Flagstar Bancorp Reports Third Quarter 2020 Net Income of $222 million, or $3.88 Per Diluted Share

Rhea-AI Summary

Flagstar Bancorp reported a remarkable third quarter of 2020, achieving net income of $222 million, or $3.88 per diluted share, significantly up from $116 million in the previous quarter. The company experienced a $12 million increase in net interest income, totaling $180 million, driven by strong performance in the banking sector. Mortgage revenue soared to $358 million due to a strong gain on sale margin. Despite a notable $30 million increase in credit loss reserves amid ongoing economic uncertainty, tangible book value grew by 25% in 2020.

Positive

• Net income increased to $222 million, up from $116 million in Q2 2020.
• Net interest income rose by $12 million to $180 million.
• Mortgage revenue reached $358 million on strong gain on sale margins.
• Tangible book value grew 25% year-to-date.

Negative

• Increased allowance for credit losses by $30 million, raising total to $280 million.

TROY, Mich., Oct. 21, 2020 /PRNewswire/ --

Key Highlights - Third Quarter 2020

• Surpassed record results from second quarter 2020 as all segments posted strong earnings
• Grew net interest income by $12 million to $180 million
• Achieved mortgage revenue of $358 million on strong gain on sale margin and volume growth
• Increased the allowance for credit losses by $30 million, raising the coverage ratio to 1.7 percent, or 3.1 percent excluding warehouse loans
• Generated tangible book value growth of 25 percent through the first nine months of 2020

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported third quarter 2020 net income of $222 million, or $3.88 per diluted share, compared to second quarter 2020 net income of $116 million, or $2.03 per diluted share and third quarter 2019 net income of $63 million, or $1.11 per diluted share.

"It was another quarter for the record books as we surpassed the high-water mark for earnings we set last quarter," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "We once again demonstrated the power of our business model as strong results across all of our primary business segments combined to produce record earnings of $3.88 per share. And while our performance in mortgage is a headline, it shares the space with outstanding results from our banking and servicing teams."

"Banking performed remarkably well during the quarter, growing net interest income $12 million to $180 million. Our warehouse business—and our success in safely growing low-risk balances without sacrificing yield—was a big contributor to our performance. Our solid performance in warehouse, combined with a concerted effort to reduce deposit funding costs, resulted in a 6-basis-point increase in net interest margin, excluding loans with government guarantees that have not been repurchased.

"We also were pleased to see commercial loan deferrals end the quarter at just $47 million. That's less than 1 percent of our commercial loan portfolio, down significantly from their peak in the second quarter. Still, we felt it was prudent to increase our credit reserves to $280 million to reflect the continued uncertainty of COVID-19 and its ongoing economic impact. We believe our conservative approach to fortify the bank's balance sheet positions us well in an unpredictable economy. Our coverage ratio is now 3.1 percent, excluding warehouse loans, which places it among the strongest in the industry.

"In Servicing, we closed the quarter with a 6 percent increase over the second quarter in loans serviced and subserviced, bringing our servicing book to a little more than 1.1 million loans. This growth is especially strong considering the headwinds from the continued pressure of elevated prepayments, and it's a testament to our business model and the strength of the relationships we have developed with our subservicing partners.

"Our mortgage team was absolutely stellar, producing revenue of $358 million on a 12-basis-point expansion of gain on sale margin and an 9 percent increase in fallout adjusted locks over the prior quarter. While a robust mortgage market fueled our revenue growth in the business, it is our diverse, multi-channel mortgage platform that allowed us to maximize mortgage profitability by optimizing product and channel mix.

"Like prior quarters, our results in the third quarter show the power of our business model. Mortgage was once again a standout, but it shares the stage with our unique and diversified businesses that deliver solid net interest income and margin in banking—led by contributions from warehouse lending—and predictable fee income from Servicing. Combined, they generated the capital that produced a tangible book value of $35.60 per share at quarter end."

Income Statement Highlights
	Three Months Ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
	(Dollars in millions)
Net interest income	$	180		$	168		$	148		$	152		$	146
Provision for credit losses	32			102			14			—			1
Noninterest income	452			378			157			162			171
Noninterest expense	305			296			235			245			238
Income before income taxes	295			148			56			69			78
Provision for income taxes	73			32			10			11			15
Net income	$	222		$	116		$	46		$	58		$	63
Income per share:
Basic	$	3.90		$	2.04		$	0.80		$	1.01		$	1.12
Diluted	$	3.88		$	2.03		$	0.80		$	1.00		$	1.11

 

Key Ratios
	Three Months Ended
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019
Net interest margin	2.78	%	2.86	%	2.81	%	2.91	%	3.05	%
Adjusted net interest margin (2)	2.94	%	2.88	%	2.81	%	2.91	%	3.05	%
Return on average assets	3.1	%	1.8	%	0.8	%	1.0	%	1.2	%
Return on average common equity	41.5	%	23.5	%	9.8	%	12.7	%	14.7	%
Efficiency ratio	48.3	%	54.3	%	77.1	%	78.2	%	75.2	%
HFI loan-to-deposit ratio	75.9	%	76.7	%	74.9	%	76.5	%	74.2	%
Adjusted HFI loan-to-deposit ratio (1)	74.8	%	85.4	%	86.3	%	84.6	%	82.0	%

(1)	Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.
(2)	Excludes LGG loans available for repurchase. See Non-GAAP Reconciliation for further information.

