Flagstar Bancorp Reports Second Quarter 2021 Net Income of $147 million, or $2.74 Per Diluted Share

Rhea-AI Summary

Flagstar Bancorp (NYSE: FBC) reported strong performance for Q2 2021, generating $183 million in net interest income and achieving a net interest margin of 2.90%. Net income for the quarter was $147 million, or $2.74 per diluted share, slightly down from Q1 2021. The company released $45 million from its allowance for credit losses, reflecting solid asset quality. Capital ratios improved, with a total risk-based capital ratio of 14.1%. Despite a decline in noninterest income to $252 million, Flagstar remains well-positioned for growth.

Positive

• Net interest income of $183 million, up from $168 million year-over-year.
• Net income of $147 million reflects solid profitability; earnings surpassed $2.00 per share for five consecutive quarters.
• Total risk-based capital ratio increased by 95 basis points to 14.1%.

Negative

• Noninterest income decreased by $72 million to $252 million from the previous quarter.
• Net gain on loan sales fell to $168 million, a 26% drop from Q1.

TROY, Mich., July 28, 2021 /PRNewswire/ --

Key Highlights - Second Quarter 2021

• Generated net interest income of $183 million, with net interest margin increasing 8 basis points.
• Produced mortgage revenue of $163 million as fallout adjusted locks remained strong at $12.4 billion.
• Maintained solid asset quality with low levels of nonperforming loans; reduced allowance for credit loss reserve by $45 million.
• Generated significant capital with total risk-based capital ratio increasing 95 basis points to 14.1 percent.
• Produced exceptional return on average tangible common equity of 25.9 percent and return on average assets of 2.1 percent.

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported second quarter 2021 net income of $147 million, or $2.74 per diluted share, compared to first quarter 2021 net income of $149 million, or $2.80 per diluted share, which on an adjusted basis was $176 million, or $3.31 per diluted share. Second quarter 2020 net income was $116 million, or $2.03 per diluted share.

"We posted another solid quarter – our fifth consecutive quarter where diluted earnings exceeded $2.00 per share," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "Highlights included net interest margin expansion, strong asset quality, steady growth in our servicing portfolio, and excellent mortgage results that remain above historical averages. Of special note was our execution of four private label securitizations during the quarter, further demonstrating the versatility of our mortgage business and the optionality it provides – truly a differentiator for Flagstar in the industry. These positives combined to produce a 6 percent growth in tangible book value and continued a trend of achieving return on assets in excess of 2 percent. Our return on average tangible common equity in the last 12 months has been a remarkable 31 percent, and in the 12 months prior to that, an impressive 18 percent.

"Credit quality remained strong, and we continue to be encouraged by the low levels of nonperforming loans and net charge-offs. And I'm pleased to say that we have no commercial loans currently in deferral. This performance, along with an improved forecast for the macroeconomic environment, enabled us to release $45 million of our allowance for credit losses. Even with this release, excluding warehouse loans, our coverage ratio was 2.6 percent  – among the strongest in the industry."

"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
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in millions, except per share data)
Net interest income	$	183		$	189		$	189		$	180		$	168
(Benefit) provision for credit losses	(44)			(28)			2			32			102
Noninterest income	252			324			332			448			375
Noninterest expense	289			347			314			301			293
Income before income taxes	190			194			205			295			148
Provision for income taxes	43			45			51			73			32
Net income	$	147		$	149		$	154		$	222		$	116
Income per share:
Basic	$	2.78		$	2.83		$	2.86		$	3.90		$	2.04
Diluted	$	2.74		$	2.80		$	2.83		$	3.88		$	2.03

 

Adjusted Income Statement Highlights (Non-GAAP)(1)
	Three Months Ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in millions, except per share data)
Net interest income	$	183		$	189		$	189		$	180		$	168
(Benefit) provision for credit losses	(44)			(28)			2			32			102
Noninterest income	252			324			332			448			375
Noninterest expense	290			312			314			301			293
Income before income taxes	189			229			205			295			148
Provision for income taxes	43			53			51			73			32
Net income	$	146		$	176		$	154		$	222		$	116
Income per share:
Basic	$	2.78		$	3.34		$	2.86		$	3.90		$	2.04
Diluted	$	2.73		$	3.31		$	2.83		$	3.88		$	2.03
(1)     See Non-GAAP Reconciliation for further information.

 

Key Ratios
	Three Months Ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
Net interest margin	2.90	%	2.82	%	2.78	%	2.78	%	2.86	%
Adjusted net interest margin (1)	3.06	%	3.02	%	2.98	%	2.94	%	2.88	%
Return on average assets	2.1	%	2.0	%	2.1	%	3.1	%	1.8	%
Return on average common equity	24.0	%	25.7	%	27.6	%	41.5	%	23.5	%
Efficiency ratio	66.6	%	67.7	%	60.4	%	47.9	%	54.1	%
HFI loan-to-deposit ratio	71.8	%	74.4	%	74.5	%	75.9	%	76.7	%
Adjusted HFI loan-to-deposit ratio (2)	64.3	%	66.3	%	69.8	%	74.8	%	85.4	%
(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
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			Seq		Yr/Yr
	(Dollars in millions)
Average interest-earning assets	$	25,269		$	27,178		$	27,100		$	25,738		$	23,692		(7)	%	7	%
Average loans held-for-sale (LHFS)	6,902			7,464			5,672			5,602			5,645			(8)	%	22	%
Average loans held-for-investment (LHFI)	13,688			14,915			15,703			14,839			13,596			(8)	%	1	%
Average total deposits	19,070			20,043			21,068			19,561			17,715			(5)	%	8	%

Net Interest Income

Net interest income in the second quarter was $183 million, a decrease of $6 million, or 3 percent as compared to the first quarter 2021. The results primarily reflect lower earning assets, the result of lower warehouse and loans held-for-sale (LHFS) balances during the quarter. Average earning assets declined $1.9 billion, or 7 percent, as warehouse balances were $1.0 billion, or 15 percent lower and LHFS declined $0.6 billion. These declines were, partially offset by a favorable decrease in funding costs and broad-based increases in loan yields.

