Flagstar Bancorp Reports Third Quarter 2021 Net Income of $152 Million, or $2.83 Per Diluted Share

Published: Oct. 27, 2021 at 5:30 AM CDT

TROY, Mich., Oct. 27, 2021 /PRNewswire/ --

Key Highlights - Third Quarter 2021

  • Generated net interest income of $195 million, up $12 million from the prior quarter.
  • Produced mortgage revenue of $178 million -- sixth consecutive quarter over $150 million.
  • Grew capital significantly with total risk-based capital ratio increasing 42 basis points to 14.5 percent.
  • Delivered exceptional returns on average tangible common equity of 25.2 percent and on average assets of 2.2 percent.

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported third quarter 2021 net income of $152 million, or $2.83 per diluted share, compared to second quarter 2021 net income of $147 million, or $2.74 per diluted share, and third quarter 2020 net income of $222 million, or $3.88 per diluted share.

Flagstar reported year to date 2021 net income of $448 million, or $8.37 per diluted share, compared to year to date 2020 net income of $384 million, or $6.71 per diluted share.

On an adjusted basis, Flagstar reported net income of $156 million, or $2.94 per diluted share, for the third quarter 2021, compared to $146 million, or $2.73 per diluted share, for the second quarter 2021. Flagstar reported adjusted year to date 2021 net income of $478 million, or $8.92 per diluted share.

"Today we posted another quarter of outstanding earnings," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "Highlights include growth of net interest income with a stable net interest margin, steady growth in our servicing portfolio, and excellent mortgage results that were in line with our expectations.

"The results once again demonstrated the strength of all our key businesses. The increase in our net interest income, the discipline of our mortgage team to drive overall gain on sale revenues and capitalize on market opportunities to become the second-largest RMBS issuer in the country during the quarter, and the uptick in our servicing portfolio, all demonstrate how we can deliver strong results. We also excelled in expense discipline, lowering the efficiency ratio 6 percent and achieving positive operating leverage. This performance combined to produce a 6 percent growth in tangible book value, which now exceeds $47 per share, and a return on average assets of 2.2 percent -- our fifth consecutive quarter that return on average assets has exceeded 2 percent. Further, since the beginning of 2020, we have grown tangible book value by $18.64 per share -- a remarkable 63 percent.

"Credit quality remained high during the quarter, with just one charge-off and one credit going to non-accrual, for which we have a healthy reserve. Given our confidence in the quality of our portfolio and forecasts for an improving economic environment, we released $30 million of our allowance for credit losses. Even with this release, excluding warehouse loans, our coverage ratio was 2.3 percent.

"As we move closer to completing our previously announced partnership with New York Community Bank, we are well positioned with strong fundamentals and a demonstrated power to generate capital. Until then, we are focusing on ensuring a smooth transition and continuing to execute on the business plan that has served our shareholders so well and brought us to this pivotal point in the history of our company."

Income Statement Highlights






Three Months Ended


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020


(Dollars in millions, except per share data)

Net interest income

$

195


$

183


$

189


$

189


$

180


(Benefit) provision for credit losses

(23)


(44)


(28)


2


32


Noninterest income

266


252


324


332


448


Noninterest expense

286


289


347


314


301


Income before income taxes

198


190


194


205


295


Provision for income taxes

46


43


45


51


73


Net income

$

152


$

147


$

149


$

154


$

222








Income per share:






Basic

$

2.87


$

2.78


$

2.83


$

2.86


$

3.90


Diluted

$

2.83


$

2.74


$

2.80


$

2.83


$

3.88


Adjusted Income Statement Highlights (Non-GAAP)(1)






Three Months Ended


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020


(Dollars in millions, except per share data)

Net interest income

$

195


$

183


$

189


$

189


$

180


(Benefit) provision for credit losses

(23)


(44)


(28)


2


32


Noninterest income

266


252


324


332


448


Noninterest expense

281


290


312


314


301


Income before income taxes

203


189


229


205


295


Provision for income taxes

47


43


53


51


73


Net income

$

156


$

146


$

176


$

154


$

222








Income per share:






Basic

$

2.98


$

2.78


$

3.34


$

2.86


$

3.90


Diluted

$

2.94


$

2.73


$

3.31


$

2.83


$

3.88




(1)

See Non-GAAP Reconciliation for further information.

Key Ratios






Three Months Ended


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Net interest margin

3.00

%

2.90

%

2.82

%

2.78

%

2.78

%

Adjusted net interest margin (1)

3.04

%

3.06

%

3.02

%

2.98

%

2.94

%

Return on average assets

2.2

%

2.1

%

2.0

%

2.1

%

3.1

%

Return on average common equity

23.4

%

24.0

%

25.7

%

27.6

%

41.5

%

Efficiency ratio

62.2

%

66.6

%

67.7

%

60.4

%

47.9

%

HFI loan-to-deposit ratio

68.8

%

71.8

%

74.4

%

74.5

%

75.9

%

Adjusted HFI loan-to-deposit ratio (2)

60.3

%

64.3

%

66.3

%

69.8

%

74.8

%



(1)

Excludes loans with government guarantees available for repurchase. See Non-GAAP Reconciliation for further information.

(2)

Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.

Average Balance Sheet Highlights








Three Months Ended

% Change


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

25,656


$

25,269


$

27,178


$

27,100


$

25,738


2

%

%

Average loans held-for-sale (LHFS)

7,839


6,902


7,464


5,672


5,602


14

%

40

%

Average loans held-for-investment (LHFI)

13,540


13,688


14,915


15,703


14,839


(1)

%

(9)

%

Average total deposits

19,686


19,070


20,043


21,068


19,561


3

%

1

%

Net Interest Income

Net interest income in the third quarter was $195 million, an increase of $12 million, or 7 percent, as compared to the second quarter 2021. The results primarily reflect higher earning assets, the result of higher loans held-for-sale during the quarter. Average earning assets increased $0.4 billion, or 2 percent, as average loans held-for-sale increased $0.9 billion. Net interest income further benefited from a decrease in funding costs, partially offset by decreases in certain yields in the loans held-for-investment portfolio.

Net interest margin in the third quarter was 3.00 percent, a 10 basis point increase from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin decreased 2 basis points to 3.04 percent in the third quarter, compared to adjusted net interest margin of 3.06 percent in the prior quarter. This compression was largely attributable to pricing actions we took to maintain warehouse balances.  Retail banking deposit rates decreased 1 basis point primarily driven by the maturity of higher cost time deposits.