 

Average Balance Sheet Highlights
	Three Months Ended															% Change
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			Seq		Yr/Yr
	(Dollars in millions)
Average interest-earning assets	$	25,738		$	23,692		$	21,150		$	20,708		$	18,997		9	%	35	%
Average loans held-for-sale (LHFS)	5,602			5,645			5,248			5,199			3,786			(1)	%	48	%
Average loans held-for-investment (LHFI)	14,839			13,596			11,823			12,168			11,743			9	%	26	%
Average total deposits	19,561			17,715			15,795			15,904			15,817			10	%	24	%

Net Interest Income

Net interest income in the third quarter 2020 was $180 million, an increase of $12 million (7 percent) compared to the second quarter 2020. The increase was primarily driven by warehouse loan growth and the impact of lower rates on deposit and borrowing costs, which was partially offset by lower yields on earning assets. Average earning assets increased $2.0 billion, reflecting increases of $2.5 billion in average total loans partially offset by a $0.6 billion decrease in average investment securities. 

The net interest margin in the third quarter 2020 was 2.78 percent, an 8 basis point decrease 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 6 basis points to 2.94 percent in the third quarter, compared to adjusted net interest margin of 2.88 percent in the prior quarter. The increase in the adjusted net interest margin was primarily driven by a shift to higher yielding warehouse loans and lower rates on deposit and borrowing costs. Retail banking deposit rates decreased 22 basis points driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits and a higher balance of noninterest bearing deposits. This improvement more than offset the impact of declining interest rates on the loans held-for-investment portfolio.

Loans held-for-investment averaged $14.8 billion for the third quarter 2020, increasing $1.2 billion (9 percent) from the prior quarter. The increase was primarily driven by $1.9 billion (51 percent) higher average warehouse loan balances as we grew this business and took advantage of the strong mortgage market. The result was partially offset by $0.5 billion (9 percent) lower average commercial loans, excluding warehouse, primarily due to a decrease in our home builder finance portfolio and the completion of the sale of the Paycheck Protection Program loans during the third quarter.

Average total deposits were $19.6 billion in the third quarter 2020, increasing $1.8 billion (10 percent) from the second quarter 2020. Average custodial deposits increased $1.1 billion (18 percent) due to higher prepayments from refinancing, average government deposits increased $0.3 billion (29 percent) and retail deposits increased $0.2 billion (2 percent) primarily due to the continued impact of COVID-19 on consumer behavior and spending patterns and higher cash balances being carried by commercial depositors.  

Provision for Credit Losses

The provision for credit losses was $32 million for the third quarter 2020, as compared to $102 million for the second quarter 2020. We have continued to add to our reserve balance as we believe the economic recovery will continue to be challenged due to the COVID-19 pandemic for an extended period of time, especially as it relates to consumer loan forbearance and the commercial real estate sector.

Noninterest Income

Noninterest income increased $74 million to $452 million in the third quarter 2020, as compared to $378 million for the second quarter 2020, primarily due to higher mortgage revenues.

Third quarter 2020 net gain on loan sales increased $43 million, to $346 million, as compared to $303 million in the second quarter 2020. The net gain on loan sale margin increased 12 basis points, to 2.31 percent for the third quarter 2020, as compared to 2.19 percent for the second quarter 2020. The increase was primarily driven by improved execution in secondary marketing and the gain associated with the residential mortgage-backed securitization transaction we executed during the quarter. Fallout -adjusted locks increased $1.2 billion, or 9 percent, to $15.0 billion, as historically low interest rates continued to fuel a strong refinance market.

Net return on mortgage servicing rights increased $20 million, to a $12 million net return for the third quarter 2020, compared to an $8 million net loss for the second quarter 2020. The third quarter 2020 MSR return normalized following the MSR valuation decrease caused by rising prepayment speeds in the second quarter 2020 which did not reoccur.

Loan administration income increased $5 million, to $26 million for the third quarter 2020, compared to $21 million for the second quarter 2020, largely driven by an increase in the average number of loans being subserviced and higher level of fees for loans in forbearance.

Loan fees and charges increased $4 million, to $45 million for the third quarter 2020, compared to $41 million for the second quarter 2020, resulting from a 19 percent increase in mortgage closings. 

Mortgage Metrics
	As of/Three months ended															Change (% / bps)
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			Seq		Yr/Yr
	(Dollars in millions)
Mortgage rate lock commitments (fallout-adjusted) (1) (2)	$	15,000		$	13,800		$	11,200		$	8,200		$	9,200		9	%	63	%
Mortgage loans closed (1)	$	14,400		$	12,200		$	8,600		$	9,300		$	9,300		19	%	56	%
Net margin on mortgage rate lock commitments (fallout-adjusted) (2)		2.31	%	2.19		%	0.80		%	1.23		%	1.20		%	12		111
Net gain on loan sales	$	346		$	303		$	90		$	101		$	110		14	%	N/M
Net return (loss) on mortgage servicing rights (MSR)	$	12		$	(8)		$	6		$	(3)		$	(2)		N/M		N/M
Gain on loan sales + net return on the MSR	$	358		$	295		$	96		$	98		$	108		21	%	N/M
Loans serviced (number of accounts - 000's) (3)	1,105			1,042			1,082			1,091			994			6	%	11	%
Capitalized value of MSRs	0.85		%	0.87		%	0.95		%	1.21		%	1.14		%	(2)		(29)
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 increased to $305 million for the third quarter 2020, compared to $296 million for the second quarter 2020. This increase was primarily due to the capitalization of origination costs in the second quarter for the PPP loans and the accelerated vesting of certain components of executive compensation that resulted from the most recent secondary share offering. Despite increased volume, mortgage expenses were flat quarter over quarter as the ratio of mortgage noninterest expense to closings – our mortgage expense ratio – declined. This improvement was due to certain expenses in the second quarter that did not reoccur this quarter and are not expected to reoccur in the future, including certain performance-related incentives related to our Opes Advisors division.

