Flagstar Reports Fourth Quarter and Full Year 2011 Results Delivers Substantially Improved Results for 2011

TROY, Mich., Jan. 24, 2012 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) (the "Company"), the holding company for Flagstar Bank, FSB (the "Bank"), today reported a fourth quarter 2011 net loss applicable to common stockholders of $(44.9) million, as compared to a third quarter 2011 net loss of $(14.2) million and a fourth quarter 2010 net loss of $(192.1) million. The full year 2011 net loss applicable to common stockholders was $(165.6) million, compared to a full year 2010 net loss of $(393.6) million.  

"Our results for the fourth quarter and full year 2011 reflect near-record revenues from our mortgage banking business, significant growth in net interest margin, de-risking of our balance sheet through building of reserves, and the benefits of our continuing transition to a full-service commercial bank.  While our 2011 results were negatively impacted by a challenging operating environment, we remain well capitalized with significant liquidity and look forward to delivering improved results in 2012," commented Joseph P. Campanelli, Chairman of the Board, President and CEO.

Campanelli continued, "I am proud of all that we have been able to accomplish this year.  During the fourth quarter, we transitioned to a new regulatory agency, made significant enhancements and investments in our mortgage loan servicing area, and successfully completed the divestitures of our retail branches in the Indiana and Georgia markets."            

Fourth Quarter and Full Year 2011 Highlights:

  • Fourth quarter 2011 pre-tax, pre-credit cost income of $131.6 million increased 28.4 percent sequentially (see non-GAAP reconciliation).

  • Credit-related costs of $173.2 million in the fourth quarter 2011, as compared to $111.7 million in the third quarter 2011 (see non-GAAP reconciliation).
    • Increased allowance for loan losses by $36.0 million in the fourth quarter 2011 from prior quarter and representation and warranty reserve by $35.0 million from prior quarter, for a total increase in reserves of $71.0 million.

  • Maintained strong capital and liquidity levels at December 31, 2011:
    • Tier 1 capital ratio of 9.19 percent.
    • Cash and cash equivalents of $731.1 million, in addition to approximately $244.0 million in liquidity in the form of unencumbered marketable securities and over $550 million in unused borrowing capacity at the Federal Home Loan Bank.

  • Generated strong revenues from mortgage banking operations in the fourth quarter 2011:
    • Gain on loan sale income increased from the prior quarter to $106.9 million (margin of 102 basis points).
    • Net servicing revenue (includes loan administration and gain (loss) on trading securities) increased 71.3 percent from the prior quarter to $29.0 million.
    • Net loan fees and charges increased 55.6 percent from the prior quarter to $28.6 million.
    • Residential first mortgage loan originations of $10.2 billion in fourth quarter 2011, increased by $3.3 billion, or 47.1 percent, from prior quarter.

  • Net interest margin continued to improve in the fourth quarter 2011:
    • Bank net interest margin of 2.43 percent, improved from 2.30 percent in prior quarter.
    • Bank average cost of funds declined from the prior quarter to 1.79 percent.  
    • Continued growth in average interest-earning assets and average retail core deposits (includes demand, savings and money market deposit accounts).

  • Continued emphasis on credit risk management, primarily associated with loans originated prior to 2009:
    • Converted residential first mortgage servicing system to a nationally recognized loan servicing platform in fourth quarter 2011.
    • Made significant investments and enhancements in residential first mortgage loan default servicing and loss mitigation in the fourth quarter 2011.

  • Completed previously announced sales of 27-branch retail bank franchise in Georgia and 22-branch retail bank franchise in Indiana, resulting in an aggregate net gain of $21.4 million (reported in net gain on sale of assets) in the fourth quarter 2011.

  • Full year 2011 net loss applicable to common stockholders improved by 57.9 percent from prior year.
    • Pre-tax, pre-credit cost income improved by $46.8 million, or 16.1 percent, from prior year (see non-GAAP reconciliation).
    • Total credit-related-costs decreased by $178.5 million from prior year (see non-GAAP reconciliation).
    • Bank net interest margin increased by 38 basis points from prior year.
    • Net servicing revenue (includes loan administration and gain (loss) on trading securities) increased by $26.5 million from prior year.

Fourth quarter 2011 net loss was $(0.08) per share (diluted) based on average shares outstanding of 555,360,000, as compared to a third quarter 2011 loss of $(0.03) per share (diluted) based on average shares outstanding of 554,489,000 and $(0.74) per share (diluted) based on average shares outstanding of 259,946,000 in the fourth quarter 2010.

For the full year 2011, net loss applicable to common stockholders was $(165.6) million, or $(0.30) per share (diluted) based on average shares outstanding of 554,343,000, a 57.9 percent improvement as compared to the full year 2010 loss of $(393.6) million, or $(2.44) per share (diluted) based on average shares of 161,565,000.

Georgia and Indiana Branch Sales

During the fourth quarter, the Company consummated the previously announced sales of the retail bank branch franchises in Indiana and Georgia to separate purchasers.  On December 2, 2011, the Company announced the completion of the sale of the 22-branch Indiana retail bank franchise to First Financial Bank, N.A., a wholly owned subsidiary of First Financial Bancorp.  On December 9, 2011, the Company announced the completion of the sale of the 27-branch Georgia retail bank franchise to PNC Bank, N.A., part of The PNC Financial Services Group, Inc.  The two transactions resulted in an aggregate net gain of $21.4 million.

Deferral of Dividend and Interest Payments

The Company intends to provide notice to the U.S. Department of the Treasury exercising its contractual rights to defer its regularly scheduled quarterly payments of dividends, beginning with February 2012 payments, on preferred stock issued and outstanding in connection with the Company's participation in the TARP Capital Purchase Program.  Under the terms of the preferred stock, the Company may defer payments of dividends for up to six quarters in total without default or penalty.

Concurrently, the Company intends to exercise its contractual rights to defer interest payments with respect to its trust preferred securities.  Under the terms of the related indentures, the Company may defer interest payments for up to 20 consecutive quarters without default or penalty.