Average total deposits were $19.7 billion in the third quarter, up $0.6 billion, or 3 percent, from the second quarter 2021, largely due to $0.4 billion, or 20 percent, higher average government deposits resulting from seasonal tax collections and average retail deposits that increased $0.1 billion, or 1 percent. Average custodial deposits remained steady at $6.2 billion.

Provision for Credit Losses

The benefit for credit losses was $23 million for the third quarter, as compared to a $44 million benefit for the second quarter 2021, reflecting the performance of our portfolio and improved economic forecasts.

Noninterest Income

Noninterest income increased $14 million to $266 million in the third quarter, as compared to $252 million for the second quarter 2021, primarily due to higher mortgage revenues.

Third quarter net gain on loan sales increased $1 million, to $169 million, as compared to $168 million in the second quarter 2021. Gain on sale margins increased 15 basis points to 150 basis points for the third quarter 2021, compared to 135 basis points for the second quarter 2021. Fallout adjusted lock volume declined slightly, to $11.3 billion from $12.4 billion for the second quarter 2021.

Net return on mortgage servicing rights increased $14 million, to $9 million for the third quarter 2021, compared to a $5 million net loss for the second quarter 2021. This was driven by the improved valuation of our MSR portfolio at September 30, 2021.

Loan fees and charges decreased $4 million, to $33 million for the third quarter, compared to $37 million for the second quarter 2021, primarily due to a 2 percent decrease in mortgage loans closed.

Mortgage Metrics








As of/Three Months Ended

Change (% / bps)


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Seq

Yr/Yr


(Dollars in millions)



Mortgage rate lock commitments (fallout-
adjusted) (1) (2)

$

11,300


$

12,400


$

12,300


$

12,000


$

15,000


(9)%

(25)%

Mortgage loans closed (1)

$

12,500


$

12,800


$

13,800


$

13,100


$

14,400


(2)%

(13)%

Net margin on mortgage rate lock commitments
(fallout-adjusted) (2)

1.50

%

1.35

%

1.84

%

1.93

%

2.31

%

15

(81)

Net gain on loan sales

$

169


$

168


$

227


$

232


$

346


1%

(51)%

Net return (loss) on mortgage servicing rights
(MSR)

$

9


$

(5)


$


$


$

12


N/M

(25)%

Gain on loan sales + net return on the MSR

$

178


$

163


$

227


$

232


$

358


9%

(50)%

Loans serviced (number of accounts - 000's) (3)

1,203


1,182


1,148


1,085


1,105


2%

9%

Capitalized value of MSRs

1.08

%

1.00

%

1.06

%

0.86

%

0.85

%

8

23










N/M

Not meaningful








(1)

Rounded to the nearest hundred million

(2)

Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.

(3)

Includes loans serviced for Flagstar's own loan portfolio, serviced for others, and subserviced for others.

Noninterest Expense

Noninterest expense decreased to $286 million for the third quarter, compared to $289 million for the second quarter 2021. Excluding $5 million of merger costs in the third quarter of 2021 and $9 million of merger expenses in the second quarter 2021, and adjusting for the $10 million benefit from an agreement to reduce the 2009 former

CEO supplemental executive retirement plan liability in the second quarter 2021, noninterest expense decreased $9 million, or 3 percent. The decrease in noninterest expense primarily reflects lower commissions as mortgage loan closings decreased 2 percent compared to the prior quarter and seasonally lower benefit costs.

Mortgage expenses were $125 million for the third quarter, a decrease of $6 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings -- our mortgage expense ratio -- was 1.00 percent, a decrease of 3 basis points from the second quarter 2021.

The efficiency ratio was 62 percent for the third quarter, as compared to 67 percent for the second quarter 2021. Excluding $5 million of merger expenses in the third quarter 2021, and $9 million of merger expenses in the second quarter 2021, and adjusting for the $10 million benefit from an agreement to reduce the 2009 former CEO supplemental executive retirement plan liability in the second quarter 2021, the adjusted efficiency ratio was 61 percent and 67 percent, respectively.

Income Taxes

The third quarter provision for income taxes totaled $46 million, with an effective tax rate of 23.2 percent, compared to $43 million and an effective tax rate of 22.5 percent for the second quarter 2021. The prior quarter's effective tax rate benefited from deductions associated with restricted stock vesting in that quarter.

Asset Quality

Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Seq

Yr/Yr


(Dollars in millions)



Allowance for credit losses (1)

$

190


$

220


$

265


$

280


$

280


(14)%

(32)%

Credit reserves to LHFI

1.33

%

1.57

%

1.78

%

1.73

%

1.70

%

(24)

-37

Credit reserves to LHFI excluding warehouse

2.29

%

2.63

%

3.11

%

3.20

%

3.07

%

(34)

(78)

Net (recoveries) charge-offs

$

6


$

1


$

(13)


$

2


$

2


N/M

N/M

Total nonperforming LHFI and TDRs

$

96


$

75


$

60


$

56


$

45


28%

N/M

Net (recoveries) charge-offs to LHFI ratio (annualized)

0.19

%

0.01

%

(0.35)

%

0.04

%

0.05

%

18

14

Ratio of nonperforming LHFI and TDRs to LHFI

0.66

%

0.53

%

0.40

%

0.34

%

0.28

%

13

38









Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):



Residential first mortgage

%

0.16

%

0.31

%

0.11

%

0.07

%

(16)

(7)

Home equity and other consumer

0.01

%

0.15

%

0.16

%

0.06

%

0.23

%

(14)

(22)

Commercial real estate

0.03

%

%

(0.01)

%

%

(0.01)

%

3

4

Commercial and industrial

1.87

%

0.04

%

(4.12)

%

0.21

%

0.06

%

183

181

N/M - Not meaningful










(1)

Includes the allowance for loan losses and the reserve on unfunded commitments.

(2)

Excludes loans carried under the fair value option.

Our portfolio has held up well following the economic stress posed by the pandemic, resulting in net charge-offs of $6 million, or 19 basis points of LHFI in the third quarter 2021, primarily from one commercial borrower, compared to net charge-offs of $1 million, or 1 basis point in the prior quarter.