The Company's efficiency ratio was 48 percent for the third quarter 2020, as compared to 54 percent for the second quarter 2020, primarily driven lower by extraordinary levels of gain on sale margin.

Income Taxes

The third quarter 2020 provision for income taxes totaled $73 million, with an effective tax rate of 24.7 percent, compared to $32 million and an effective tax rate of 21.5 percent for the second quarter 2020. Our effective tax rate increased due to the higher level of income, which is taxed at higher marginal tax rates. Additionally, we delayed certain tax planning strategies.

Asset Quality

Credit Quality Ratios
	As of/Three Months Ended															Change (% / bps)
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			Seq		Yr/Yr
	(Dollars in millions)
Allowance for credit losses	$	280		$	250		$	152		$	110		$	113		12	%	N/M
Credit reserves to LHFI		1.70	%	1.69		%	1.10		%	0.91		%	0.90		%	1		80
Credit reserves to LHFI excluding warehouse	3.07		%	2.60		%	1.54		%	1.12		%	1.16		%	47		191
Charge-offs, net of recoveries	$	2		$	3		$	2		$	3		$	1		(33)	%	100	%
Total nonperforming LHFI and TDRs	$	45		$	33		$	29		$	26		$	26		36	%	73	%
Net charge-offs to LHFI ratio (annualized)	0.05		%	0.11		%	0.08		%	0.10		%	0.02		%	(6)		3
Ratio of nonperforming LHFI and TDRs to LHFI	0.28		%	0.22		%	0.21		%	0.21		%	0.21		%	6		7
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):
Residential first mortgage	0.07		%	0.26		%	0.08		%	0.08		%	0.07		%	(19)		—
Home equity and other consumer	0.23		%	0.28		%	0.28		%	0.49		%	0.27		%	(5)		(4)
Commercial real estate	(0.01)		%	0.01		%	(0.01)		%	—		%	—		%	(2)		(1)
Commercial and industrial	0.06		%	0.08		%	0.09		%	0.07		%	(0.22)		%	(2)		28
N/M - Not meaningful

(1)    Excludes loans carried under the fair value option.

 

The allowance for credit losses was $280 million and covered 1.70 percent of loans held-for-investment at September 30, 2020, flat compared to June 30, 2020. Excluding warehouse loans, the allowance coverage ratio was 3.07 percent, a 47 basis point increase from June 30, 2020. The increase in the allowance coverage reflects our forecast of economic conditions and our view that the economy will continue to be challenged for an extended period of time as a result of the COVID-19 pandemic.

Net charge-offs in the third quarter 2020 were negligible at $2 million, or 5 basis points of LHFI, compared to $3 million, or 11 basis points in the prior quarter.

Nonperforming loans were $45 million and our ratio of nonperforming loans to loans held-for-investment was 28 basis points at September 30, 2020, a 6 basis point increase compared to June 30, 2020. The increase was due to one commercial loan that was placed on nonaccrual during the quarter. At September 30, 2020, early stage loan delinquencies totaled $13 million, or 8 basis points, of total loans, compared to $15 million, or 10 basis points, at June 30, 2020.

Capital

Capital Ratios (Bancorp)																Change (% / bps)
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			Seq		Yr/Yr
Tier 1 leverage (to adj. avg. total assets)	8.04		%	7.76		%	8.09		%	7.57		%	7.98		%	28		6
Tier 1 common equity (to RWA)	9.21		%	9.11		%	9.17		%	9.32		%	9.25		%	10		(4)
Tier 1 capital (to RWA)	10.31		%	10.33		%	10.52		%	10.83		%	10.81		%	(2)		(50)
Total capital (to RWA)	11.29		%	11.32		%	11.18		%	11.52		%	11.54		%	(3)		(25)
Tangible common equity to asset ratio (1)	6.90		%	6.58		%	6.25		%	6.95		%	7.08		%	32		(18)
Tangible book value per share (1)	$	35.60		$	31.74		$	29.52		$	28.57		$	27.62		12	%	29	%

(1)	See Non-GAAP Reconciliation for further information.

 

The Company maintained a solid capital position with regulatory ratios well 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 sale 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 10.9 percent and a total risk-based capital ratio of 13.4 percent at September 30, 2020.

Importantly, tangible book value per share grew to $35.60, up $3.86 from last quarter and $7.98 higher than the same quarter last year, an increase of 29 percent.

Earnings Conference Call

As previously announced, the Company's third quarter 2020 earnings call will be held Wednesday, October 21, 2020 at 11 a.m. (ET).

To join the call, please dial (800) 353-6461 toll free or (334) 323-0501 and use passcode 9179222. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820, and using passcode 9179222.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $29.5 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 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 87 retail locations in 29 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $227 billion of loans representing slightly over 1.1 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 conference call slides, the Form 8-K Current Report related to this news release and in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company's website at flagstar.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.'s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

 