At December 31, 2011, the Bank remained well capitalized.  However, the Company believes it is prudent capital stewardship to refrain from making further payments until the Company's financial condition improves.  These payments will be periodically evaluated and reinstated when appropriate, subject to provisions of the supervisory agreement currently in place with the Company.

Net Interest Income

Fourth quarter 2011 net interest income was $75.9 million, as compared to $65.6 million during the third quarter 2011.  The increase in net interest income from prior quarter was driven primarily by growth in average interest-earning assets and an improvement in funding costs on deposits and FHLB advances.  

Net interest margin for the Bank was 2.43 percent for the fourth quarter 2011, as compared to 2.30 percent for the third quarter 2011.  

Average interest-earning assets increased by 9.2 percent to $12.8 billion in the fourth quarter 2011, as compared to $11.7 billion in the third quarter 2011.  The increase from the prior quarter was reflective of growth in the average balances of the Company's targeted growth portfolios, primarily warehouse loans made to other mortgage-related entities, available-for-sale residential first mortgage loans and commercial loans. This growth offset the 15 basis point decline in average yield on interest-earning assets, primarily due to the decline in mortgage yields that arose from the U.S. Treasury 10-year rate declines during the fourth quarter 2011.

The average cost of funds for the fourth quarter 2011 was 1.81 percent, a 28 basis point improvement from the prior quarter and a 50 basis point improvement from fourth quarter 2010. The improvement was driven by a lower cost of deposits and a lower cost on FHLB advances from a full quarter's impact of the refinance of $1.0 billion of long-term FHLB advances that occurred at the end of the third quarter 2011.  

The average cost of deposits declined in the fourth quarter 2011 to 1.24 percent, compared to 1.37 percent in the third quarter 2011.  The decrease in the cost of deposits from prior quarter was primarily attributable to a more favorable mix of deposits and reduced reliance on wholesale borrowings, as well as to the sale of the associated deposits of the Georgia and Indiana branch sales, which had a higher average funding cost than the remaining deposits.  The funding outflow associated with the sale of the deposits was offset by growth in retail and government deposits and short term FHLB advances, both of which provided lower funding costs.

Non-interest Income

Fourth quarter 2011 non-interest income was $118.6 million, as compared to $112.6 million for the third quarter 2011.  Excluding the representation and warranty reserve – change in estimate, non-interest income was $187.9 million in the fourth quarter 2011, compared to $151.5 million in the third quarter 2011.  The increase in non-interest income from the prior quarter was attributable to increases in gain on loan sale income, loan fees and charges, and net servicing revenues, and an aggregate net gain from the sale of the Indiana and Georgia retail bank franchises.

Fourth quarter 2011 gain on loan sales totaled $106.9 million, compared to $103.9 million for the third quarter 2011.  The increase from the prior quarter was a result of increased residential first mortgage originations and continued strong margin on the sales of those originations, as well as a reduction in overall hedging costs.  Residential first mortgage originations, which are principally comprised of agency-eligible residential first mortgages, increased to $10.2 billion during the fourth quarter 2011, from $6.9 billion in the third quarter 2011.  Loan sales also increased for the fourth quarter 2011 to $10.5 billion, as compared to $6.8 billion for the third quarter 2011.  

Gain on loan sale margin, which is calculated based on mortgage rate lock commitments and actual loan sales, net of sales expenses and hedging costs, decreased to 1.02 percent for the fourth quarter 2011, as compared to 1.53 percent for the third quarter 2011.  Mortgage rate lock commitments decreased to $11.2 billion during the fourth quarter 2011, as compared to $13.1 billion during the third quarter 2011.  

Loan fees and charges increased to $28.6 million in the fourth quarter 2011, compared to $18.4 million in the third quarter 2011, based on increased originations during the quarter.

Net servicing revenue, which is the combination of net loan administration income (including the off-balance hedges of mortgage servicing rights) and the gain (loss) on trading securities (the on-balance sheet hedges of mortgage servicing rights), increased to $29.0 million during fourth quarter 2011, as compared to $16.9 million during third quarter 2011.  The increase from the prior quarter was primarily attributable to hedge positioning, along with reduced rate volatility, and an increase in servicing fee income associated with a larger servicing portfolio that arose from the increased loan sales activity during the quarter.

Non-interest Expense

Fourth quarter non-interest expense was $172.5 million, compared to $150.7 million in the third quarter 2011.  Excluding asset resolution expense, non-interest expense was $140.1 million in the fourth quarter 2011, compared to $116.2 million in the third quarter 2011.  The increase from the prior quarter was primarily driven by increased compensation and commissions related to the growth in the mortgage banking business, including mortgage servicing operations, and an increase in consulting fees related to improvements in mortgage servicing and other banking operations.  The efficiency ratio, as adjusted to exclude credit related costs, improved to 53.1 percent during the fourth quarter 2011, as compared to 53.5 percent during the third quarter 2011 (see Non-GAAP reconciliation).

Compensation, benefits and commission expense increased to $74.2 million for the fourth quarter 2011, as compared to $65.4 million in third quarter 2011.  The increase in compensation, benefits and commission from prior quarter was driven primarily by a 47.1 percent increase in residential first mortgage loan origination volume as compared to the prior quarter.  

General and administrative expense increased to $34.4 million in the fourth quarter 2011, compared to $26.6 million in the third quarter 2011.  The increase from the prior quarter was primarily due to increased consulting fees associated with the enhancements made in the residential first mortgage loan default servicing and loss mitigation areas.  

Warrant expense was $0.1 million for the fourth quarter 2011, as compared to income of $(4.2) million in the third quarter 2011, reflecting the increase in the quarterly valuation of the outstanding warrant liability primarily due to the increase in the market price of the Company's common stock since the end of third quarter 2011.

