5,528,530


1.06

%


5,173,532


1.34

%

Demand deposits

95,805


0.49

%


98,724


0.49

%


66,549


0.55

%

Savings deposits

272,119


0.56

%


270,601


0.57

%


433,642


0.65

%

Certificate of deposits

361,315


0.66

%


392,656


0.66

%


237,600


0.67

%

Total government deposits

729,239


0.60

%


761,981


0.61

%


737,791


0.65

%

Wholesale deposits

339,018


3.78

%


357,532


3.74

%


741,024


3.46

%

Total deposits

6,855,195


1.07

%


6,648,043


1.15

%


6,652,347


1.50

%

FHLB advances

3,996,527


2.76

%


4,097,630


2.69

%


3,400,202


3.56