The net interest margin in the second quarter was 2.90 percent, an 8 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 expanded 4 basis points to 3.06 percent in the second quarter, compared to adjusted net interest margin of 3.02 percent in the prior quarter. The expansion in net interest margin was largely attributable to an increase in LHFS yields due to a mix shift to higher yielding products supporting our residential mortgage-backed securities program, higher LHFI yields and lower deposit costs. Retail banking deposit rates decreased 4 basis points primarily driven by the maturity of higher cost time deposits. 

Average total deposits were $19.1 billion in the second quarter, decreasing $1.0 billion, or 5 percent from the first quarter 2021. Average custodial deposits decreased $1.0 billion, or 14 percent primarily driven by decreasing mortgage payoff rates and actions taken to manage internal liquidity measures.

Provision for Credit Losses

The benefit for credit losses was $44 million for the second quarter, as compared to a $28 million benefit for credit losses for the first quarter 2021, reflecting the performance of our portfolio and improved economic forecasts. Additionally, net charge-offs remained low at $1 million for the quarter, or 1 basis point of LHFI.

Noninterest Income

Noninterest income decreased $72 million to $252 million in the second quarter, as compared to $324 million for the first quarter 2021, primarily due to lower mortgage revenues and loan fees and charges.

Second quarter net gain on loan sales decreased $59 million, to $168 million, as compared to $227 million in the first quarter 2021. Gain on sale margins decreased 49 basis points, to 1.35 percent for the second quarter 2021, as compared to 1.84 percent for the first quarter 2021. The decrease was primarily driven by competitive factors and channel-mix based margin compression.

Net loss on mortgage servicing rights was $5 million in the second quarter 2021, reflecting an $8 million write off of mortgage servicing right fair value for those loans with government guarantees that were repurchased during the quarter. In addition, mortgage refinance activity continued to be elevated compared to historical norms which impacted prepayment speeds and overall net return on mortgage servicing rights.

Loan fees and charges decreased $5 million, to $37 million for the second quarter, compared to $42 million for the first quarter 2021, primarily due to a 7 percent decrease in mortgage loans closed.  

Mortgage Metrics
	As of/Three Months Ended															Change (% / bps)
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			Seq	Yr/Yr
	(Dollars in millions)
Mortgage rate lock commitments (fallout- adjusted) (1) (2)	$	12,400		$	12,300		$	12,000		$	15,000		$	13,800		1%	(10)%
Mortgage loans closed (1)	$	12,800		$	13,800		$	13,100		$	14,400		$	12,200		(7)%	5%
Net margin on mortgage rate lock commitments (fallout-adjusted) (2)	1.35		%	1.84		%	1.93		%	2.31		%	2.19		%	(49)	(84)
Net gain on loan sales	$	168		$	227		$	232		$	346		$	303		(26)%	(45)%
Net return (loss) on mortgage servicing rights (MSR)	$	(5)		$	—		$	—		$	12		$	(8)		N/M	(38)%
Gain on loan sales + net return on the MSR	$	163		$	227		$	232		$	358		$	295		(28)%	(45)%
Loans serviced (number of accounts - 000's) (3)	1,182			1,148			1,085			1,105			1,042			3%	13%
Capitalized value of MSRs	1.00		%	1.06		%	0.86		%	0.85		%	0.87		%	(6)	13

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 $289 million for the second quarter, compared to $347 million for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability in the first quarter 2021 and $9 million of merger expenses in the second quarter 2021, noninterest expense decreased $32 million, or 10 percent. The decrease in noninterest expense primarily reflects lower commissions as mortgage loan closings decreased 7 percent compared to the prior quarter and the prior quarter included expenses associated with seasonally higher payroll taxes which did not reoccur. The second quarter included a $10 million benefit from an agreement to reduce the 2009 former CEO supplemental executive retirement plan liability.

Mortgage expenses were $131 million for the second quarter, a decrease of $17 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings – our mortgage expense ratio – was 1.03 percent, a decrease of 5 basis points quarter over quarter, primarily driven by lower commissions.

The efficiency ratio was 67 percent for the second quarter, as compared to 68 percent for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability, the adjusted efficiency ratio was 61 percent for the first quarter, primarily driven by the strength of mortgage revenue in the first quarter.

Income Taxes

The second quarter provision for income taxes totaled $43 million, with an effective tax rate of 22.5 percent, compared to $45 million and an effective tax rate of 23.0 percent for the first quarter 2021.

Asset Quality

Credit Quality Ratios
	As of/Three Months Ended															Change (% / bps)
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			Seq	Yr/Yr
	(Dollars in millions)
Allowance for credit losses (1)	$	220		$	265		$	280		$	280		$	250		(17)%	(12)%
Credit reserves to LHFI	1.57		%	1.78		%	1.73		%	1.70		%	1.69		%	(21)	-12
Credit reserves to LHFI excluding warehouse	2.63		%	3.11		%	3.20		%	3.07		%	2.60		%	(48)	3
Net (recoveries) charge-offs	$	1		$	(13)		$	2		$	2		$	3		N/M	(67)%
Total nonperforming LHFI and TDRs	$	74		$	60		$	56		$	45		$	33		23%	N/M
Net (recoveries) charge-offs to LHFI ratio (annualized)	0.01		%	(0.35)		%	0.04		%	0.05		%	0.11		%	36	(10)
Ratio of nonperforming LHFI and TDRs to LHFI	0.53		%	0.40		%	0.34		%	0.28		%	0.22		%	13	31
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):
Residential first mortgage	0.16		%	0.31		%	0.11		%	0.07		%	0.26		%	(15)	(10)
Home equity and other consumer	0.15		%	0.16		%	0.06		%	0.23		%	0.28		%	(1)	(13)
Commercial real estate	—		%	(0.01)		%	—		%	(0.01)		%	0.01		%	1	(1)
Commercial and industrial	0.04		%	(4.12)		%	0.21		%	0.06		%	0.08		%	416	(4)
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.