Flagstar Bancorp, Inc. Consolidated Statements of Financial Condition  (Dollars in millions) (Unaudited)
	September 30, 2020				June 30, 2020				December 31, 2019				September 30, 2019
Assets
Cash	$	194			$	204			$	220			$	234
Interest-earning deposits	86				23				206				119
Total cash and cash equivalents	280				227				426				353
Investment securities available-for-sale	2,165				2,348				2,116				1,697
Investment securities held-to-maturity	440				496				598				635
Loans held-for-sale	5,372				5,615				5,258				4,196
Loans held-for-investment	16,476				14,808				12,129				12,548
Loans with government guarantees	2,500				1,791				736				607
Less: allowance for loan losses	(255)				(229)				(107)				(110)
Total loans held-for-investment and loans with government guarantees, net	18,721				16,370				12,758				13,045
Mortgage servicing rights	323				261				291				285
Federal Home Loan Bank stock	377				377				303				303
Premises and equipment, net	410				410				416				417
Goodwill and intangible assets	160				164				170				174
Other assets	1,228				1,200				930				943
Total assets	$	29,476			$	27,468			$	23,266			$	22,048
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	9,429			$	7,921			$	5,467			$	5,649
Interest-bearing deposits	10,516				9,977				9,679				10,096
Total deposits	19,945				17,898				15,146				15,745
Short-term Federal Home Loan Bank advances and other	2,226				3,354				4,165				2,329
Long-term Federal Home Loan Bank advances	1,200				1,200				650				650
Other long-term debt	493				493				496				496
Other liabilities	3,417				2,552				1,021				1,094
Total liabilities	27,281				25,497				21,478				20,314
Stockholders' Equity
Common stock	1				1				1				1
Additional paid in capital	1,493				1,488				1,483				1,481
Accumulated other comprehensive income	46				46				1				5
Retained earnings	655				436				303				247
Total stockholders' equity	2,195				1,971				1,788				1,734
Total liabilities and stockholders' equity	$	29,476			$	27,468			$	23,266			$	22,048

 

Flagstar Bancorp, Inc. Condensed Consolidated Statements of Operations (Dollars in millions, except per share data) (Unaudited)
																	Change compared to:
	Three Months Ended																2Q20						3Q19
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019				Amount Percent						Amount Percent
Interest Income
Total interest income	$	206		$	201		$	201		$	213		$	203			$	5		2	%		$	3		1	%
Total interest expense	26			33			53			61			57				(7)			(21)	%		(31)			(54)	%
Net interest income	180			168			148			152			146				12			7	%		34			23	%
Provision for credit losses	32			102			14			—			1				(70)			(69)	%		31			N/M
Net interest income after provision for credit losses	148			66			134			152			145				82			124	%		3			2	%
Noninterest Income
Net gain on loan sales	346			303			90			101			110				43			14	%		236			N/M
Loan fees and charges	45			41			26			30			29				4			10	%		16			55	%
Net return (loss) on the mortgage servicing rights	12			(8)			6			(3)			(2)				20			N/M			14			N/M
Loan administration income	26			21			12			8			5				5			24	%		21			N/M
Deposit fees and charges	8			7			9			10			10				1			14	%		(2)			(20)	%
Other noninterest income	15			14			14			16			19				1			7	%		(4)			(21)	%
Total noninterest income	452			378			157			162			171				74			20	%		281			164	%
Noninterest Expense
Compensation and benefits	123			116			102			102			98				7			6	%		25			26	%
Occupancy and equipment	47			44			41			43			40				3			7	%		7			18	%
Commissions	72			61			29			35			38				11			18	%		34			89	%
Loan processing expense	24			25			20			20			22				(1)			(4)	%		2			9	%
Legal and professional expense	9			5			6			9			6				4			80	%		3			50	%
Federal insurance premiums	6			7			6			6			5				(1)			(14)	%		1			20	%
Intangible asset amortization	3			4			3			4			3				(1)			(25)	%		—			—	%
Other noninterest expense	21			34			28			26			26				(13)			(38)	%		(5)			(19)	%
Total noninterest expense	305			296			235			245			238				9			3	%		67			28	%
Income before income taxes	295			148			56			69			78				147			99	%		217			278	%
Provision for income taxes	73			32			10			11			15				41			128	%		58			N/M
Net income	$	222		$	116		$	46		$	58		$	63			$	106		91	%		$	159		252	%
Income per share
Basic	$	3.90		$	2.04		$	0.80		$	1.01		$	1.12			$	1.86		91	%		$	2.78		248	%
Diluted	$	3.88		$	2.03		$	0.80		$	1.00		$	1.11			$	1.85		91	%		$	2.77		250	%
Cash dividends declared	$	0.05		$	0.05		$	0.05		$	0.04		$	0.04			$	—		—	%		$	0.01		25	%
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, 2020				September 30, 2019				Amount			Percent
Interest Income
Total interest income	$	608			$	581			$	27		5	%
Total interest expense	112				171				(59)			(35)	%
Net interest income	496				410				86			21	%
Provision for credit losses	148				18				130			N/M
Net interest income after provision for credit losses	348				392				(44)			(11)	%
Noninterest Income
Net gain on loan sales	739				234				505			N/M
Loan fees and charges	112				70				42			60	%
Net return (loss) on the mortgage servicing rights	10				9				1			11	%
Loan administration income	59				22				37			168	%
Deposit fees and charges	24				28				(4)			(14)	%
Other noninterest income	44				85				(41)			(48)	%
Total noninterest income	988				448				540			121	%
Noninterest Expense
Compensation and benefits	341				275				66			24	%
Occupancy and equipment	132				118				14			12	%
Commissions	162				76				86			N/M
Loan processing expense	69				60				9			15	%
Legal and professional expense	20				18				2			11	%
Federal insurance premiums	19				14				5			36	%
Intangible asset amortization	10				11				(1)			(9)	%
Other noninterest expense	84				71				13			18	%
Total noninterest expense	837				643				194			30	%
Income before income taxes	499				197				302			153	%
Provision for income taxes	115				37				78			N/M
Net income	$	384			$	160			$	224		140	%
Income per share
Basic	$	6.76			$	2.83			$	3.93		139	%
Diluted	$	6.71			$	2.80			$	3.91		140	%
Cash dividends declared	$	0.15			$	0.12			$	0.03		25	%
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, 2020			June 30, 2020			September 30, 2019				September 30, 2020			September 30, 2019
Selected Mortgage Statistics (1):
Mortgage rate lock commitments (fallout-adjusted) (2)	$	15,000		$	13,800		$	9,200			$	40,000		$	24,100
Mortgage loans closed	$	14,400		$	12,200		$	9,300			$	35,200		$	23,400
Mortgage loans sold and securitized	$	14,500		$	12,900		$	8,200			$	34,900		$	22,200
Selected Ratios:
Interest rate spread (3)	2.44		%	2.52		%	2.48		%		2.41		%	2.57		%
Net interest margin	2.78		%	2.86		%	3.05		%		2.81		%	3.07		%
Net margin on loans sold and securitized	2.39		%	2.35		%	1.34		%		2.12		%	1.05		%
Return on average assets	3.15		%	1.77		%	1.20		%		1.97		%	1.08		%
Adjusted return on average assets (4) (5)	3.15		%	1.77		%	1.20		%		1.97		%	0.98		%
Return on average common equity	41.54		%	23.47		%	14.72		%		25.71		%	12.90		%
Return on average tangible common equity (5)	45.42		%	26.16		%	17.12		%		28.58		%	15.30		%
Adjusted return on average tangible common equity (4) (5)	45.42		%	26.16		%	17.12		%		28.58		%	13.99		%
Efficiency ratio	48.3		%	54.3		%	75.2		%		56.4		%	75.0		%
Common equity-to-assets ratio (average for the period)	7.57		%	7.53		%	8.12		%		7.66		%	8.34		%
Average Balances:
Average interest-earning assets	$	25,738		$	23,692		$	18,997			$	23,535		$	17,693
Average interest-bearing liabilities	$	14,281		$	15,119		$	12,893			$	14,625		$	12,767
Average stockholders' equity	$	2,141		$	1,977		$	1,722			$	1,991		$	1,658