Balance Sheet and Funding

Total assets at December 31, 2011 were $13.6 billion, as compared to $13.7 billion at September 30, 2011.  The decrease from prior quarter is the result of a decline in residential first mortgage loans held available-for-sale, as loan sales exceeded originations, partially offset by the growth in the mortgage servicing rights portfolio due to the loan sale activity.  The decline was also partially offset by growth in warehouse lending, which funds correspondents that also originate residential first mortgage loans, and growth in the commercial and industrial loan portfolio.  At the same time, interest-bearing deposits declined, as a result of the sale of deposits in the Georgia and Indiana branches, but such outflow was primarily offset by increases in lower-costing retail deposits from the Bank's branch network and by increases in low-cost short-term FHLB advances.

The Company funds its loans primarily with deposits obtained through its community banking branches and its internet banking platform, as well as deposits obtained from municipalities and investment banking firms.  Funds are also obtained from time to time through loan repayments and sales of loans and securities in the ordinary course of business, advances from the FHLB in varying maturities depending upon current needs, community banking operations, customer escrow accounts and security repurchase agreements.  The Company relies upon several of these sources 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 December 31, 2011, the Bank had a collateralized $4.6 billion line of credit with the FHLB, of which $4.0 billion was advanced or borrowed, and $555.2 million remained as borrowing capacity.  The Company also had $731.1 million in cash on hand and interest-earning deposits (excluding other marketable securities).

Credit Related Costs and Asset Quality

Credit related costs consist primarily of loan loss provision expense, representation and warranty reserve – change in estimate, asset resolution expense and impairment on investment securities available-for-sale.  Fourth quarter 2011 credit related costs totaled $173.2 million, as compared to $111.7 million for the third quarter 2011 (see Non-GAAP reconciliation).  The increase from the prior quarter includes $71.0 million in increases to the allowance for loan losses and representation and warranty reserve, and is reflective of the Company's emphasis on improving credit risk management through continued loan modifications and meaningful loss mitigation activities associated with loans originated prior to 2009.  In addition, the increase in the representation and warranty reserve – change in estimate reflects the continued but abating level of loan repurchase requests received from government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac, and the response to matters prolonged by negative influences on housing values and mortgage finance.  

Fourth quarter 2011 loan loss provision expense was $63.5 million, as compared to $36.7 million in third quarter 2011. The increase from the prior quarter reflects a $36.0 million increase in the allowance for loan losses, due to increased loss rates arising from loan modification activity and updating of historical loss rates.  

Allowance for loan losses at December 31, 2011 was $318.0 million, or 4.5 percent of loans held-for-investment and 65.1 percent of non-performing loans held-for-investment, as compared to $282.0 million, or 4.1 percent of loans held-for-investment and 63.4 percent of non-performing loans held-for-investment at September 30, 2011.  

Total non-performing loans (i.e., loans 90 days or more past due and matured loans) increased to $488.4 million at December 31, 2011, compared to $444.9 million at September 30, 2011.  The increase from the prior quarter was primarily due to a $31.9 million increase in residential first mortgage performing troubled debt restructurings ("TDRs"), which are loan modifications that must be classified as non-performing during the first six months following the modification date, and an $8.5 million increase in commercial real estate non-performing loans.  Excluding performing TDRs, residential first mortgage non-performing loans remained relatively flat from the prior quarter.  The Company classifies residential first mortgage performing TDRs as non-performing loans until the loans have performed for six consecutive months following the modification date.  The increase in the level of performing TDRs from prior quarter is consistent with the Company's enhanced loan modification efforts.  

Non-performing commercial loans increased by $8.5 million to $101.0 million in the fourth quarter 2011, as compared to the $92.5 million in the third quarter 2011.  The increase from the prior quarter was primarily driven by four new delinquent commercial real estate loans with an average size of $2.2 million.  Loan loss provision expense related to the commercial real estate portfolio increased to $13.4 million in the fourth quarter 2011, compared to $11.4 million in the third quarter 2011.  

The Company maintains a representation and warranty reserve on the balance sheet, which reflects the estimate of probable losses it may incur on loans which have been sold or securitized into the secondary market, primarily to the GSEs.  In the fourth quarter 2011, provisions related to that representation and warranty reserve were $69.3 million, as compared to $39.0 million in the third quarter 2011.  

During the fourth quarter, the Company made refinements to the process for estimating the representation and warranty reserve, due primarily to changes in counterparty activity and our ability to estimate forecasted repurchase demands over the expected period of repurchase exposure.

Prior repurchase requests from the GSEs were largely concentrated in foreclosed loans. Recent repurchase requests have been more heavily weighted towards loans that are currently delinquent but for which the foreclosure sale has yet to occur, which the Company believes is an indication of acceleration of repurchase demands on a relatively static population by the GSEs.        

As a result of these refinements, we recorded a $35.0 million increase in our representation and warranty reserve in the fourth quarter.  As of December 31, 2011, the representation and warranty reserve was $120.0 million, as compared to $85.0 million as of September 30, 2011.  

Asset resolution expense, which includes expenses associated with foreclosed properties (including the foreclosure claims in process with Ginnie Mae), decreased slightly to $32.4 million in the fourth quarter 2011, as compared to $34.5 million in the third quarter of 2011.    

During the fourth quarter 2011, the Company recorded an impairment on investment securities available-for-sale of $(7.1) million, as compared to $(1.3) million during the third quarter 2011.  The impairment losses during the fourth quarter 2011 relate to expected future credit losses in securities backed by prime mortgage collateral. Management believes the deterioration in performance of the collateral underlying the securities is a result of continued macroeconomic weakness and continued declines in home prices.  

Capital

The Bank remained "well-capitalized" for regulatory purposes at December 31, 2011, with regulatory capital ratios of 9.19 percent for Tier 1 capital and 17.07 percent for total risk-based capital.  During the fourth quarter 2011, the Company invested $18.0 million in the Bank as capital, thereby providing cushion to ensure sufficient capital to effectively manage on-going business opportunities.  At December 31, 2011, the Company had an equity-to-assets ratio of 8.16 percent.