The allowance for credit losses was $220 million and covered 1.57 percent of loans held-for-investment at June 30, 2021, a 21 basis point decrease from March 31, 2021. Excluding warehouse loans, the allowance coverage ratio was 2.63 percent, a 48 basis point decrease from March 31, 2021. The lower allowance for credit losses primarily reflects improvements in our economic forecasts and the performance of the LHFI portfolio throughout the pandemic.

Net charge-offs in the second quarter 2021 were $1 million, compared to $13 million of net recoveries in the prior quarter. Net charge-offs for the second quarter were 1 basis point of LHFI, compared to 8 basis points in the prior quarter when excluding the $16 million commercial loan recovery obtained in the quarter.

Nonperforming loans and troubled debt restructurings (TDRs) were $74 million and our ratio of nonperforming loans and TDRs to loans held-for-investment was 53 basis points at June 30, 2021, a 13 basis point increase compared to March 31, 2021 as nonperforming loans remained low and LHFI balances decreased $0.8 billion. At June 30, 2021, early stage loan delinquencies totaled $12 million, or 9 basis points of total loans, compared to $15 million, or 10 basis points, at March 31, 2021.

Capital

Capital Ratios (Bancorp)																Change (% / bps)
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020			Seq	Yr/Yr
Tier 1 leverage (to adj. avg. total assets)	9.21		%	8.11		%	7.71		%	8.04		%	7.76		%	110	145
Tier 1 common equity (to RWA)	11.38		%	10.31		%	9.15		%	9.21		%	9.11		%	107	227
Tier 1 capital (to RWA)	12.56		%	11.45		%	10.23		%	10.31		%	10.33		%	111	223
Total capital (to RWA)	14.13		%	13.18		%	11.89		%	11.29		%	11.32		%	95	281
Tangible common equity to asset ratio (1)	8.67		%	7.48		%	6.58		%	6.90		%	6.58		%	119	209
Tangible book value per share (1)	$	44.38		$	41.77		$	38.80		$	35.60		$	31.74		6%	40%
(1)     See Non-GAAP Reconciliation for further information.

The Company 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 Company's held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 13.13 percent and a total risk-based capital ratio of 16.30 percent at June 30, 2021.

Importantly, tangible book value per share grew to $44.38, up $2.61, or 6 percent from last quarter.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.1 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 86 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 $255.7 billion of loans representing almost 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, shareholder 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)
	June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Assets
Cash	$	168			$	106			$	251			$	204
Interest-earning deposits	177				343				372				23
Total cash and cash equivalents	345				449				623				227
Securitized HFS loans not sold	—				—				—				—
Investment securities available-for-sale	1,823				1,764				1,944				2,348
Investment securities held-to-maturity	270				319				377				496
Loans held-for-sale	6,138				7,087				7,098				5,615
Loans held-for-investment	14,052				14,887				16,227				14,808
Loans with government guarantees	2,226				2,457				2,516				1,791
Less: allowance for loan losses	(202)				(241)				(252)				(229)
Total loans held-for-investment and loans with government guarantees, net	16,076				17,103				18,491				16,370
Mortgage servicing rights	342				428				329				261
Federal Home Loan Bank stock	377				377				377				377
Premises and equipment, net	374				393				392				410
Goodwill and intangible assets	152				155				157				164
Other assets	1,168				1,374				1,250				1,200
Total assets	$	27,065			$	29,449			$	31,038			$	27,468
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	10,675			$	10,798			$	9,458			$	7,921
Interest-bearing deposits	7,986				8,622				10,515				9,977
Total deposits	18,661				19,420				19,973				17,898
Short-term Federal Home Loan Bank advances and other	2,095				2,745				3,900				3,354
Long-term Federal Home Loan Bank advances	1,200				1,200				1,200				1,200
Other long-term debt	396				396				641				493
Loan with government guarantee repurchase options	989				1,780				1,851				1,067
Other liabilities	1,226				1,550				1,272				1,485
Total liabilities	24,567				27,091				28,837				25,497
Stockholders' Equity
Common stock	1				1				1				1
Additional paid in capital	1,356				1,350				1,346				1,488
Accumulated other comprehensive income	45				54				47				46
Retained earnings	1,096				953				807				436
Total stockholders' equity	2,498				2,358				2,201				1,971
Total liabilities and stockholders' equity	$	27,065			$	29,449			$	31,038			$	27,468

 