(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, 2020				June 30, 2020				December 31, 2019				September 30, 2019
Selected Statistics:
Book value per common share	$	38.41			$	34.62			$	31.57			$	30.69
Tangible book value per share (1)	$	35.60			$	31.74			$	28.57			$	27.62
Number of common shares outstanding	57,150,470				56,943,979				56,631,236				56,510,341
Number of FTE employees	4,871				4,641				4,453				4,171
Number of bank branches	160				160				160				160
Ratio of nonperforming assets to total assets (2)	0.17		%		0.14		%		0.15		%		0.16		%
Common equity-to-assets ratio	7.45		%		7.18		%		7.68		%		7.88		%
MSR Key Statistics and Ratios:
Weighted average service fee (basis points)	35.0				37.0				39.7				39.9
Capitalized value of mortgage servicing rights	0.85		%		0.87		%		1.21		%		1.14		%

(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, 2020									June 30, 2020									September 30, 2019
	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	$	5,602		$	45		3.21%			$	5,645		$	48		3.42%			$	3,786		$	40		4.22%
Loans held-for-investment
Residential first mortgage	2,584			21			3.24%			2,822			24			3.41%			3,282			29			3.58%
Home equity	951			9			3.77%			1,001			9			3.78%			934			13			5.37%
Other	950			13			5.28%			881			12			5.42%			658			10			5.99%
Total consumer loans	4,485			43			3.78%			4,704			45			3.87%			4,874			52			4.24%
Commercial real estate	3,007			27			3.47%			3,101			28			3.64%			2,594			35			5.39%
Commercial and industrial	1,650			14			3.25%			2,006			17			3.34%			1,767			22			4.97%
Warehouse lending	5,697			56			3.92%			3,785			38			3.88%			2,508			32			5.00%
Total commercial loans	10,354			97			3.68%			8,892			83			3.67%			6,869			89			5.14%
Total loans held-for-investment	14,839			140			3.71%			13,596			128			3.74%			11,743			141			4.77%
Loans with government guarantees	2,122			5			0.89%			858			4			1.97%			574			4			2.78%
Investment securities	2,807			16			2.29%			3,417			21			2.42%			2,713			17			2.63%
Interest-earning deposits	368			—			0.11%			176			—			0.11%			181			1			2.22%
Total interest-earning assets	25,738			$	206		3.16%			23,692			$	201		3.38%			18,997			$	203		4.27%
Other assets	2,539									2,569									2,207
Total assets	$	28,277								$	26,261								$	21,204
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,824		$	—		0.09%			$	1,800		$	1		0.22%			$	1,388		$	3		0.88%
Savings deposits	3,675			3			0.34%			3,476			4			0.52%			3,262			10			1.20%
Money market deposits	733			—			0.09%			716			—			0.12%			722			1			0.34%
Certificates of deposit	1,672			8			1.62%			1,987			10			2.00%			2,583			15			2.40%
Total retail deposits	7,904			11			0.53%			7,979			15			0.78%			7,955			29			1.42%
Government deposits	1,403			1			0.35%			1,088			2			0.63%			1,253			4			1.45%
Wholesale deposits and other	953			4			1.77%			738			4			2.07%			744			5			2.42%
Total interest-bearing deposits	10,260			16			0.62%			9,805			21			0.86%			9,952			38			1.52%
Short-term FHLB advances and other	2,328			2			0.20%			3,753			2			0.26%			1,910			10			2.24%
Long-term FHLB advances	1,200			3			1.03%			1,068			3			1.13%			536			2			1.72%
Other long-term debt	493			5			4.52%			493			7			4.99%			495			7			5.60%
Total interest-bearing liabilities	14,281			26			0.72%			15,119			33			0.86%			12,893			57			1.79%
Noninterest-bearing deposits
Retail deposits and other	1,954									1,687									1,315
Custodial deposits (1)	7,347									6,223									4,550
Total noninterest-bearing deposits	9,301									7,910									5,865
Other liabilities	2,554									1,255									717
Stockholders' equity	2,141									1,977									1,722
Total liabilities and stockholders' equity	$	28,277								$	26,261								$	21,197
Net interest-earning assets	$	11,457								$	8,573								$	6,104
Net interest income				$	180								$	168								$	146
Interest rate spread (2)							2.44%									2.52%									2.48%
Net interest margin (3)							2.78%									2.86%									3.05%
Ratio of average interest-earning assets to interest-bearing liabilities							180.2%									156.7%									147.3%
Total average deposits	$	19,561								$	17,715								$	15,817