Earnings Conference Call

As previously announced, the Company's quarterly earnings conference call will be held on Wednesday, January 25, 2012 from 11:00 a.m. until 12:00 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 Web site, 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 (866) 294-1212 toll free or (702) 696-4911 and use passcode: 40653036.

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 $13.6 billion in total assets at December 31, 2011, Flagstar is the largest publicly held savings bank headquartered in the Midwest.  As of December 31, 2011, Flagstar operated 113 branches in Michigan, 27 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 www.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 reconcilement 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, the result of improvements to the Company's servicing processes, the suspension of dividend payments on preferred stock, the deferral of interest payments on trust preferred securities, and other similar matters.  For a further discussion of the factors that may cause actual results to differ materially from current expectations, please review the Company's filings with the Securities and Exchange Commission ("SEC"), including but not limited to, our Forms 10-K and 10-Q.  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)



December 31,

2011


September 30,

2011


December 31,

2010

Assets




   Cash and cash items

$

49,715


$                       63,288


$                   60,039


   Interest-earning deposits


681,343


839,510


893,495


        Cash and cash equivalents


731,058


902,798


953,534


   Securities classified as trading


313,383


312,766


160,775


   Securities classified as available-for-sale


481,352


521,259


475,225


   Loans available-for-sale

        ($1,629,618, $1,939,780, and $2,343,638 at fair value at

        December 31, 2011, September 30, 2011, and December 31, 2010,

        respectively)


1,800,885


2,080,926


2,585,200


   Loans repurchased with government guarantees


1,899,267


1,745,974


1,674,752


   Loans held-for-investment ($22,651, $22,787, and $19,011 at fair value

        at December 31, 2011, September 30, 2011, and December 31, 2010,

        respectively)


7,038,587


6,821,737


6,305,483


        Less: allowance for loan losses


(318,000)


(282,000)


(274,000)


        Loans held-for-investment, net


6,720,587


6,539,737


6,031,483


            Total interest-earning assets


11,896,817


12,040,172


11,820,930


   Accrued interest receivable


105,200


100,442


83,893


   Repossessed assets, net


114,715


113,365


151,085


   Federal Home Loan Bank stock


301,737


301,737


337,190


   Premises and equipment, net


203,578


250,674


232,203


   Mortgage servicing rights at fair value


510,475


437,338


580,299


   Other assets


455,236


427,013


377,865


            Total assets

$

13,637,473


$                 13,734,029


$            13,643,504


Liabilities and Stockholders' Equity








   Deposits

$

7,689,988


$                   8,128,258


$              7,998,099


   Federal Home Loan Bank advances


3,953,000


3,615,000


3,725,083


   Long-term debt


248,585


248,585


248,610


           Total interest-bearing liabilities


11,891,573


11,991,843


11,971,792


   Accrued interest payable


8,723


8,452


12,965


   Representation and warranty reserve


120,000


85,000


79,400


   Other liabilities


504,161


489,395


319,684


           Total liabilities


12,524,457


12,574,690


12,383,841


   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 December 31, 2011, September 30, 2011, and

      December 31, 2010, respectively


254,732


253,344


249,196







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

      555,775,639, 555,015,011, and 553,313,113 shares issued and

      outstanding at December 31, 2011, September 30, 2011, and

      December 31, 2010, respectively


5,558


5,550


5,533


   Additional paid in capital


1,466,461


1,465,554


1,461,373


   Accumulated other comprehensive loss


(7,819)


(4,074)


(16,165)


   Retained earnings (accumulated deficit)


(605,916)


(561,035)


(440,274)


           Total stockholders' equity


1,113,016


1,159,339


1,259,663


           Total liabilities and stockholders' equity

$

13,637,473


$                 13,734,029


$            13,643,504





Flagstar Bancorp, Inc.

Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)



For the Three Months Ended


For the Years Ended


December 31,

2011


September 30,

2011


December 31,

2010


December 31,

2011


December 31,

2010

Interest Income










Loans

$                    116,790


$                  109,966


$                    120,700


$                   427,022


$                     474,769

Securities classified as available-for-sale or trading

8,929


9,626


8,763


35,602


55,832

Interest-earning deposits and other

426


433


549


2,785


2,180

   Total interest income

126,145


120,025


130,012


465,409


532,781

Interest Expense










Deposits

20,944


22,679


31,015


95,546


154,692

FHLB advances

27,646


30,121


31,209


117,963


154,964

Security repurchase agreements

-


-


-


-


2,750

Other

1,692


1,611


1,652


6,527


9,712

   Total interest expense

50,282


54,411


63,876


220,036


322,118

Net interest income

75,863


65,614


66,136


245,373


210,663

Provision for loan losses

63,548


36,690


225,375


176,931


426,353

Net interest income (expense) after provision

     for loan losses

12,315


28,924


(159,239)


68,442


(215,690)

Non-Interest Income










Loan fees and charges

28,610


18,383


28,605


77,843


89,535

Deposit fees and charges

6,332


7,953


7,385


29,629


32,181

Loan administration

28,295


(3,478)


28,269


94,604


12,679

Gain (loss) on trading securities

674


20,385


(173)


21,088


76,529

(Loss) gain on trading securities residuals

(847)


(186)


3,812


(5,673)


(7,847)

Net gain on loan sales

106,919


103,858


76,931


300,789


296,965

Net loss on sales of mortgage servicing rights

(2,823)


(2,587)


(2,303)


(7,903)


(6,977)

Net gain on securities available-for-sale

-


-


-


-


6,689

Net gain on sale of assets

21,379


1,041


-


22,676


-

   Total other-than-temporary impairment (loss) gain

(11,569)


51,003


12,801


(30,456)


43,600

   Gain (loss) recognized in other comprehensive

          income before taxes

4,437


(52,325)


(14,114)


6,417


(48,591)

Net impairment losses recognized in earnings

(7,132)


(1,322)


(1,313)


(24,039)


(4,991)

Representation and warranty reserve –

    change in estimate

(69,279)