Flagstar Bancorp, Inc.  Condensed Consolidated Statements of Operations  (Dollars in millions, except per share data) (Unaudited)
																	Change compared to:
	Three Months Ended																1Q21						2Q20
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020				Amount			Percent			Amount			Percent
Interest Income
Total interest income	$	198		$	208		$	212		$	206		$	201			$	(10)		(5)	%		$	(3)		(1)	%
Total interest expense	15			19			23			26			33				(4)			(21)	%		(18)			(55)	%
Net interest income	183			189			189			180			168				(6)			(3)	%		15			9	%
(Benefit) provision for credit losses	(44)			(28)			2			32			102				(16)			57	%		N/M			N/M
Net interest income after   provision for credit losses	227			217			187			148			66				10			5	%		161			244	%
Noninterest Income
Net gain on loan sales	168			227			232			346			303				(59)			(26)	%		(135)			(45)	%
Loan fees and charges	37			42			48			41			38				(5)			(12)	%		(1)			(3)	%
Net return (loss) on the mortgage servicing rights	(5)			—			—			12			(8)				(5)			N/M			3			(38)	%
Loan administration income	28			27			25			26			21				1			4	%		7			33	%
Deposit fees and charges	8			8			8			8			7				—			—	%		1			14	%
Other noninterest income	16			20			19			15			14				(4)			(20)	%		2			14	%
Total noninterest income	252			324			332			448			375				(72)			(22)	%		N/M			N/M
Noninterest Expense
Compensation and benefits	122			144			125			123			116				(22)			(15)	%		6			5	%
Occupancy and equipment	50			46			44			47			44				4			9	%		6			14	%
Commissions	51			62			70			72			61				(11)			(18)	%		(10)			(16)	%
Loan processing expense	22			21			24			20			22				1			5	%		—			—	%
Legal and professional expense	11			8			11			9			5				3			38	%		6			N/M
Federal insurance premiums	4			6			5			6			7				(2)			(33)	%		(3)			(43)	%
Intangible asset amortization	3			3			3			3			4				—			—	%		(1)			(25)	%
Other noninterest expense	26			57			32			21			34				(31)			(54)	%		(8)			(24)	%
Total noninterest expense	289			347			314			301			293				(58)			(17)	%		(4)			(1)	%
Income before income taxes	190			194			205			295			148				(4)			(2)	%		42			28	%
Provision for income taxes	43			45			51			73			32				(2)			(4)	%		11			34	%
Net income	$	147		$	149		$	154		$	222		$	116			$	(2)		(1)	%		$	31		27	%
Income per share
Basic	$	2.78		$	2.83		$	2.86		$	3.90		$	2.04			$	(0.05)		(2)	%		$	0.74		36	%
Diluted	$	2.74		$	2.80		$	2.83		$	3.88		$	2.03			$	(0.06)		(2)	%		$	0.71		35	%
Cash dividends declared	$	0.06		$	0.06		$	0.05		$	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)
	Six Months Ended								Change
	June 30, 2021				June 30, 2020				Amount			Percent
Interest Income
Total interest income	$	405			$	402			$	3		1	%
Total interest expense	34				86				(52)			(60)	%
Net interest income	371				316				55			17	%
(Benefit) provision for credit losses	(72)				116				(188)			N/M
Net interest income after provision for credit losses	443				200				243			N/M
Noninterest Income
Net gain on loan sales	395				393				2			1	%
Loan fees and charges	79				61				18			30	%
Net return (loss) on the mortgage servicing rights	(5)				(2)				(3)			N/M
Loan administration income	54				33				21			64	%
Deposit fees and charges	17				16				1			6	%
Other noninterest income	36				28				8			29	%
Total noninterest income	576				529				47			9	%
Noninterest Expense
Compensation and benefits	266				218				48			22	%
Occupancy and equipment	95				85				10			12	%
Commissions	112				90				22			24	%
Loan processing expense	43				39				4			10	%
Legal and professional expense	20				11				9			82	%
Federal insurance premiums	10				13				(3)			(23)	%
Intangible asset amortization	5				7				(2)			(29)	%
Other noninterest expense	85				63				22			35	%
Total noninterest expense	636				526				110			21	%
Income before income taxes	383				203				180			89	%
Provision for income taxes	87				42				45			107	%
Net income	$	296			$	161			$	135		84	%
Income per share
Basic	$	5.61			$	2.85			$	2.76		97	%
Diluted	$	5.54			$	2.83			$	2.71		96	%
Cash dividends declared	$	0.12			$	0.10			$	0.02		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												Six Months Ended
	June 30, 2021				March 31, 2021				June 30, 2020				June 30, 2021				June 30, 2020
Selected Mortgage Statistics (1):
Mortgage rate lock commitments (fallout-adjusted) (2)	$	12,400			$	12,300			$	13,800			$	24,800			$	25,000
Mortgage loans closed	$	12,800			$	13,800			$	12,200			$	26,600			$	20,700
Mortgage loans sold and securitized	$	14,100			$	13,700			$	12,900			$	27,800			$	20,400
Selected Ratios:
Interest rate spread (3)	2.70		%		2.55		%		2.52		%		2.62		%		2.41		%
Net interest margin	2.90		%		2.82		%		2.86		%		2.86		%		2.83		%
Net margin on loans sold and securitized	1.20		%		1.65		%		2.35		%		1.42		%		1.93		%
Return on average assets	2.09		%		1.98		%		1.77		%		2.04		%		1.30		%
Adjusted return on average assets (4) (5)	2.09		%		2.34		%		1.77		%		2.19		%		1.30		%
Return on average common equity	23.97		%		25.73		%		23.47		%		12.41		%		16.86		%
Return on average tangible common equity (5)	25.92		%		27.99		%		26.16		%		13.46		%		19.07		%
Adjusted return on average tangible common equity (4) (5)	25.68		%		32.97		%		26.16		%		30.63		%		19.07		%
Efficiency ratio	66.6		%		67.7		%		54.1		%		67.2		%		62.2		%
Adjusted efficiency ratio (4)	66.8		%		60.8		%		54.1		%		70.7		%		62.2		%
Common equity-to-assets ratio (average for the period)	8.74		%		7.71		%		7.53		%		8.21		%		15.42		%
Average Balances:
Average interest-earning assets	$	25,269			$	27,178			$	23,692			$	26,218			$	22,421
Average interest-bearing liabilities	$	14,641			$	15,011			$	15,119			$	14,825			$	14,800
Average stockholders' equity	$	2,448			$	2,319			$	1,977			$	2,384			$	1,915

(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.