Nonperforming loans held-for-investment and troubled debt restructurings (TDRs) were $96 million and our ratio of nonperforming loans held-for-investment and TDRs to loans held-for-investment was 66 basis points at September 30, 2021, a 13 basis point increase compared to June 30, 2021. At September 30, 2021, early stage loan delinquencies totaled $14 million, or 10 basis points of total loans, compared to $12 million, or 9 basis points, at June 30, 2021.

The allowance for credit losses was $190 million and covered 1.33 percent of loans held-for-investment at September 30, 2021, a 24 basis point decrease from June 30, 2021. Excluding warehouse loans, the allowance coverage ratio was 2.29 percent, a 34 basis point decrease from June 30, 2021. The lower allowance for credit losses primarily reflects improvements in our economic forecasts and our evaluation of the performance of the LHFI portfolio as borrowers continue to recover from the economic stress caused by the pandemic. Overall, the portfolio quality has remained solid as shown by the relatively low levels of charge-offs, TDRs, nonperforming loans and early stage delinquencies.

Capital

Capital Ratios (Bancorp)


Change (% / bps)


September 30,

2021

June 30,

2021

March 31,

2021

December 31,

2020

September 30,

2020

Seq

Yr/Yr

Tier 1 leverage (to adj. avg. total assets)

9.72

%

9.21

%

8.11

%

7.71

%

8.04

%

51

168

Tier 1 common equity (to RWA)

11.95

%

11.38

%

10.31

%

9.15

%

9.21

%

57

274

Tier 1 capital (to RWA)

13.11

%

12.56

%

11.45

%

10.23

%

10.31

%

55

280

Total capital (to RWA)

14.55

%

14.13

%

13.18

%

11.89

%

11.29

%

42

326

Tangible common equity to asset ratio (1)

9.23

%

8.67

%

7.48

%

6.58

%

6.90

%

56

233

Tangible book value per share (1)

$

47.21


$

44.38


$

41.77


$

38.80


$

35.60


6%

33%





















(1)

See Non-GAAP Reconciliation for further information.

We maintained a solid capital position with regulatory ratios above current regulatory quantitative guidelines for "well capitalized" institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio -- the largest component of the our held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of historically low level of losses from this portfolio, coupled with the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, we would have had a Tier 1 common equity ratio of 13.91 percent and a total risk-based capital ratio of 16.94 percent at September 30, 2021.

Importantly, tangible book value per share grew to $47.21, up $2.83, or 6 percent from last quarter.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.0 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 84 retail locations in 28 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $272 billion of loans representing over 1.2 million borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Flagstar's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website at flagstar.com.

Cautionary Statements Regarding Forward-Looking Statements

Certain statements in this press release may constitute "forward–looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to New York Community Banks ("NYCB") and Flagstar's beliefs, goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; NYCB's and Flagstar's estimates of future costs and benefits of the actions each company may take; NYCB's and Flagstar's assessments of probable losses on loans; NYCB's and Flagstar's assessments of interest rate and other market risks; and NYCB's and Flagstar's ability to achieve their respective financial and other strategic goals.

Forward–looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.

Additionally, forward–looking statements speak only as of the date they are made; NYCB and Flagstar do not assume any duty, and do not undertake, to update such forward–looking statements. Furthermore, because forward–looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in such forward-looking statements as a result of a variety of factors, many of which are beyond the control of NYCB and Flagstar. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement among NYCB, 615 Corp. and Flagstar; the outcome of any legal proceedings that may be instituted against NYCB or Flagstar; the possibility that the proposed transaction will not close when expected or at all because required regulatory, or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated; the ability of NYCB and Flagstar to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of NYCB or Flagstar; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where NYCB and Flagstar do business; certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the proposed transaction within the expected timeframes or at all and to successfully integrate Flagstar's operations and those of NYCB; such integration may be more difficult, time consuming or costly than expected; revenues following the proposed transaction may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; NYCB's and Flagstar's success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by NYCB's issuance of additional shares of its capital stock in connection with the proposed transaction; and other factors that may affect future results of NYCB and Flagstar; and the other factors discussed in the "Risk Factors" section NYCB's Annual Report on Form 10–K for the year ended December 31, 2020 and in other reports NYCB files with the U.S. Securities and Exchange Commission (the "SEC"), which are available at http://www.sec.gov and in the "SEC Filings" section of NYCB's website, https://ir.mynycb.com, under the heading "Financial Information," and in Flagstar's Annual Report on Form 10-K for the year ended December 31, 2020 and in Flagstar's other filings with SEC, which are available at http://www.sec.gov and in the "Documents" section of Flagstar's website, https://investors.flagstar.com.

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition 

(Dollars in millions)

(Unaudited)



September 30,

2021


June 30,

2021


December 31,

2020


September 30,

2020

Assets








Cash

$

103



$

168



$

251



$

194


Interest-earning deposits

46



177



372



86


Total cash and cash equivalents

149



345



623



280


Investment securities available-for-sale

1,802



1,823



1,944



2,165


Investment securities held-to-maturity

236



270



377



440


Loans held-for-sale

6,378



6,138



7,098



5,372


Loans held-for-investment

14,268



14,052



16,227



16,476


Loans with government guarantees

1,945



2,226



2,516



2,500


Less: allowance for loan losses

(171)



(202)



(252)



(255)


Total loans held-for-investment and loans with government
guarantees, net

16,042



16,076



18,491



18,721


Mortgage servicing rights

340



342



329



323


Federal Home Loan Bank stock

377



377



377



377


Premises and equipment, net

370



374



392



410


Goodwill and intangible assets

149



152



157



160


Other assets

1,199



1,168



1,250



1,228


Total assets

$

27,042



$

27,065



$

31,038



$

29,476


Liabilities and Stockholders' Equity








Noninterest-bearing deposits

$

8,108



$

7,986



$

9,458



$

9,429


Interest-bearing deposits

11,228



10,675



10,515



10,516


Total deposits

19,336



18,661



19,973



19,945


Short-term Federal Home Loan Bank advances and other

1,870



2,095



3,900



2,226


Long-term Federal Home Loan Bank advances

1,400



1,200



1,200



1,200


Other long-term debt

396



396



641



493


Loan with government guarantee repurchase options

163



989



1,851



1,783


Other liabilities

1,232



1,226



1,272



1,634


Total liabilities

24,397



24,567



28,837



27,281


Stockholders' Equity








Common stock

1



1



1



1


Additional paid in capital

1,362



1,356



1,346



1,493


Accumulated other comprehensive income

38



45



47



46


Retained earnings

1,244



1,096



807



655


Total stockholders' equity

2,645



2,498



2,201



2,195


Total liabilities and stockholders' equity

$

27,042



$

27,065



$

31,038



$

29,476










Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)