(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)
	Nine Months Ended,
	September 30, 2020									September 30, 2019
	Average Balance			Interest			Annualized Yield/Rate			Average Balance			Interest			Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	5,499		$	142		3.44	%		$	3,532		$	119		4.48	%
Loans held-for-investment
Residential first mortgage	2,822			72			3.40	%		3,158			85			3.61	%
Home equity	990			30			4.10	%		832			34			5.50	%
Other	882			36			5.47	%		512			25			6.51	%
Total consumer loans	4,694			138			3.94	%		4,502			144			4.29	%
Commercial real estate	3,019			90			3.90	%		2,414			102			5.56	%
Commercial and industrial	1,774			50			3.68	%		1,702			67			5.20	%
Warehouse lending	3,937			119			3.98	%		1,898			74			5.17	%
Total commercial loans	8,730			259			3.89	%		6,014			243			5.34	%
Total loans held-for-investment	13,424			397			3.91	%		10,516			387			4.89	%
Loans with government guarantees	1,267			12			1.23	%		511			11			2.88	%
Investment securities	3,094			56			2.40	%		2,957			61			2.77	%
Interest-earning deposits	251			1			0.56	%		177			3			2.38	%
Total interest-earning assets	23,535			608			3.42	%		17,693			581			4.37	%
Other assets	2,457									2,184
Total assets	$	25,992								$	19,877
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,737		$	4		0.33	%		$	1,311		$	8		0.80	%
Savings deposits	3,513			17			0.63	%		3,181			26			1.10	%
Money market deposits	712			1			0.17	%		748			2			0.31	%
Certificates of deposit	1,970			29			1.98	%		2,561			44			2.29	%
Total retail deposits	7,932			51			0.86	%		7,801			80			1.37	%
Government deposits	1,208			6			0.68	%		1,184			13			1.49	%
Wholesale deposits and other	758			12			2.03	%		518			9			2.35	%
Total interest-bearing deposits	9,898			69			0.93	%		9,503			102			1.44	%
Short-term FHLB advances and other	3,212			16			0.65	%		2,420			44			2.45	%
Long-term FHLB advances	1,021			9			1.13	%		349			4			1.71	%
Other long-term debt	494			18			4.94	%		495			21			5.84	%
Total interest-bearing liabilities	14,625			112			1.01	%		12,767			171			1.80	%
Noninterest-bearing deposits
Retail deposits and other	1,680									1,278
Custodial deposits (1)	6,120									3,524
Total noninterest-bearing deposits	7,800									4,802
Other liabilities	1,576									650
Stockholders' equity	1,991									1,658
Total liabilities and stockholders' equity	$	25,992								$	19,877
Net interest-earning assets	$	8,910								$	4,926
Net interest income				$	496								$	410
Interest rate spread (2)							2.41	%								2.57	%
Net interest margin (3)							2.81	%								3.07	%
Ratio of average interest-earning assets to interest-bearing liabilities							160.9	%								138.6	%
Total average deposits	17,698									14,305

(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.

 

Earnings Per Share (Dollars in millions, except share data) (Unaudited)
	Three Months Ended												Nine Months Ended
	September 30, 2020				June 30 2020				September 30, 2019				September 30, 2020				September 30, 2019
Net Income	$	222			$	116			$	63			$	384			$	160
Weighted average common shares outstanding	57,032,746				56,790,642				56,484,499				56,827,171				56,607,944
Stock-based awards	347,063				333,064				626,297				404,518				644,596
Weighted average diluted common shares	57,379,809				57,123,706				57,110,796				57,231,689				57,252,540
Basic earnings per common share	$	3.90			$	2.04			$	1.12			$	6.76			$	2.83
Stock-based awards	(0.02)				(0.01)				(0.01)				(0.05)				(0.03)
Diluted earnings per common share	$	3.88			$	2.03			$	1.11			$	6.71			$	2.80

 

Regulatory Capital - Bancorp (Dollars in millions) (Unaudited)
	September 30, 2020						June 30, 2020						December 31, 2019						September 30, 2019
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,256		8.04	%		$	2,021		7.76	%		$	1,826		8.00	%		$	1,668		7.98	%
Total adjusted avg. total asset base	$	28,069					$	26,040					$	22,830					$	20,901
Tier 1 common equity (to risk weighted assets)	$	2,016		9.21	%		$	1,781		9.11	%		$	1,586		9.62	%		$	1,428		9.25	%
Tier 1 capital (to risk weighted assets)	$	2,256		10.31	%		$	2,021		10.33	%		$	1,826		11.07	%		$	1,668		10.81	%
Total capital (to risk weighted assets)	$	2,471		11.29	%		$	2,214		11.32	%		$	1,936		11.74	%		$	1,781		11.54	%
Risk-weighted asset base	$	21,882					$	19,562					$	16,493					$	15,432