 

	June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2020
Selected Statistics:
Book value per common share	$	47.26			$	44.71			$	41.79			$	34.62
Tangible book value per share (1)	$	44.38			$	41.77			$	38.80			$	31.74
Number of common shares outstanding	52,862,264				52,752,600				52,656,067				56,943,979
Number of FTE employees	5,503				5,418				5,214				4,641
Number of bank branches	158				158				158				160
Ratio of nonperforming assets to total assets (2)	0.30		%		0.23		%		0.21		%		0.14		%
Common equity-to-assets ratio	9.23		%		8.01		%		7.09		%		7.18		%
MSR Key Statistics and Ratios:
Weighted average service fee (basis points)	32.6				33.2				34.3				37.0
Capitalized value of mortgage servicing rights	1.00		%		1.06		%		0.86		%		0.87		%

(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
	June 30, 2021									March 31, 2021									June 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	$	6,902		$	53		3.05%			$	7,464		$	53		2.83%			$	5,645		$	48		3.42%
Loans held-for-investment
Residential first mortgage	1,887			15			3.27%			2,132			17			3.20%			2,822			24			3.41%
Home equity	748			7			3.64%			820			7			3.50%			1,001			9			3.78%
Other	1,101			13			4.80%			1,040			12			4.79%			881			12			5.42%
Total consumer loans	3,736			35			3.79%			3,992			36			3.68%			4,704			45			3.87%
Commercial real estate	3,093			26			3.37%			3,042			26			3.36%			3,101			28			3.64%
Commercial and industrial	1,449			14			3.72%			1,486			13			3.53%			2,006			17			3.34%
Warehouse lending	5,410			54			3.95%			6,395			64			4.00%			3,785			38			3.88%
Total commercial loans	9,952			94			3.74%			10,923			103			3.76%			8,892			83			3.67%
Total loans held-for-investment	13,688			129			3.75%			14,915			139			3.73%			13,596			128			3.74%
Loans with government guarantees	2,344			5			0.79%			2,502			4			0.56%			858			4			1.97%
Investment securities	2,123			12			2.19%			2,210			12			2.21%			3,417			21			2.42%
Interest-earning deposits	212			—			0.13%			87			—			0.14%			176			—			0.11%
Total interest-earning assets	25,269			$	199		3.12%			27,178			$	208		3.06%			23,692			$	201		3.38%
Other assets	2,742									2,887									2,569
Total assets	$	28,011								$	30,065								$	26,261
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,686		$	—		0.06%			$	1,852		$	—		0.07%			$	1,800		$	1		0.22%
Savings deposits	4,084			1			0.14%			3,945			1			0.14%			3,476			4			0.52%
Money market deposits	762			—			0.07%			685			—			0.06%			716			—			0.12%
Certificates of deposit	1,126			3			0.62%			1,293			4			0.96%			1,987			10			2.00%
Total retail deposits	7,658			4			0.18%			7,775			5			0.25%			7,979			15			0.78%
Government deposits	1,795			1			0.19%			1,773			1			0.22%			1,088			2			0.63%
Wholesale deposits and other	1,170			4			1.33%			1,031			4			1.59%			738			4			2.07%
Total interest-bearing deposits	10,623			9			0.31%			10,579			10			0.38%			9,805			21			0.86%
Short-term FHLB advances and other	2,422			1			0.17%			2,779			1			0.17%			3,753			2			0.26%
Long-term FHLB advances	1,200			3			1.03%			1,200			3			1.03%			1,068			3			1.13%
Other long-term debt	396			3			3.19%			453			5			4.11%			493			7			4.99%
Total interest-bearing liabilities	14,641			16			0.43%			15,011			19			0.51%			15,119			33			0.86%
Noninterest-bearing deposits
Retail deposits and other	2,259									2,270									1,687
Custodial deposits (1)	6,188									7,194									6,223
Total noninterest-bearing deposits	8,447									9,464									7,910
Other liabilities	2,476									3,271									1,255
Stockholders' equity	2,448									2,319									1,977
Total liabilities and stockholders' equity	$	28,012								$	30,065								$	26,261
Net interest-earning assets	$	10,628								$	12,167								$	8,573
Net interest income				$	183								$	189								$	168
Interest rate spread (2)							2.70%									2.55%									2.52%
Net interest margin (3)							2.90%									2.82%									2.86%
Ratio of average interest-earning assets to interest-bearing liabilities							172.6%									181.1%									156.7%
Total average deposits	$	19,070								$	20,043								$	17,715

(1)	Approximately 80 percent of custodial deposits from loans subserviced which pay interest is 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)
	Six Months Ended
	June 30, 2021									June 30, 2020
	Average Balance			Interest			Annualized Yield/Rate			Average Balance			Interest			Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	7,181		$	105		2.94%			$	5,447		$	97		3.56%
Loans held-for-investment
Residential first mortgage	2,009			33			3.23%			2,942			51			3.46%
Home equity	784			14			3.56%			1,010			21			4.26%
Other	1,071			25			4.80%			848			24			5.59%
Total consumer loans	3,864			72			3.73%			4,800			96			4.01%
Commercial real estate	3,068			52			3.36%			3,025			63			4.11%
Commercial and industrial	1,467			27			3.62%			1,836			36			3.88%
Warehouse lending	5,900			118			3.98%			3,048			62			4.04%
Total commercial loans	10,435			197			3.75%			7,909			161			4.03%
Total loans held-for-investment	14,299			269			3.74%			12,709			257			4.02%
Loans with government guarantees	2,422			8			0.67%			834			7			1.68%
Investment securities	2,166			24			2.20%			3,239			40			2.45%
Interest-earning deposits	150			—			0.14%			192			1			1.00%
Total interest-earning assets	26,218			$	406		3.09%			22,421			$	402		3.57%
Other assets	2,814									2,416
Total assets	$	29,032								$	24,837
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,768		$	—		0.07%			$	1,693		$	4		0.47%
Savings deposits	4,015			3			0.14%			3,433			14			0.79%
Money market deposits	724			—			0.06%			701			1			0.22%
Certificates of deposit	1,209			5			0.80%			2,120			22			2.13%
Total retail deposits	7,716			8			0.22%			7,947			41			1.03%
Government deposits	1,784			2			0.21%			1,110			5			0.89%
Wholesale deposits and other	1,101			8			1.47%			659			7			2.21%
Total interest-bearing deposits	10,601			18			0.35%			9,716			53			1.09%
Short-term FHLB advances and other	2,600			2			0.17%			3,659			14			0.79%
Long-term FHLB advances	1,200			6			1.03%			931			6			1.20%
Other long-term debt	424			8			3.68%			494			13			5.16%
Total interest-bearing liabilities	14,825			34			0.47%			14,800			86			1.16%
Noninterest-bearing deposits
Retail deposits and other	2,264									1,541
Custodial deposits (1)	6,688									5,499
Total noninterest-bearing deposits	8,952									7,040
Other liabilities	2,871									1,082
Stockholders' equity	2,384									1,915
Total liabilities and stockholders' equity	$	29,032								$	24,837
Net interest-earning assets	$	11,393								$	7,621
Net interest income				$	372								$	316
Interest rate spread (2)							2.62%									2.41%
Net interest margin (3)							2.86%									2.83%
Ratio of average interest-earning assets to interest-bearing liabilities							176.9%									145.9%
Total average deposits	$	19,554								$	16,755