Change compared to:


Three Months Ended


2Q21


3Q20


September 30,
2021

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$

209


$

198


$

208


$

212


$

206



$

11


6

%


$

3


1

%

Total interest expense

14


15


19


23


26



(1)


(7)

%


(12)


(46)

%

Net interest income

195


183


189


189


180



12


7

%


15


8

%

(Benefit) provision for
credit losses

(23)


(44)


(28)


2


32



21


(48)

%


(55)


N/M

Net interest income after
provision for credit losses

218


227


217


187


148



(9)


(4)

%


70


47

%

Noninterest Income












Net gain on loan sales

169


168


227


232


346



1


1

%


(177)


(51)

%

Loan fees and charges

33


37


42


48


41



(4)


(11)

%


(8)


(20)

%

Net return (loss) on the
mortgage servicing rights

9


(5)




12



14


N/M


(3)


(25)

%

Loan administration income

31


28


27


25


26



3


11

%


5


19

%

Deposit fees and charges

9


8


8


8


8



1


13

%


1


13

%

Other noninterest income

15


16


20


19


15



(1)


(6)

%



%

Total noninterest income

266


252


324


332


448



14


6

%


(182)


(41)

%

Noninterest Expense












Compensation and benefits

130


122


144


125


123



8


7

%


7


6

%

Occupancy and equipment

46


50


46


44


47



(4)


(8)

%


(1)


(2)

%

Commissions

44


51


62


70


72



(7)


(14)

%


(28)


(39)

%

Loan processing expense

22


22


21


24


20




%


2


10

%

Legal and professional
expense

12


11


8


11


9



1


9

%


3


33

%

Federal insurance premiums

6


4


6


5


6



2


50

%



%

Intangible asset
amortization

3


3


3


3


3




%



%

Other noninterest expense

23


26


57


32


21



(3)


(12)

%


2


10

%

Total noninterest expense

286


289


347


314


301



(3)


(1)

%


(15)


(5)

%

Income before income taxes

198


190


194


205


295



8


4

%


(97)


(33)

%

Provision for income taxes

46


43


45


51


73



3


7

%


(27)


(37)

%

Net income

$

152


$

147


$

149


$

154


$

222



$

5


3

%


$

(70)


(32)

%

Income per share












Basic

$

2.87


$

2.78


$

2.83


$

2.86


$

3.90



$

0.09


3

%


$

(1.03)


(26)

%

Diluted

$

2.83


$

2.74


$

2.80


$

2.83


$

3.88



$

0.09


3

%


$

(1.05)


(27)

%













Cash dividends declared

$

0.06


$

0.06


$

0.06


$

0.05


$

0.05



$


%


$

0.01


20

%

N/M - Not meaningful












Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)



Nine Months Ended


Change


September 30,

2021


September 30,

2020


Amount

Percent

Interest Income







Total interest income

$

614



$

608



$

6


1

%

Total interest expense

48



112



(64)


(57)

%

Net interest income

566



496



70


14

%

(Benefit) provision for credit losses

(95)



148



(243)


N/M

Net interest income after provision for credit losses

661



348



313


N/M

Noninterest Income







Net gain on loan sales

564



739



(175)


(24)

%

Loan fees and charges

112



102



10


10

%

Net return on the mortgage servicing rights

4



10



(6)


N/M

Loan administration income

85



59



26


44

%

Deposit fees and charges

26



24



2


8

%

Other noninterest income

51



44



7


16

%

Total noninterest income

842



978



(136)


(14)

%

Noninterest Expense







Compensation and benefits

396



341



55


16

%

Occupancy and equipment

141



132



9


7

%

Commissions

156



162



(6)


(4)

%

Loan processing expense

65



59



6


10

%

Legal and professional expense

32



20



12


60

%

Federal insurance premiums

16



19



(3)


(16)

%

Intangible asset amortization

8



10



(2)


(20)

%

Other noninterest expense

108



84



24


29

%

Total noninterest expense

922



827



95


11

%

Income before income taxes

581



499



82


16

%

Provision for income taxes

133



115



18


16

%

Net income

$

448



$

384



$

64


17

%

Income per share







Basic

$

8.48



$

6.76



$

1.72


25

%

Diluted

$

8.37



$

6.71



$

1.66


25

%








Cash dividends declared

$

0.18



$

0.15



$

0.03


20

%

N/M - Not meaningful







Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Nine Months Ended


September 30,

2021


June 30,

2021


September 30,

2020


September 30,

2021


September 30,

2020

Selected Mortgage Statistics (1):










Mortgage rate lock commitments (fallout-adjusted) (2)

$

11,300



$

12,400



$

15,000



$

36,000



$

40,000


Mortgage loans closed

$

12,500



$

12,800



$

14,400



$

39,100



$

35,200


Mortgage loans sold and securitized

$

12,400



$

14,000



$

14,500



$

40,100



$

34,900


Selected Ratios:










Interest rate spread (3)

2.84

%


2.70

%


2.44

%


2.70

%


2.41

%

Net interest margin

3.00

%


2.90

%


2.78

%


2.90

%


2.81

%

Net margin on loans sold and securitized

1.36

%


1.20

%


2.39

%


1.41

%


2.12

%

Return on average assets

2.16

%


2.09

%


3.15

%


2.08

%


1.97

%

Adjusted return on average assets (4)

2.21

%


2.08

%


3.15

%


2.22

%


1.97

%

Return on average common equity

23.40

%


23.97

%


41.54

%


24.32

%


25.71

%

Return on average tangible common equity (5)

25.18

%


25.92

%


45.42

%


24.65

%


28.58

%

Adjusted return on average tangible common equity (4) (5)

26.16

%


25.67

%


45.42

%


27.23

%


28.58

%

Efficiency ratio

62.2

%


66.6

%


47.9

%


65.5

%


56.1

%

Adjusted efficiency ratio (4)

61.1

%


66.8

%


47.9

%


62.8

%


56.1

%

Common equity-to-assets ratio (average for the period)

9.24

%


8.74

%


7.57

%


8.55

%


7.66

%

Average Balances:










Average interest-earning assets

$

25,656



$

25,269



$

25,738



$

26,029



$

23,535


Average interest-bearing liabilities

$

15,590



$

14,641



$

14,281



$

15,083



$

14,625


Average stockholders' equity

$

2,592



$

2,448



$

2,141



$

2,454



$

1,991




(1)

Rounded to nearest hundred million.