 

Regulatory Capital - Bank (Dollars in millions) (Unaudited)
	September 30, 2020						June 30, 2020						December 31, 2019						September 30, 2019
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,212		7.89	%		$	1,969		7.57	%		$	1,752		7.71	%		$	1,747		8.35	%
Total adjusted avg. total asset base	28,051						$	26,020					22,727						$	19,614
Tier 1 common equity (to risk weighted assets)	$	2,212		10.11	%		$	1,969		10.07	%		$	1,752		11.04	%		$	1,747		11.33	%
Tier 1 capital (to risk weighted assets)	$	2,212		10.11	%		$	1,969		10.07	%		$	1,752		11.04	%		$	1,747		11.33	%
Total capital (to risk weighted assets)	$	2,427		11.09	%		$	2,161		11.05	%		$	1,862		11.73	%		$	1,860		12.06	%
Risk-weighted asset base	21,882						$	19,559					$	15,873					$	14,538

 

Loans Serviced (Dollars in millions) (Unaudited)
	September 30, 2020						June 30, 2020						December 31, 2019						September 30, 2019
	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)	$	180,981		893,559			$	174,517		854,693			$	194,638		918,662			$	171,145		826,472
Serviced for others	37,908			148,868			29,846			122,779			24,003			105,469			25,039			106,992
Serviced for own loan portfolio (3)	8,469			62,486			9,211			64,142			9,536			66,526			8,058			60,088
Total loans serviced	$	227,358		1,104,913			$	213,574		1,041,614			$	228,177		1,090,657			$	204,242		993,552

(1)	Unpaid principal balance, net of write downs, does not include premiums or discounts.
(2)	Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets.
(3)	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, 2020						June 30, 2020						December 31, 2019						September 30, 2019
Consumer loans
Residential first mortgage	$	2,472		15.0	%		$	2,716		18.3	%		$	3,154		26.0	%		$	3,258		26.0	%
Home equity	924			5.6	%		978			6.6	%		1,024			8.4	%		985			7.8	%
Other	973			5.9	%		898			6.1	%		729			6.0	%		693			5.5	%
Total consumer loans	4,369			26.5	%		4,592			31.0	%		4,907			40.4	%		4,936			39.3	%
Commercial loans
Commercial real estate	2,996			18.2	%		3,016			20.4	%		2,828			23.3	%		2,697			21.5	%
Commercial and industrial	1,520			9.2	%		1,968			13.3	%		1,634			13.5	%		1,700			13.6	%
Warehouse lending	7,591			46.1	%		5,232			35.3	%		2,760			22.8	%		3,215			25.6	%
Total commercial loans	12,107			73.5	%		10,216			69.0	%		7,222			59.6	%		7,612			60.7	%
Total loans held-for-investment	$	16,476		100.0	%		$	14,808		100.0	%		$	12,129		100.0	%		$	12,548		100.0	%

 

Other Consumer Loans Held-for-Investment (Dollars in millions) (Unaudited)
	September 30, 2020						June 30, 2020						December 31, 2019						September 30, 2019
Indirect Lending	$	710		73.0	%		$	647		72.0	%		$	578		79.3	%		$	519		74.9	%
Point of Sale	202			20.8	%		181			20.2	%		63			8.6	%		58			8.4	%
Other	61			6.3	%		70			7.8	%		88			12.1	%		116			16.7	%
Total other consumer loans	$	973		100.0	%		$	898		100.0	%		$	729		100.0	%		$	693		100.0	%

 

Allowance for Credit Losses (Dollars in millions) (Unaudited)
	September 30, 2020				June 30, 2020				September 30, 2019
Residential first mortgage	$	52			$	60			$	28
Home equity	29				28				16
Other	38				34				6
Total consumer loans	119				122				50
Commercial real estate	89				83				33
Commercial and industrial	42				23				22
Warehouse lending	5				1				5
Total commercial loans	136				107				60
Allowance for loan losses	255				229				110
Reserve for unfunded commitments	25				21				3
Allowance for credit losses	$	280			$	250			$	113

 

Allowance for Credit Losses (Dollars in millions) (Unaudited)
	Three Months Ended September 30, 2020
	Residential First Mortgage			Home  Equity			Other Consumer			Commercial Real Estate			Commercial and Industrial			Warehouse Lending			Total LHFI Portfolio (1)			Unfunded Commitments
Beginning balance	$	60		$	28		$	34		$	83		$	23		$	1		$	229		$	21
Provision (benefit) for credit losses:
Loan volume	(4)			(1)			3			—			(4)			1			(5)			4
Economic forecast (2)	(3)			(3)			(1)			—			—			—			(7)			—
Credit (3)	(7)			1			(4)			13			12			—			15			—
Qualitative factor adjustments (4)	6			3			5			(7)			11			3			21			—
Charge-offs	(2)			(1)			(1)			—			—			—			(4)			—
Provision for charge-offs	2			1			1			—			—			—			4			—
Recoveries	—			1			1			—			—			—			2			—
Ending allowance balance	$	52		$	29		$	38		$	89		$	42		$	5		$	255		$	25

(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 $10 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