a.	Approximately 80 percent of custodial deposits from loans subserviced which pay interest is 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												Six Months Ended
	June 30, 2021				March 31 2021				June 30, 2020				June 30, 2021				June 30, 2020
Net income	$	147			$	149			$	116			$	296			$	161
Weighted average common shares outstanding	52,763,868				52,675,562				56,790,642				52,719,959				56,723,254
Stock-based awards	772,801				622,241				333,064				697,937				433,561
Weighted average diluted common shares	53,536,669				53,297,803				57,123,706				53,417,896				57,156,815
Basic earnings per common share	$	2.78			$	2.83			$	2.04			$	5.61			$	2.85
Stock-based awards	(0.04)				(0.03)				(0.01)				(0.07)				(0.02)
Diluted earnings per common share	$	2.74			$	2.80			$	2.03			$	5.54			$	2.83

 

Regulatory Capital - Bancorp (Dollars in millions) (Unaudited)
	June 30, 2021						March 31, 2021						December 31, 2020						June 30, 2020
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,562		9.21	%		$	2,423		8.11	%		$	2,270		7.71	%		$	2,021		7.76	%
Total adjusted avg. total asset base	$	27,828					$	29,881					$	29,444					$	26,040
Tier 1 common equity (to risk weighted assets)	$	2,322		11.38	%		$	2,183		10.31	%		$	2,030		9.15	%		$	1,781		9.11	%
Tier 1 capital (to risk weighted assets)	$	2,562		12.56	%		$	2,423		11.45	%		$	2,270		10.23	%		$	2,021		10.33	%
Total capital (to risk weighted assets)	$	2,882		14.13	%		$	2,790		13.18	%		$	2,638		11.89	%		$	2,214		11.32	%
Risk-weighted asset base	$	20,399					$	21,164					$	22,190					$	19,562

 

Regulatory Capital - Bank (Dollars in millions) (Unaudited)
	June 30, 2021						March 31, 2021						December 31, 2020						June 30, 2020
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,464		8.88	%		$	2,523		8.45	%		$	2,390		8.12	%		$	1,969		7.57	%
Total adjusted avg. total asset base	$	27,767					$	29,866					$	29,437					$	26,020
Tier 1 common equity (to risk weighted assets)	$	2,464		12.08	%		$	2,523		11.93	%		$	2,390		10.77	%		$	1,969		10.07	%
Tier 1 capital (to risk weighted assets)	$	2,464		12.08	%		$	2,523		11.93	%		$	2,390		10.77	%		$	1,969		10.07	%
Total capital (to risk weighted assets)	$	2,634		12.92	%		$	2,740		12.96	%		$	2,608		11.75	%		$	2,161		11.05	%
Risk-weighted asset base	$	20,395					$	21,141					$	22,194					$	19,559

 

Loans Serviced (Dollars in millions) (Unaudited)
	June 30, 2021						March 31, 2021						December 31, 2020						June 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)	$	211,775		975,467			$	197,053		921,126			$	178,606		867,799			$	174,517		854,693
Serviced for others (3)	34,263			139,029			40,402			160,511			38,026			151,081			29,846			122,779
Serviced for own loan portfolio (4)	9,685			67,988			9,965			66,363			10,079			66,519			9,211			64,142
Total loans serviced	$	255,723		1,182,484			$	247,420		1,148,000			$	226,711		1,085,399			$	213,574		1,041,614

(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)
	June 30, 2021						March 31, 2021						December 31, 2020						June 30, 2020
Consumer loans
Residential first mortgage	$	1,794		12.8	%		$	1,998		13.4	%		$	2,266		14.0	%		$	2,716		18.3	%
Home equity	717			5.1	%		781			5.2	%		856			5.3	%		978			6.6	%
Other	1,133			8.0	%		1,049			7.0	%		1,004			6.1	%		898			6.1	%
Total consumer loans	3,644			25.9	%		3,828			25.6	%		4,126			25.4	%		4,592			31.0	%
Commercial loans
Commercial real estate	3,169			22.6	%		3,084			20.7	%		3,061			18.9	%		3,016			20.4	%
Commercial and industrial	1,376			9.8	%		1,424			9.6	%		1,382			8.5	%		1,968			13.3	%
Warehouse lending	5,863			41.7	%		6,551			44.1	%		7,658			47.2	%		5,232			35.3	%
Total commercial loans	10,408			74.1	%		11,059			74.4	%		12,101			74.6	%		10,216			69.0	%
Total loans held-for-investment	$	14,052		100.0	%		$	14,887		100.0	%		$	16,227		100.0	%		$	14,808		100.0	%

 

Other Consumer Loans Held-for-Investment (Dollars in millions) (Unaudited)
	June 30, 2021						March 31, 2021						December 31, 2020						June 30, 2020
Indirect lending	$	866		76.4	%		$	791		75.4	%		$	713		71.0	%		$	647		72.0	%
Point of sale	225			19.9	%		214			20.4	%		211			21.0	%		181			20.2	%
Other	42			3.7	%		44			4.2	%		80			8.0	%		70			7.8	%
Total other consumer loans	$	1,133		100.0	%		$	1,049		100.0	%		$	1,004		100.0	%		$	898		100.0	%

 