(2)

Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates. 

(3)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(4)

See Non-GAAP Reconciliation for further information.

(5)

Excludes goodwill, intangible assets and the associated amortization. See Non-GAAP Reconciliation for further information. 


September 30,

2021


June 30,

2021


December 31,

2020


September 30,

2020

Selected Statistics:








Book value per common share

$

50.04



$

47.26



$

41.79



$

38.41


Tangible book value per share (1)

$

47.21



$

44.38



$

38.80



$

35.60


Number of common shares outstanding

52,862,383



52,862,264



52,656,067



57,150,470


Number of FTE employees

5,461



5,503



5,214



4,871


Number of bank branches

158



158



158



160


Ratio of nonperforming assets to total assets (2)

0.37

%


0.30

%


0.21

%


0.17

%

Common equity-to-assets ratio

9.78

%


9.23

%


7.09

%


7.45

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

32.1



32.6



34.3



35.0


Capitalized value of mortgage servicing rights

1.08

%


1.00

%


0.86

%


0.85

%



(1)

Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.

(2)

Ratio excludes LHFS.

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Three Months Ended


September 30, 2021


June 30, 2021


September 30, 2020


Average Balance

Interest

Annualized

Yield/Rate


Average Balance

Interest

Annualized

Yield/Rate


Average Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

7,839


$

63


3.22%


$

6,902


$

53


3.05%


$

5,602


$

45


3.21%

Loans held-for-investment












Residential first mortgage

1,706


14


3.14%


1,887


15


3.27%


2,584


21


3.24%

Home equity

686


6


3.64%


748


7


3.64%


951


9


3.77%

Other

1,177


14


4.76%


1,101


13


4.80%


950


13


5.28%

Total consumer loans

3,569


34


3.77%


3,736


35


3.79%


4,485


43


3.78%

Commercial real estate

3,238


28


3.43%


3,093


26


3.37%


3,007


27


3.47%

Commercial and industrial

1,341


12


3.56%


1,449


14


3.72%


1,650


14


3.25%

Warehouse lending

5,392


52


3.76%


5,410


53


3.95%


5,697


56


3.92%

Total commercial loans

9,971


92


3.62%


9,952


93


3.74%


10,354


97


3.68%

Total loans held-for-investment

13,540


126


3.66%


13,688


128


3.75%


14,839


140


3.71%

Loans with government guarantees

2,046


8


1.61%


2,344


5


0.79%


2,122


5


0.89%

Investment securities

2,058


12


2.15%


2,123


12


2.19%


2,807


16


2.29%

Interest-earning deposits

173



0.18%


212



0.13%


368



0.11%

Total interest-earning assets

25,656


$

209


3.22%


25,269


$

198


3.12%


25,738


$

206


3.16%

Other assets

2,391





2,742





2,539




Total assets

$

28,047





$

28,011





$

28,277




Interest-Bearing Liabilities












Retail deposits












Demand deposits

$

1,603


$


0.05%


$

1,686


$


0.06%


$

1,824


$


0.09%

Savings deposits

4,144


2


0.14%


4,084


1


0.14%


3,675


3


0.34%

Money market deposits

840



0.08%


762



0.07%


733



0.09%

Certificates of deposit

1,038


1


0.50%


1,126


2


0.62%


1,672


8


1.62%

Total retail deposits

7,625


3


0.16%


7,658


3


0.18%


7,904


11


0.53%

Government deposits

2,148


1


0.17%


1,795


1


0.19%


1,403


1


0.35%

Wholesale deposits and other

1,342


3


0.99%


1,170


4


1.33%


953


4


1.77%

Total interest-bearing deposits

11,115


7


0.26%


10,623


8


0.31%


10,260


16


0.62%

Short-term FHLB advances and other

2,736


1


0.18%


2,422


1


0.17%


2,328


2


0.20%

Long-term FHLB advances

1,343


3


0.92%


1,200


3


1.03%


1,200


3


1.03%

Other long-term debt

396


3


3.16%


396


3


3.19%


493


5


4.52%

Total interest-bearing liabilities

15,590


14


0.38%


14,641


15


0.43%


14,281


26


0.72%

Noninterest-bearing deposits












Retail deposits and other

2,391





2,259





1,954




Custodial deposits (1)

6,180





6,188





7,347




Total noninterest-bearing deposits

8,571





8,447





9,301




Other liabilities

1,294





2,476





2,554




Stockholders' equity

2,592





2,448





2,141




Total liabilities and stockholders'
equity

$

28,047





$

28,012





$

28,277




Net interest-earning assets

$

10,066





$

10,628





$

11,457




Net interest income


$

195





$

183





$

180



Interest rate spread (2)



2.84%




2.70%




2.44%

Net interest margin (3)



3.00%




2.90%




2.78%

Ratio of average interest-earning assets to
interest-bearing liabilities



164.6

%




172.6

%




180.2

%

Total average deposits

$

19,686





$

19,070





$

19,561

































(1)

Approximately 80 percent of custodial deposits from loans subserviced for which LIBOR based fees are recognized as an offset in net loan administration income.  

(2)

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

(3)

Net interest margin is net interest income divided by average interest-earning assets.