(38,985)


(10,349)


(150,055)


(61,523)

Other fees and charges, net

6,493


7,489


5,599


26,557


20,440

   Total non-interest income

118,621


112,551


136,463


385,516


453,680

Non-Interest Expense










Compensation, commissions and benefits

74,162


65,426


66,009


264,056


237,955

Occupancy and equipment

19,448


17,083


17,614


70,117


65,284

Asset resolution

32,408


34,515


41,757


128,313


161,326

Federal insurance premiums

11,401


10,665


8,179


41,581


37,389

Other taxes

606


647


(481)


2,784


3,178

Warrant expense (income)

138


(4,202)


7,854


(6,889)


4,189

Loss on extinguishment of debt

-


-


-


-


20,826

General and administrative

34,374


26,557


21,568


101,418


80,552

   Total non-interest expense

172,537


150,691


162,500


601,380


610,699

Loss before federal income taxes

(41,601)


(9,216)


(185,276)


(147,422)


(372,709)

Provision for federal income taxes

264


264


2,104


1,056


2,104

Net Loss

(41,865)


(9,480)


(187,380)


(148,478)


(374,813)

Preferred stock dividend/accretion

(3,016)


(4,719)


(4,689)


(17,165)


(18,748)

Net loss applicable to common stockholders

$                   (44,881)


$                 (14,199)


$              (192,070)


$                  (165,643)


$                 (393,561)

Loss per share










      Basic

$                       (0.08)


$                     (0.03)


$                    (0.74)


$                        (0.30)


$                       (2.44)

      Diluted

$                       (0.08)


$                     (0.03)


$                    (0.74)


$                        (0.30)


$                       (2.44)




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 Years Ended

Summary of Consolidated

Statements of Operations

December 31,

2011


September 30, 2011


December 31, 2010


December 31,

2011


December 31,

2010


Return on average assets

(1.27)%


(0.43)%


(1.37)%


(1.24)%


(2.81)%

Return on average equity

(15.82)%


(4.90)%


(14.84)%


(13.97)%


(36.63)%

Efficiency ratio (1)

88.7%


84.6%


80.2%


95.3%


91.9%

Efficiency ratio (credit-adjusted) (1)

53.1%


53.5%


56.7%


60.6%


61.9%

Equity/assets ratio (average for the period)

8.02%


8.80%


9.20%


8.88%


7.66%

Residential first mortgage loans originated

$      10,187,100


$      6,926,451


$       9,164,615


$        26,612,800


$         26,560,810

Other loans originated

$           199,529


$         322,732


$            13,642


$             700,969


$                40,420

Mortgage loans sold and securitized

$      10,476,542


$      6,782,795


$       8,612,997


$        27,451,362


$         26,506,672

Interest rate spread – Bank only (2)

2.15%


2.02%


1.86%


1.86%


1.45%

Net interest margin – Bank only (3)

2.43%


2.30%


2.18%


2.13%


1.75%

Interest rate spread – Consolidated (2)

2.13%


2.01%


1.85%


1.85%


1.43%

Net interest margin – Consolidated (3)

2.37%


2.25%


2.12%


2.07%


1.67%

Average common shares outstanding

555,359,916


554,489,448


259,945,773


554,342,958


161,565,164

Average fully diluted shares outstanding

555,359,916


554,489,448


259,945,773


554,342,958


161,565,164

Average interest earning assets

$      12,752,968


$    11,677,994


$     12,437,610


$        11,803,669


$         12,522,640

Average interest paying liabilities

$      11,018,201


$    10,337,645


$     10,960,772


$        10,530,370


$         11,437,410

Average stockholder's equity

$        1,135,078


$      1,159,825


$       1,293,937


$          1,185,822


$           1,074,571

Charge-offs to average investment loans

      (annualized)

1.60%


1.83%


25.06%


2.14%


9.34%






December 31,

2011


September 30,

2011


December 31,

2010

Equity/assets ratio

8.16%


8.44%


9.23%

Core capital ratio (4)

9.19%


9.31%


9.61%

Total risk-based capital ratio (4)

17.07%


17.64%


18.55%

Book value per common share

$                  1.54


$                  1.63


$                   1.83

Number of common shares outstanding

555,775,639


555,015,011


553,313,113

Mortgage loans serviced for others

$       63,770,676


$       56,772,598


$        56,040,063

Weighted average service fee (bps)

30.8


30.5


30.8

Capitalized value of mortgage servicing rights

0.80%


0.77%


1.04%

Ratio of allowance for loan losses to non-

   performing loans held-for-investment (5)

65.1%


63.4%


86.1%

Ratio of allowance for loan losses to loans

   held-for-investment (5)

4.52%


4.13%


4.35%

Ratio of non-performing assets to total assets

   (bank only)

4.43%


4.09%


4.35%

Number of bank branches

113


162


162

Number of loan origination centers

27


29


27

Number of employees (excluding loan officers

  and account executives)

2,839


2,993


3,001

Number of loan officers and account executives

297


306


278









(1)  See Non-GAAP reconciliation.

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

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

(4)  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.  

(5)  Bank only and does not include non-performing loans available-for-sale






Loan Originations

(Dollars in thousands)

(Unaudited)



For the Three Months Ended



December 31,

2011


September 30,

2011


December 31,

2010

Consumer loans:









   Residential first mortgage

$      10,187,100

98.1%


$   6,926,451

97.6%


$     9,164,615

99.9%

   Other consumer (1)

3,033

-


4,338

0.1


1,022

-

Total consumer loans

10,190,133

98.1


6,930,789

97.7


9,165,637

99.9

Commercial loans (2)

196,496

1.9


318,394

2.3


12,440

0.1

     Total loan originations

$      10,386,629

100.0%


$   7,249,183

100.0%


$     9,178,077

100.0%





For the Years Ended


December 31,

2011


December 31,

2010

Consumer loans:






   Residential first mortgage

$      26,612,800

97.4%


$ 26,560,810

99.9%

   Other consumer (1)

11,024

0.1


3,068

-

Total consumer loans

26,623,824

97.5


26,563,878

99.9

Commercial loans (2)

689,945

2.5


37,352

0.1

     Total loan originations

$      27,313,769

100.0%


$ 26,601,230

100.0%




(1)  Other consumer loans include: second mortgage, construction, warehouse lending, HELOC and other consumer loans.