Allowance for Credit Losses (Dollars in millions) (Unaudited)
	June 30, 2021				March 31, 2021				June 30, 2020
Residential first mortgage	$	48			$	45			$	60
Home equity	17				20				28
Other	38				33				34
Total consumer loans	103				98				122
Commercial real estate	58				84				83
Commercial and industrial	38				55				23
Warehouse lending	3				4				1
Total commercial loans	99				143				107
Allowance for loan losses	202				241				229
Reserve for unfunded commitments	18				24				21
Allowance for credit losses	$	220			$	265			$	250

 

Allowance for Credit Losses (Dollars in millions) (Unaudited)
	Three Months Ended June 30, 2021
	Residential First Mortgage			Home Equity			Other Consumer			Commercial Real Estate			Commercial and Industrial			Warehouse Lending			Total LHFI Portfolio (1)			Unfunded Commitments
Adjusted beginning balance	$	45		$	20		$	33		$	84		$	55		$	4		$	241		$	24
Provision (benefit) for credit losses:
Loan volume	6			(1)			2			2			—			(1)			8			(6)
Economic forecast (2)	(1)			(1)			2			(13)			(4)			—			(17)			—
Credit (3)	3			1			1			(14)			—			—			(9)			—
Qualitative factor adjustments (4)	(5)			(2)			—			(1)			(13)			—			(21)			—
Charge-offs	(1)			—			(1)			—			—			—			(2)			—
Recoveries	—			1			—			—			—			—			1			—
Provision for net charge-offs	1			(1)			1			—			—			—			1			—
Ending allowance balance	$	48		$	17		$	38		$	58		$	38		$	3		$	202		$	18

(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 $9 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

Allowance for Credit Losses (Dollars in millions) (Unaudited)
	Six Months Ended June 30, 2021
	Residential First Mortgage			Home Equity			Other Consumer			Commercial Real Estate			Commercial and Industrial			Warehouse Lending			Total LHFI Portfolio (1)			Unfunded Commitments
Adjusted beginning balance	$	49		$	25		$	39		$	84		$	51		$	4		$	252		$	28
Provision (benefit) for credit losses:
Loan volume	3			(2)			3			3			1			(1)			7			(10)
Economic forecast (2)	(4)			(3)			(1)			(2)			(9)			—			(19)			—
Credit (3)	6			2			1			(22)			(1)			—			(14)			—
Qualitative factor adjustments (4)	(6)			(5)			(4)			(5)			(4)			—			(24)			—
Charge-offs	(3)			—			(2)			—			(1)			—			(6)			—
Recoveries	1			(1)			2			—			16			—			18			—
Provision for net charge-offs	2			1			—			—			(15)			—			(12)			—
Ending allowance balance	$	48		$	17		$	38		$	58		$	38		$	3		$	202		$	18

(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 $9 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

Nonperforming Loans and Assets (Dollars in millions) (Unaudited)
	June 30, 2021				March 31, 2021				December 31, 2020				June 30, 2021
Nonperforming LHFI	$	63			$	49			$	46			$	23
Nonperforming TDRs	6				5				4				4
Nonperforming TDRs at inception but performing for less than six months	5				6				6				6
Total nonperforming LHFI and TDRs (1)	74				60				56				33
Other nonperforming assets, net	6				7				8				7
LHFS	9				9				9				7
Total nonperforming assets	$	89			$	76			$	73			$	47
Ratio of nonperforming assets to total assets (2)	0.30		%		0.23		%		0.21		%		0.14		%
Ratio of nonperforming LHFI and TDRs to LHFI	0.53		%		0.40		%		0.34		%		0.22		%
Ratio of nonperforming assets to LHFI and repossessed assets (2)	0.57		%		0.45		%		0.40		%		0.27		%

(1)	Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.
(2)	Ratio excludes 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
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
March 31, 2021
Consumer loans	$	10			$	5			$	42			$	57			$	3,828
Commercial loans	—				—				18				18				11,059
Total loans	$	10			$	5			$	60			$	75			$	14,887
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
June 30, 2020
Consumer loans	$	9			$	6			$	33			$	48			$	4,592
Commercial loans	—				—				—				—				10,216
Total loans	$	9			$	6			$	33			$	48			$	14,808

(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
June 30, 2021
Consumer loans	$	31			$	11			$	42
Commercial loans	2				—				2
Total TDR loans	$	33			$	11			$	44
March 31, 2021
Consumer loans	$	31			$	11			$	42
Commercial loans	5				—				5
Total TDR loans	$	36			$	11			$	47
December 31, 2020
Consumer loans	$	31			$	10			$	41
Commercial loans	5				—				5
Total TDR loans	$	36			$	10			$	46
June 30, 2020
Consumer loans	$	35			$	10			$	45
Commercial loans	5				—				5
Total TDR loans	$	40			$	10			$	50

 

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 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.
	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
	(Dollars in millions, except share data)
Total stockholders' equity	$	2,498			$	2,358			$	2,201			$	2,195			$	1,971
Less: Goodwill and intangible assets	152				155				157				160				164
Tangible book value	$	2,346			$	2,203			$	2,044			$	2,035			$	1,807
Number of common shares outstanding	52,862,264				52,752,600				52,656,067				57,150,470				56,943,979
Tangible book value per share	$	44.38			$	41.77			$	38.80			$	35.60			$	31.74
Total assets	$	27,065			$	29,449			$	31,038			$	29,476			$	27,468
Tangible common equity to assets ratio	8.67		%		7.48		%		6.58		%		6.90		%		6.58		%

 

Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.
	Three Months Ended												Six Months Ended
	June 30, 2021				March 31, 2021				June 30, 2020				June 30, 2021				June 30, 2020
	(Dollars in millions)
Net income	$	147			$	149			$	116			$	296			$	161
Add: Intangible asset amortization, net of tax	2				2				3				2				6
Tangible net income	$	149			$	151			$	119			$	298			$	167
Total average equity	$	2,448			$	2,319			$	1,977			$	2,384			$	1,915
Less: Average goodwill and intangible assets	153				156				165				155				167
Total tangible average equity	$	2,295			$	2,163			$	1,812			$	2,229			$	1,748
Return on average tangible common equity	25.92		%		27.99		%		26.16		%		26.89		%		19.07		%
Adjustment to remove DOJ settlement expense	—		%		4.98		%		—		%		3.86		%		—		%
Adjustment for former CEO SERP agreement	(2.14)		%		—		%		—		%		(1.10)		%		—		%
Adjustment for merger costs	1.89		%		—		%		—		%		0.97		%		—		%
Adjusted return on average tangible common equity	25.67		%		32.97		%		26.16		%		30.62		%		19.07		%
Return on average assets	2.09		%		1.98		%		1.77		%		2.04		%		1.30		%
Adjustment to remove DOJ	—		%		0.36		%		—		%		0.16		%		—		%
Adjustment for former CEO SERP settlement agreement	(0.11)		%		—		%		—		%		(0.05)		%		—		%
Adjustment for merger costs	0.10		%		—		%		—		%		0.04		%		—		%
Adjusted return on average assets	2.08		%		2.34		%		1.77		%		2.19		%		1.30		%

 

Adjusted HFI loan-to-deposit ratio.
	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
	(Dollars in millions)
Average LHFI	$	13,688			$	14,915			$	15,703			$	14,839			$	13,596
Less: Average warehouse loans	5,410				6,395				6,948				5,697				3,785
Adjusted average LHFI	$	8,278			$	8,520			$	8,755			$	9,142			$	9,811
Average deposits	$	19,070			$	20,043			$	21,068			$	19,561			$	17,715
Less: Average custodial deposits	6,188				7,194				8,527				7,347				6,223
Adjusted average deposits	$	12,882			$	12,849			$	12,541			$	12,214			$	11,492
HFI loan-to-deposit ratio	71.8		%		74.4		%		74.5		%		75.9		%		76.7		%
Adjusted HFI loan-to-deposit ratio	64.3		%		66.3		%		69.8		%		74.8		%		85.4		%

 

Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, net interest margin and efficiency ratio.
	Three Months Ended
	June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
	(Dollar in millions)
Noninterest expense	$	289			$	347			$	314			$	301			$	293
Adjustment to remove DOJ settlement expense	—				35				—				—				—
Adjustment for former CEO SERP agreement	(10)				—				—				—				—
Adjustment for merger costs	9				—				—				—				—
Adjusted noninterest expense	$	290			$	312			$	314			$	301			$	293
Income before income taxes	$	190			$	194			$	205			$	295			$	148
Adjustment to remove DOJ settlement expense	$	—			$	35			$	—			$	—			$	—
Adjustment for former CEO SERP agreement	(10)				—				—				—				—
Adjustment for merger costs	9				—				—				—				—
Adjusted income before income taxes	$	189			$	229			$	205			$	295			$	148
Provision for income taxes	$	43			$	45			$	51			$	73			$	32
Adjustment to remove DOJ settlement expense	—				(8)				—				—				—
Adjustment for former CEO SERP agreement	2				—				—				—				—
Adjustment for merger costs	(2)				—				—				—				—
Adjusted provision for income taxes	$	43			$	53			$	51			$	73			$	32
Net income	$	147			$	149			$	154			$	222			$	116
Adjusted net income	$	146			$	176			$	154			$	222			$	116
Weighted average common shares outstanding	52,763,868				52,675,562				53,912,584				57,032,746				56,790,642
Weighted average diluted common shares	53,536,669				53,297,803				54,343,966				57,379,809				57,123,706
Adjusted basic earnings per share	$	2.78			$	3.34			$	2.86			$	3.90			$	2.04
Adjusted diluted earnings per share	$	2.73			$	3.31			$	2.83			$	3.88			$	2.03
Average interest earning assets	$	25,269			$	27,178			$	27,100			$	25,738			$	23,692
Net interest margin	2.90		%		2.82		%		2.78		%		2.78		%		2.86		%
Adjustment to LGG loans available for repurchase	0.16		%		0.20		%		0.20		%		0.16		%		0.02		%
Adjusted net interest margin	3.06		%		3.02		%		2.98		%		2.94		%		2.88		%
Efficiency ratio	66.6		%		67.7		%		60.4		%		47.9		%		54.1		%
Adjustment to remove DOJ settlement expense	—		%		(6.8)		%		—		%		—		%		0.1		%
Adjustment for former CEO SERP agreement	1.6		%		—		%		—		%		—		%		—		%
Adjustment for merger costs	(1.4)		%		—		%		—		%		—		%		—		%
Adjusted efficiency ratio	66.8		%		60.9		%		60.4		%		47.9		%		54.2		%

 

	Twelve Months Ended
	June 30, 2021			June 30, 2020
	(Dollar in millions)
Average Equity	2,285,768,506			1,838,956,372
Average GW/Intangible	156,156,714			168,585,196
Adjusted Average Equity	2,129,611,792			1,670,371,176
Tangible Net Income	681,175,736			293,106,675
Adjustments for DOJ, CEO SERP, and merger costs (net of tax effect)	26,048,207			—
Adjusted Tangible Net Income	655,127,529			293,106,675
Adjusted return on average common equity	31	%		18	%

                                       

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

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SOURCE Flagstar Bancorp, Inc.

FAQ

What were Flagstar Bancorp's Q2 2021 earnings results?

Flagstar Bancorp reported net income of $147 million or $2.74 per diluted share for Q2 2021.

How much net interest income did Flagstar generate in Q2 2021?

Flagstar generated $183 million in net interest income in Q2 2021.

What is the current capital ratio of Flagstar Bancorp?

As of Q2 2021, Flagstar Bancorp's total risk-based capital ratio is 14.1%.

Did Flagstar Bancorp release any allowance for credit losses in Q2 2021?

Yes, Flagstar released $45 million from its allowance for credit losses in Q2 2021.

What changes occurred in Flagstar's mortgage revenue during Q2 2021?

Flagstar's mortgage revenue decreased to $163 million, influenced by lower loan sales.