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Nine Months Ended


September 30, 2021


September 30, 2020


Average Balance

Interest

Annualized

Yield/Rate


Average Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

7,403


$

169


3.04%


$

5,499


$

142


3.44%

Loans held-for-investment








Residential first mortgage

1,907


46


3.21%


2,822


72


3.40%

Home equity

751


20


3.59%


990


30


4.10%

Other

1,106


40


4.78%


882


36


5.47%

Total consumer loans

3,764


106


3.75%


4,694


138


3.94%

Commercial real estate

3,125


80


3.38%


3,019


90


3.90%

Commercial and industrial

1,425


39


3.60%


1,774


50


3.68%

Warehouse lending

5,729


170


3.91%


3,937


119


3.98%

Total commercial loans

10,279


289


3.71%


8,730


259


3.89%

Total loans held-for-investment

14,043


395


3.72%


13,424


397


3.91%

Loans with government guarantees

2,295


15


0.95%


1,267


12


1.23%

Investment securities

2,130


35


2.19%


3,094


56


2.40%

Interest-earning deposits

158



0.15%


251


1


0.56%

Total interest-earning assets

26,029


$

614


3.13%


23,535


$

608


3.42%

Other assets

2,672





2,457




Total assets

$

28,701





$

25,992




Interest-Bearing Liabilities








Retail deposits








Demand deposits

$

1,713


$

1


0.06%


$

1,737


$

4


0.33%

Savings deposits

4,058


4


0.14%


3,513


17


0.63%

Money market deposits

763



0.07%


712


1


0.17%

Certificates of deposit

1,152


6


0.71%


1,970


29


1.98%

Total retail deposits

7,686


11


0.20%


7,932


51


0.86%

Government deposits

1,907


3


0.19%


1,208


6


0.68%

Wholesale deposits and other

1,182


11


1.27%


758


12


2.03%

Total interest-bearing deposits

10,775


25


0.32%


9,898


69


0.93%

Short-term FHLB advances and other

2,646


3


0.17%


3,212


16


0.65%

Long-term FHLB advances

1,248


9


0.99%


1,021


9


1.13%

Other long-term debt

414


11


3.50%


494


18


4.94%

Total interest-bearing liabilities

15,083


48


0.43%


14,625


112


1.01%

Noninterest-bearing deposits








Retail deposits and other

2,307





1,680




Custodial deposits (1)

6,517





6,120




Total noninterest-bearing deposits

8,824





7,800




Other liabilities

2,340





1,576




Stockholders' equity

2,454





1,991




Total liabilities and stockholders' equity

$

28,701





$

25,992




Net interest-earning assets

$

10,946





$

8,910




Net interest income


$

566





$

496



Interest rate spread (2)



2.70%




2.41%

Net interest margin (3)



2.90%




2.81%

Ratio of average interest-earning assets to
interest-bearing liabilities



172.6

%




160.9

%

Total average deposits

$

19,598





$

17,698
























a.

Approximately 80 percent of custodial deposits are from subserviced loans for which LIBOR based fees are recognized as an offset in net loan administration income.  

b.

Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.

c.

Net interest margin is net interest income divided by average interest-earning assets.

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Nine Months Ended


September 30,

2021


June 30

2021


September 30,

2020


September 30,

2021


September 30,

2020

Net income

$

152



$

147



$

222



$

448



$

384


Weighted average common shares outstanding

52,862,288



52,763,868



57,032,746



52,767,923



56,827,171


Stock-based awards

797,134



772,801



347,063



731,366



404,518


Weighted average diluted common shares

53,659,422



53,536,669



57,379,809



53,499,289



57,231,689


Basic earnings per common share

$

2.87



$

2.78



$

3.90



$

8.48



$

6.76


Stock-based awards

(0.04)



(0.04)



(0.02)



(0.11)



(0.05)


Diluted earnings per common share

$

2.83



$

2.74



$

3.88



$

8.37



$

6.71


Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


December 31, 2020


September 30, 2020


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,709


9.72

%


$

2,562


9.21

%


$

2,270


7.71

%


$

2,256


8.04

%

Total adjusted avg. total asset base

$

27,863




$

27,828




$

29,444




$

28,069



Tier 1 common equity (to risk weighted assets)

$

2,469


11.95

%


$

2,322


11.38

%


$

2,030


9.15

%


$

2,016


9.21

%

Tier 1 capital (to risk weighted assets)

$

2,709


13.11

%


$

2,562


12.56

%


$

2,270


10.23

%


$

2,256


10.31

%

Total capital (to risk weighted assets)

$

3,006


14.55

%


$

2,882


14.13

%


$

2,638


11.89

%


$

2,471


11.29

%

Risk-weighted asset base

$

20,664




$

20,399




$

22,190




$

21,882



Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


December 31, 2020


September 30, 2020


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,619


9.40

%


$

2,464


8.88

%


$

2,390


8.12

%


$

2,212


7.89

%

Total adjusted avg. total asset base

$

27,851




$

27,767




$

29,437




$

28,051



Tier 1 common equity (to risk weighted assets)

$

2,619


12.71

%


$

2,464


12.08

%


$

2,390


10.77

%


$

2,212


10.11

%

Tier 1 capital (to risk weighted assets)

$

2,619


12.71

%


$

2,464


12.08

%


$

2,390


10.77

%


$

2,212


10.11

%

Total capital (to risk weighted assets)

$

2,766


13.42

%


$

2,634


12.92

%


$

2,608


11.75

%


$

2,427


11.09

%

Risk-weighted asset base

$

20,609




$

20,395




$

22,194




$

21,882



Loans Serviced

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


December 31, 2020


September 30, 2020


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts

Subserviced for others (2)

$

230,045


1,007,557



$

211,775


975,467



$

178,606


867,799



$

180,981


893,559


Serviced for others (3)

31,354


124,665



34,263


139,029



38,026


151,081



37,908


148,868


Serviced for own loan portfolio (4)

10,410


70,738



9,685


67,988



10,079


66,519



8,469


62,486


Total loans serviced

$

271,809


1,202,960



$

255,723


1,182,484



$

226,711


1,085,399



$

227,358


1,104,913




(1)

UPB, net of write downs, does not include premiums or discounts.

(2)

Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes temporary short-term subservicing performed as a result of sales of servicing-released MSRs.

(3)

Loans for which Flagstar owns the MSR.