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




Loans Held-for-Investment

(Dollars in thousands)

(Unaudited)



December 31,

2011


September 30,

2011


December 31,

2010

Consumer loans:









Residential first mortgage and construction

$   3,749,821

53.1%


$   3,828,114

56.2%


$        3,792,712

60.2%

Second mortgage

138,912

2.0


146,501

2.1


174,789

2.8

Warehouse lending

1,173,898

16.7


995,663

14.6


720,770

11.4

HELOC

221,845

3.2


232,796

3.4


271,326

4.3

Other

67,754

1.0


73,127

1.1


86,710

1.4

   Total consumer loans

5,352,230

76.0


5,276,201

77.4


5,046,307

80.1

Commercial loans:









Commercial real estate

1,242,969

17.7


1,268,878

18.6


1,250,301

19.8

Commercial and industrial

330,099

4.7


234,148

3.4


8,875

0.1

Commercial lease financing

113,289

1.6


42,510

0.6


-

-

   Total commercial loans

1,686,357

24.0


1,545,536

22.6


1,259,176

19.9


    Total loans held-for-investment

$   7,038,587

100.0%


$   6,821,737

100.0%


$        6,305,483

100.0%




Composition of Mortgage Loans Held-for-Investment

(In thousands)

(Unaudited)



December 31, 2011


September 30, 2011


Portfolio Balance (1)


Allowance (1)


Portfolio Balance (1)


Allowance (1)

    Performing modified (TDR)

$                    496,187


$                     40,760


$                    488,981


$                   41,381

    Performing and not delinquent within

            last 36 months

1,996,563


27,788


2,160,067


25,752

    Performing with government

            insurance

99,142


-


104,240


-

    Other performing

844,490


30,276


801,269


37,287

    Non-performing - 90+ day delinquent

323,926


92,082


291,826


64,722

    Non-performing with government

           insurance

67,938


1,160


64,932


1,095

    30 day and 60 day delinquent

60,487


3,818


63,301


4,030

Total

$                 3,888,733


$                   195,884


$                 3,974,616


$                 174,267











December 31, 2010


Portfolio Balance (1)


Allowance (1)

    Performing modified (TDR)

$                    576,594


$                   46,857

    Performing and not delinquent within

            last 36 months

2,084,578


27,700

    Performing with government

            insurance

122,677


-

    Other performing

987,975


46,499

    Non-performing - 90+ day delinquent

76,572


19,786

    Non-performing with government

           insurance

56,587


1,915

    30 day and 60 day delinquent

62,518


4,866

Total

$                 3,967,501


$                 147,623





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




Composition of Commercial Loans Held-for-Investment

(In thousands)

(Unaudited)



December 31, 2011


  September 30, 2011


Portfolio Balance (1)


Allowance (1)


Portfolio Balance (1)


Allowance (1)

    Performing – not impaired

$                    1,308,000


$                    32,970


$                   1,197,714


$                    33,523

    Special mention – not impaired

153,795


12,016


145,524


10,322

    Impaired

125,650


32,944


107,477


27,712

    Non-performing – not impaired

2,928


97


173


4

    Non-performing

95,984


25,560


94,648


17,683

Total

$                    1,686,357


$                  103,587


$                   1,545,536


$                    89,244






December 31, 2010


Portfolio Balance (1)


Allowance (1)

    Performing – not impaired

$                    933,557


$                         33,699

    Special mention – not impaired

85,103


5,907

    Impaired

73,631


17,181

    Non-performing – not impaired

6,485


752

    Non-performing

160,400


39,847

Total

$                 1,259,176


$                         97,386


(1)  Includes commercial real estate, commercial and industrial, and commercial lease financing loans.





Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)



For the Three Months Ended


For the Years Ended


December 31,

2011


September 30, 2011


December 31, 2010


December 31,

2011


December 31,

2010


Beginning balance

$             282,000


$             274,000


$            474,000


$                 274,000


$              524,000

Provision for loan losses

63,548


36,690


225,375


176,931


426,353

Charge-offs










Consumer loans:










    Residential first mortgage

(19,042)


(11,233)


(359,720)


(41,140)


(473,614)

    Second mortgage

(2,672)


(4,629)


(5,907)


(19,217)


(27,846)

    Construction

-


-


(81)


(419)


(581)

    Warehouse lending

(562)


(272)


(254)


(1,122)


(2,154)

          HELOC

(3,515)


(3,477)


(4,551)


(16,980)


(21,495)

          Other

(916)


(1,208)


(1,283)


(4,729)


(5,583)

Total consumer loans

(26,707)


(20,819)


(371,796)


(83,607)


(531,273)

Commercial loans:










    Commercial real estate

(2,527)


(9,853)


(56,003)


(57,626)


(153,020)

    Commercial and industrial

-


(587)


(189)


(644)


(1,181)

Total commercial loans

(2,527)


(10,440)


(56,192)


(58,270)


(154,201)

Total charge-offs

(29,234)


(31,259)


(427,988)


(141,877)


(685,474)

Recoveries










Consumer loans:










    Residential first mortgage

400


756


652


1,650


2,506

    Second mortgage

65


371


612


1,646


1,806

    Construction

1


-


-


2


7

    Warehouse lending

-


-


72


5


516

          HELOC

57


524


489


1,510


1,531

          Other

319


423


430


1,603


1,615

Total consumer loans

842


2,074


2,255


6,416


7,981

Commercial loans:










    Commercial real estate

844


373


358


2,408


1,123

    Commercial and industrial

-


122


-


122


17

Total commercial loans

844


495


358


2,530


1,140

Total recoveries

1,686


2,569


2,613


8,946


9,121

Charge-offs, net of recoveries

(27,548)


(28,690)


(425,375)


(132,931)


(676,353)

Ending balance

$             318,000


$             282,000


$            274,000


$                 318,000


$              274,000

Net charge-off ratio

1.60%


1.83%


25.06%


2.14%


9.34%




Composition of Allowance for Loan Losses

As of December 31, 2011

(In thousands)

(Unaudited)



Collectively Evaluated
Reserves (1)


Individually Evaluated
Reserves (2)


Total

Consumer loans:






  Residential first mortgage

$                           66,073


$                        112,938


$                      179,011

  Second mortgage

11,928


4,738


16,666

  Construction

129


78


207

  Warehouse lending 

1,250


-


1,250

  HELOC

13,070


1,775


14,845

  Other

2,432


2


2,434

Total consumer loans

94,882


119,531


214,413

Commercial loans:






  Commercial real estate

43,839


53,145


96,984

  Commercial and industrial

1,178


-


1,178

  Commercial lease financing 

3,837


1,588


5,425

Total commercial loans

48,854


54,733


103,587

Total allowance for loan losses

$                         143,736


$                        174,264


$                      318,000




(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)



December 31,

2011


September 30,

2011


December 31,

2010

Non-performing loans held-for-investment

$               488,367


$           444,887


$             318,416

Real estate and other non-performing assets, net

114,715


113,365


179,557

Nonperforming assets held-for-investment, net

603,082


558,252


497,973

Non-performing loans available-for-sale

4,573


3,331


94,889

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

$               607,655


$           561,583


$             592,862

Ratio of nonperforming loans held-for-

    investment to loans held-for-investment

6.94%


6.52%


5.05%

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

4.43%


4.09%


4.35%




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, 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

September 30, 2011






Consumer loans (1)

$                       91,318

$                           46,023

$                       352,429

$                    489,770

$                     5,276,201

Commercial loans (1)

13,699

10,454

92,458

116,611

1,545,536

    Total loans

$                     105,017

$                           56,477

$                       444,887

$                    606,381

$                     6,821,737

December 31, 2010






Consumer loans (1)

$                     105,029

$                           46,907

$                       137,939

$                    289,875

$                     5,046,307

Commercial loans (1)

28,420

6,838

180,477

215,735

1,259,176

    Total loans

$                     133,449

$                           53,745

$                       318,416

$                    505,610

$                     6,305,483


(1)  Consumer loans include: residential first mortgage, second mortgage, construction, 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


December 31, 2011


September 30, 2011


December 31, 2010

Description

(000's)

bps


(000's)

bps


(000's)

bps

Valuation gain (loss):









    Value of interest rate locks

$          (19,033)

(18)


$             79,078

117


$            (36,144)

(42)

    Value of forward sales

17,793

17


(52,573)

(78)


54,938

64

    Fair value of loans available-for-sale

96,911

92


132,285

195


37,099

43

    LOCOM adjustments on loans held-for-

        investment

-

-


-

-


248

-

Total valuation gains

95,671

91


158,790

234


56,141

65










Sales gains (losses):









    Marketing gains, net of adjustments

73,560

70


94,942

140


26,748

31

    Pair-off gains (losses)

(58,831)

(56)


(148,078)

(218)


5,998

7

Provision for representation and warranty

     reserve

(3,481)

(3)


(1,796)

(3)


(11,956)

(14)

Total sales gains

11,248

11


(54,932)

(81)


20,790

24

Total gain on loan sales and securitizations

$           106,919

102


$           103,858

153


$               76,931

89

Total loan sales and securitizations

$      10,476,542



$        6,782,795



$          8,612,997







For the Years Ended


December 31, 2011


December 31, 2010

Description

(000's)

bps


(000's)

bps

Valuation gain (loss):






    Value of interest rate locks

$             56,569

21


$                 4,335

2

    Value of forward sales

(78,798)

(29)


8,056

3

    Fair value of loans available-for-sale

356,278

130


340,812

129

    LOCOM adjustments on loans held-for-

        investment

16

-


286

-

Total valuation gains

334,065

122


353,489

134







Sales gains (losses):






    Marketing gains, net of adjustments

191,118

69


106,760

39

    Pair-off gains (losses)

(215,402)

(78)


(114,778)

(43)

    Provision for representation and warranty

       reserve

(8,993)

(3)


(35,200)

(13)

Total sales gains

(33,277)

(12)


(56,524)

(22)

Total gain on loan sales and securitizations

$           300,788

110


$             296,965

112

Total loan sales and securitizations

$      27,451,362



$        26,506,672





Average Balances, Yields and Rates

(Dollars in thousands)

(Unaudited)



For the Three Months Ended


December 31, 2011


September 30, 2011


December 31, 2010


Average

Balance

Annualized

Yield/Rate


Average

Balance

Annualized

Yield/Rate


Average

Balance

Annualized

Yield/Rate

Interest-Earning Assets:





Loans available-for-sale

$        2,468,813

3.94%


$        2,041,173

4.35%


$        2,408,275

4.39%

Loans repurchased with

    government guarantees

1,849,827

3.44


1,790,464

3.34


1,664,049

2.82

Loans held-for-investment:









    Consumer loans (1)

5,288,088

4.37


4,857,771

4.54


5,477,833

4.84

    Commercial loans (1)

1,620,132

4.53


1,429,449

4.82


1,312,254

4.86

Loans held-for-investment

6,908,220

4.40


6,287,220

4.60


6,790,087

4.83

Securities classified as available-for-sale

    or trading

813,865

4.39


840,490

4.58


659,650

5.28

Interest-earning deposits and other

712,242

0.24


718,647

0.24


915,549

0.24

Total interest-earning assets

12,752,967

3.94


11,677,994

4.09


12,437,610

4.17

Other assets

1,401,566



1,503,828



1,620,474


Total assets

$      14,154,533



$      13,181,822



$      14,058,084


Interest-Bearing Liabilities:









        Demand deposits

$           382,419

0.29%


$           401,647

0.31%


$           391,972

0.42%

        Savings deposits

1,432,094

0.81


1,250,844

0.73


918,289

0.96

        Money market deposits

531,981

0.61


580,508

0.65


554,803

0.88

        Certificate of deposits

3,010,919

1.52


2,811,458

1.72


3,314,286

2.17

     Total retail deposits

5,357,413

1.15


5,044,457

1.24


5,179,350

1.68

        Demand deposits

82,278

0.52


84,114

0.54


161,056

0.28

        Savings deposits

379,959

0.60


485,815

0.65


313,394

0.65

        Certificate of deposits

407,386

0.60


289,063

0.54


274,820

0.80

     Total government deposits

869,623

0.60


858,992

0.60


749,270

0.63

     Wholesale deposits

464,104

3.47


657,557

3.41


987,189

3.15

  Total deposits

6,691,140

1.24


6,561,006

1.37


6,915,809

1.78

  FHLB advances

4,078,476

2.69


3,528,054

3.39


3,796,353

3.26

  Other

248,585

2.70


248,585

2.57


248,610

2.64

Total interest-bearing liabilities

11,018,201

1.81


10,337,645

2.09


10,960,772

2.31

Other liabilities

2,001,254



1,684,352



1,803,375


Stockholder's equity

1,135,078



1,159,825



1,293,937


Total liabilities and stockholder's equity

$      14,154,533



$      13,181,822



$      14,058,084



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



Average Balances, Yields and Rates

(Dollars in thousands)

(Unaudited)



For the Years Ended


December 31, 2011



December 31, 2010


Average

Balance

Annualized

Yield/Rate



Average

Balance

Annualized

Yield/Rate

Interest-Earning Assets:


Loans available-for-sale

$        1,928,339

4.31%



$        1,945,913

4.69%

Loans repurchased with

    government guarantees

1,784,927

3.19



1,307,070

2.68

Loans held-for-investment:







    Consumer loans (1)

4,830,127

4.58



5,776,292

4.84

    Commercial loans (1)

1,373,566

4.74



1,466,241

4.64

Loans held-for-investment

6,203,693

4.61



7,242,533

4.80

Securities classified as available-for-sale

    or trading

752,871

4.73



1,076,610

5.19

Interest-earning deposits and other

1,133,840

0.25



950,513

0.23

Total interest-earning assets

11,803,670

3.94



12,522,639

4.25

Other assets

1,544,924




1,507,533


Total assets

$      13,348,594




$      14,030,172


Interest-Bearing Liabilities:







        Demand deposits

$           397,988

0.33%



$           382,195

0.50%

        Savings deposits

1,236,105

0.81



761,416

0.92

        Money market deposits

561,943

0.69



560,237

0.92

        Certificate of deposits

3,001,587

1.75



3,355,041

2.71

     Total retail deposits

5,197,623

1.30



5,058,889

2.08

        Demand deposits

77,702

0.54



264,473

0.38

        Savings deposits

414,394

0.64



158,493

0.65

        Certificate of deposits

296,830

0.62



309,051

0.84

     Total government deposits

788,926

0.62



732,017

0.63

     Wholesale deposits

674,856

3.41



1,456,221

3.09

  Total deposits

6,661,405

1.43



7,247,127

2.13

  FHLB advances

3,620,368

3.26



3,849,897

4.03

  Security repurchase agreements

-

-



79,053

3.48

  Other

248,597

2.63



261,333

3.72

Total interest-bearing liabilities

10,530,370

2.09



11,437,410

2.82

Other liabilities

1,632,402




1,518,191


Stockholder's equity

1,185,822




1,074,571


Total liabilities and stockholder's equity

$      13,348,594




$      14,030,172



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



Non-GAAP Reconciliation

(Dollars in thousands)

(Unaudited)



For the Three Months Ended

For the Years Ended


December 31,

2011


September

30, 2011


December 31,

2010


December 31,

2011


December 31,

2010

Pre-tax, pre-credit-cost income










Loss before tax provision

$        (41,601)


$          (9,216)


$       (185,276)


$        (147,422)


$        (372,709)

Add back:










    Provision for loan losses

63,548


36,690


225,375


176,931


426,353

    Asset resolution

32,408


34,515


41,757


128,313


161,326

    Other than temporary impairment

          on AFS investments

7,132


1,322


1,313


24,039


4,991

     Representation and warranty          

        repurchase reserve – change

        in estimate

69,279


38,985


10,349


150,055


61,523

    Write down of residual interest

847


186


(3,812)


5,673


7,847

    Reserve increase for reinsurance

-


-


-


-


1,432

         Total credit-related-costs:

173,214


111,698


274,982


485,011


663,472

Pre-tax, pre-credit-cost income

$        131,613


$        102,482


$           89,706


$           337,589


$           290,763

Efficiency ratio (credit-adjusted)










Net interest income (a)

$          75,863


$            65,614


$           66,136


$           245,373


$           210,663

Non-interest income (b)

118,621


112,551


136,463


385,516


453,680

Less:  Representation and warranty  

   repurchase reserve – change in

   estimate reserve (d)

69,279


38,985


10,349


150,055


61,523

   Adjusted revenue

263,763


217,150


212,948


780,944


725,866

Non-interest expense (c)

172,537


150,691


162,500


601,380


610,699

Less: Asset resolution expense (e)

(32,408)


(34,515)


(41,757)


(128,313)


(161,326)

    Adjusted non-interest expense

$        140,129


$          116,176


$         120,743


$           473,067


$           449,373

Efficiency ratio (c/(a+b))

88.7%


84.6%


80.2%


95.3%


91.9%

Efficiency ratio (credit-adjusted)

    ((c-e)/((a+b)-d)))

53.1%


53.5%


56.7%


60.6%


61.9%














SOURCE Flagstar Bancorp, Inc.



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