(4)

Includes LHFI (residential first mortgage, home equity and other consumer), LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


December 31, 2020


September 30, 2020

Consumer loans












Residential first mortgage

$

1,626


11.5

%


$

1,794


12.8

%


$

2,266


14.0

%


$

2,472


15.0

%

Home equity

657


4.6

%


717


5.1

%


856


5.3

%


924


5.6

%

Other

1,203


8.3

%


1,133


8.0

%


1,004


6.1

%


973


5.9

%

Total consumer loans

3,486


24.4

%


3,644


25.9

%


4,126


25.4

%


4,369


26.5

%

Commercial loans












Commercial real estate

3,216


22.6

%


3,169


22.6

%


3,061


18.9

%


2,996


18.2

%

Commercial and industrial

1,387


9.7

%


1,376


9.8

%


1,382


8.5

%


1,520


9.2

%

Warehouse lending

6,179


43.3

%


5,863


41.7

%


7,658


47.2

%


7,591


46.1

%

Total commercial loans

10,782


75.6

%


10,408


74.1

%


12,101


74.6

%


12,107


73.5

%

Total loans held-for-investment

$

14,268


100.0

%


$

14,052


100.0

%


$

16,227


100.0

%


$

16,476


100.0

%

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


December 31, 2020


September 30, 2020

Indirect lending

$

916


76.1

%


$

866


76.4

%


$

713


71.0

%


$

710


73.0

%

Point of sale

248


20.6

%


225


19.9

%


211


21.0

%


202


20.7

%

Other

39


3.2

%


42


3.7

%


80


8.0

%


61


6.3

%

Total other consumer loans

$

1,203


100.0

%


$

1,133


100.0

%


$

1,004


100.0

%


$

973


100.0

%

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



September 30, 2021


June 30, 2021


September 30, 2020

Residential first mortgage

$

43



$

48



$

52


Home equity

15



17



29


Other

32



38



38


Total consumer loans

90



103



119


Commercial real estate

35



58



89


Commercial and industrial

43



38



42


Warehouse lending 

3



3



5


Total commercial loans

81



99



136


Allowance for loan losses

171



202



255


Reserve for unfunded commitments

19



18



25


Allowance for credit losses

$

190



$

220



$

280


Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



Three Months Ended September 30, 2021


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Beginning balance

$

48


$

17


$

38


$

58


$

38


$

3


$

202


$

18


Provision (benefit) for credit losses:









Loan volume

(1)


(1)


2


1




1


1


Economic forecast (2)

(2)


(1)



(3)


(4)



(10)



Credit (3)

(1)


1



(11)


17



6



Qualitative factor adjustments (4)

(1)


(1)


(8)


(10)


(8)



(28)



Charge-offs

(1)



(1)



(6)



(8)



Recoveries

1


1






2



Provision for net charge-offs


(1)


1



6



6



Ending allowance balance

$

43


$

15


$

32


$

35


$

43


$

3


$

171


$

19




(1)

Excludes loans carried under the fair value option.

(2)

Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

(3)

Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4)

Includes $6 million of unallocated reserves attributed to various portfolios for presentation purposes.

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



Nine Months Ended September 30, 2021


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Beginning balance

$

49


$

25


$

39


$

84


$

51


$

4


$

252


$

28


Provision (benefit) for credit losses:









Loan volume

2


(3)


5


4


1


(1)


8


(9)


Economic forecast (2)

(6)


(4)


(1)


(5)


(13)



(29)



Credit (3)

5


3


1


(33)


16



(8)



Qualitative factor adjustments (4)

(7)


(6)


(12)


(15)


(12)



(52)



Charge-offs

(4)


(1)


(3)



(7)



(15)



Recoveries

2


1


2



16



21



Provision for net charge-offs

2



1



(9)



(6)



Ending allowance balance

$

43


$

15


$

32


$

35


$

43


$

3


$

171


$

19




(1)

Excludes loans carried under the fair value option.

(2)

Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

(3)

Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4)

Includes $6 million of unallocated reserves attributed to various portfolios for presentation purposes.

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)



September 30,

2021


June 30,

2021


December 31,

2020


September 30,

2021

Nonperforming LHFI

$

82



$

63



$

46



$

36


Nonperforming TDRs

5



6



4



4


Nonperforming TDRs at inception but performing for less than six
months

9



7



6



5


Total nonperforming LHFI and TDRs (1)

96



76



56



45


Other nonperforming assets, net

6



6



8



6


LHFS

10



9



9



6


Total nonperforming assets

$

112



$

91



$

73



$

57










Ratio of nonperforming assets to total assets (2)

0.37

%


0.30

%


0.21

%


0.17

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.66

%


0.53

%


0.34

%


0.28

%

Ratio of nonperforming assets to LHFI and repossessed assets (2)

0.70

%


0.57

%


0.40

%


0.31

%



(1)

Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.

(2)

Ratio excludes nonperforming LHFS.

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



30-59 Days
Past Due


60-89 Days
Past Due


Greater than
90 days (1)


Total Past
Due


Total LHFI

September 30, 2021










Consumer loans

$

12



$

2



$

58



$

72



$

3,486


Commercial loans





35



35



10,782


Total loans

$

12



$

2



$

93



$

107



$

14,268


June 30, 2021










Consumer loans

$

8



$

4



$

55



$

67



$

3,644


Commercial loans





20



20



10,408


     Total loans

$

8



$

4



$

75



$

87



$

14,052


December 31, 2020










Consumer loans

$

9



$

6



$

38



$

53



$

4,126


Commercial loans

21





18



39



12,101


     Total loans

$

30



$

6



$

56



$

92



$

16,227


September 30, 2020










Consumer loans

$

9



$

4



$

36



$

49



$

4,369


Commercial loans





10



10



12,107


Total loans

$

9



$

4



$

46



$

59



$

16,476




(1)

Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued.

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)



TDRs


Performing


Nonperforming


Total

September 30, 2021


Consumer loans

$

34



$

14



$

48


Commercial loans



2



2


Total TDR loans

$

34



$

14



$

50


June 30, 2021






Consumer loans

$

31



$

11



$

42


Commercial loans



2



2


Total TDR loans

$

31



$

13



$

44


December 31, 2020






Consumer loans

$

31



$

10



$

41


Commercial loans

5





5


Total TDR loans

$

36



$

10



$

46


September 30, 2020






Consumer loans

$

34



$

9



$

43


Commercial loans

5





5


Total TDR loans

$

39



$

9



$

48


Non-GAAP Reconciliation

(Unaudited)


In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. The non-GAAP measures presented in the tables below reflect the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations. The DOJ benefit and loans with government guarantees that have not been repurchased and don't accrue interest are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted net interest margin and adjusted efficiency ratio provide a meaningful representation of its operating performance on an ongoing basis.


The following tables provide a reconciliation of non-GAAP financial measures.

Tangible book value per share and tangible common equity to assets ratio.



September 30,

2021


June 30,

2021


March 31,

2021


December 31,

2020


September 30,

2020


(Dollars in millions, except share data)

Total stockholders' equity

$

2,645



$

2,498



$

2,358



$

2,201



$

2,195


Less: Goodwill and intangible assets

149



152



155



157



160


Tangible book value

$

2,496



$

2,346



$

2,203



$

2,044



$

2,035












Number of common shares outstanding

52,862,383



52,862,264



52,752,600



52,656,067



57,150,470


Tangible book value per share

$

47.21



$

44.38



$

41.77



$

38.80



$

35.60












Total assets

$

27,042



$

27,065



$

29,449



$

31,038



$

29,476


Tangible common equity to assets ratio

9.23

%


8.67

%


7.48

%


6.58

%


6.90

%

Adjusted return on average tangible common equity and adjusted return on average assets.



Three Months Ended


Nine Months Ended


September 30,

2021


June 30,

2021


September 30,

2020


September 30,

2021


September 30,

2020


(Dollars in millions)

Net income

$

152



$

147



$

222



$

448



$

384


Add: Intangible asset amortization, net of tax

2



2



3



6



7


Tangible net income

$

154



$

149



$

225



$

454



$

391












Total average equity

$

2,592



$

2,448



$

2,141



$

2,454



$

1,991


Less: Average goodwill and intangible assets

151



153



162





165


Total tangible average equity

$

2,441



$

2,295



$

1,979



$

2,454



$

1,826












Return on average tangible common equity

25.18

%


25.92

%


45.42

%


24.65

%


28.58

%

Adjustment to remove DOJ settlement expense

%


%


%


2.34

%


%

Adjustment for former CEO SERP agreement

%


(2.14)

%


%


(0.67)

%


%

Adjustment for merger costs

0.98

%


1.89

%


%


0.91

%


%

Adjusted return on average tangible common
equity

26.16

%


25.67

%


45.42

%


27.23

%


28.58

%











Return on average assets

2.16

%


2.09

%


3.15

%


2.08

%


1.97

%

Adjustment to remove DOJ

%


%


%


0.13

%


%

Adjustment for former CEO SERP settlement
agreement

%


(0.11)

%


%


(0.04)

%


%

Adjustment for merger costs

0.05

%


0.10

%


%


0.05

%


%

Adjusted return on average assets

2.21

%


2.08

%


3.15

%


2.22

%


1.97

%

Adjusted HFI loan-to-deposit ratio.



September 30,

2021


June 30,

2021


March 31,

2021


December 31,
2020


September 30,

2020


(Dollars in millions)

Average LHFI

$

13,540



$

13,688



$

14,915



$

15,703



$

14,839


Less: Average warehouse loans

5,392



5,410



6,395



6,948



5,697


Adjusted average LHFI

$

8,148



$

8,278



$

8,520



$

8,755



$

9,142












Average deposits

$

19,686



$

19,070



$

20,043



$

21,068



$

19,561


Less: Average custodial deposits

6,180



6,188



7,194



8,527



7,347


Adjusted average deposits

$

13,506



$

12,882



$

12,849



$

12,541



$

12,214












HFI loan-to-deposit ratio

68.8

%


71.8

%


74.4

%


74.5

%


75.9

%

Adjusted HFI loan-to-deposit ratio

60.3

%


64.3

%


66.3

%


69.8

%


74.8

%

Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, and efficiency ratio.



Three Months Ended


Nine Months Ended


September 30,

2021


June 30,

2021


March 31,

2021


September 30,
2021


(Dollar in millions)

Noninterest expense

$

286



$

289



$

347



$

922


Adjustment to remove DOJ settlement expense





35



35


Adjustment for former CEO SERP agreement



(10)





(10)


Adjustment for merger costs

5



9





14


Adjusted noninterest expense

$

281



$

290



$

312



$

883










Income before income taxes

$

198



$

190



$

194



$

581


Adjustment to remove DOJ settlement expense





35



35


Adjustment for former CEO SERP agreement



(10)





(10)


Adjustment for merger costs

5



9





14


Adjusted income before income taxes

$

203



$

189



$

229



$

620










Provision for income taxes

$

46



$

43



$

45



$

133


Adjustment to remove DOJ settlement expense





(8)



(8)


Adjustment for former CEO SERP agreement



2





2


Adjustment for merger costs

(1)



(2)





(3)


Adjusted provision for income taxes

$

47



$

43



$

53



$

142










Net income

$

152



$

147



$

149



$

448


Adjusted net income

$

156



$

146



$

176



$

478










Weighted average common shares outstanding

52,862,288



52,763,868



52,675,562



52,767,923


Weighted average diluted common shares

53,659,422



53,536,669



53,297,803



53,499,289


Adjusted basic earnings per share

$

2.98



$

2.78



$

3.34



$

9.04


Adjusted diluted earnings per share

$

2.94



$

2.73



$

3.31



$

8.92










Efficiency ratio

62.2

%


66.6

%


67.7

%


65.5

%

Adjustment to remove DOJ settlement expense

%


%


(6.8)

%


(2.5)

%

Adjustment for former CEO SERP agreement

%


1.6

%


%


0.7

%

Adjustment for merger costs

(1.1)

%


(1.4)

%


%


(1.0)

%

Adjusted efficiency ratio

61.1

%


66.8

%


60.9

%


62.7

%

Adjusted net interest margin



Three Months Ended


September 30,
2021


June 30,

2021


March 31,

2021


December 31,

2020


September 30,

2020

Average interest earning assets

$

25,656



$

25,269



$

27,178



$

27,100



$

25,738


Net interest margin

3.00

%


2.90

%


2.82

%


2.78

%


2.78

%

Adjustment to LGG loans available for repurchase

0.04

%


0.16

%


0.20

%


0.20

%


0.16

%

Adjusted net interest margin

3.04

%


3.06

%


3.02

%


2.98

%


2.94

%

For more information, contact:
Kenneth Schellenberg
FBCInvestorRelations@flagstar.com
(248) 312-5741

View original content:

SOURCE Flagstar Bancorp, Inc.

The above press release was provided courtesy of PRNewswire. The views, opinions and statements in the press release are not endorsed by Gray Media Group nor do they necessarily state or reflect those of Gray Media Group, Inc.