Nonperforming Loans and Assets (Dollars in millions) (Unaudited)
	September 30, 2020				June 30, 2020				December 31, 2019				September 30, 2019
Nonperforming LHFI	$	36			$	23			$	16			$	16
Nonperforming TDRs	4				4				3				3
Nonperforming TDRs at inception but performing for less than six months	5				6				7				7
Total nonperforming LHFI and TDRs (1)	45				33				26				26
Other nonperforming assets, net	6				7				10				9
LHFS	6				7				5				17
Total nonperforming assets	$	57			$	47			$	41			$	52
Ratio of nonperforming assets to total assets (2)	0.17		%		0.14		%		0.15		%		0.16		%
Ratio of nonperforming LHFI and TDRs to LHFI	0.28		%		0.22		%		0.21		%		0.21		%
Ratio of nonperforming assets to LHFI and repossessed assets (2)	0.31		%		0.27		%		0.30		%		0.29		%

(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
September 30, 2020
Consumer loans	$	9		$	6		$	4		$	48		$	36			$	49			$	4,369
Commercial loans	—						—						10				10				12,107
Total loans	$	9					$	4					$	46			$	59			$	16,476
June 30, 2020
Consumer loans	$	9					$	6					$	33			$	48			$	4,592
Commercial loans	—						—						—				—				10,216
Total loans	$	9					$	6					$	33			$	48			$	14,808
December 31, 2019
Consumer loans	$	9					$	5					$	26			$	40			$	4,907
Commercial loans	—						—						—				—				7,222
Total loans	$	9					$	5					$	26			$	40			$	12,129
September 30, 2019
Consumer loans	$	9					$	3					$	26			$	38			$	4,936
Commercial loans	—						—						—				—				7,612
Total loans	$	9					$	3					$	26			$	38			$	12,548

(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, 2020
Consumer loans	$	34			$	9			$	43
Commercial loans	5				—				5
Total TDR loans	$	39			$	9			$	48
June 30, 2020
Consumer loans	$	35			$	10			$	45
Commercial loans	5				—				5
Total TDR loans	$	40			$	10			$	50
December 31, 2019
Consumer loans	$	38			$	10			$	48
Total TDR loans	$	38			$	10			$	48
September 30, 2019
Consumer loans	$	39			$	10			$	49
Total TDR loans	$	39			$	10			$	49

 

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, return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio and adjusted net interest margin 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, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
	(Dollars in millions, except share data)
Total stockholders' equity	$	2,195			$	1,971			$	1,842			$	1,788			$	1,734
Less: Goodwill and intangible assets	160				164				167				170				174
Tangible book value	$	2,035			$	1,807			$	1,675			$	1,618			$	1,560
Number of common shares outstanding	57,150,470				56,943,979				56,729,789				56,631,236				56,510,341
Tangible book value per share	$	35.60			$	31.74			$	29.52			$	28.57			$	27.62
Total assets	$	29,476			$	27,468			$	26,805			$	23,266			$	22,048
Tangible common equity to assets ratio	6.90		%		6.58		%		6.25		%		6.95		%		7.08		%

 

Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.
	Three Months Ended												Nine Months Ended
	September 30, 2020				December 31, 2019				September 30, 2019				September 30, 2020				September 30, 2019
	(Dollars in millions)
Net income	$	222			$	58			$	63			$	384			$	160
Add: Intangible asset amortization, net of tax	3				3				2				7				10
Tangible net income	$	225			$	61			$	65			$	391			$	170
Total average equity	$	2,141			$	1,803			$	1,722			$	1,991			$	1,658
Less: Average goodwill and intangible assets	162				172				176				165				184
Total tangible average equity	$	1,979			$	1,631			$	1,546			$	1,826			$	1,474
Return on average tangible common equity	45.42		%		14.76		%		17.12		%		28.58		%		15.30		%
Adjustment to remove DOJ adjustment	—		%		—		%		—		%		—		%		(1.31)		%
Adjusted return on average tangible common equity	45.42		%		14.76		%		17.12		%		28.58		%		13.99		%
Return on average assets	3.15		%		0.99		%		1.20		%		1.97		%		1.08		%
Adjustment to remove DOJ adjustment	—		%		—		%		—		%		—		%		(0.10)		%
Adjusted return on average assets	3.15		%		0.99		%		1.20		%		1.97		%		0.98		%

 

Adjusted HFI loan-to-deposit ratio.
	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
	(Dollars in millions)
Average LHFI	$	14,839			$	13,596			$	11,823			$	12,168			$	11,743
Less: Average warehouse loans	5,697				3,785				2,310				2,747				2,508
Adjusted average LHFI	$	9,142			$	9,811			$	9,513			$	9,421			$	9,235
Average deposits	$	19,561			$	17,715			$	15,795			$	15,904			$	15,817
Less: Average custodial deposits	7,347				6,223				4,776				4,772				4,550
Adjusted average deposits	$	12,214			$	11,492			$	11,019			$	11,132			$	11,267
HFI loan-to-deposit ratio	75.9		%		76.7		%		74.9		%		76.5		%		74.2		%
Adjusted HFI loan-to-deposit ratio	74.8		%		85.4		%		86.3		%		84.6		%		82.0		%

 

Adjusted net interest margin.
	Three Months Ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019
Net interest margin	2.78	%		2.86	%		2.81	%		2.91	%		3.05	%
Adjustment to LGG loans available for repurchase	0.16	%		0.02	%		—	%		—	%		—	%
Adjusted net interest margin	2.94	%		2.88	%		2.81	%		2.91	%		3.05	%

 

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

View original content:http://www.prnewswire.com/news-releases/flagstar-bancorp-reports-third-quarter-2020-net-income-of-222-million-or-3-88-per-diluted-share-301156455.html

SOURCE Flagstar Bancorp, Inc.

FAQ

What was Flagstar Bancorp's net income in Q3 2020?

Flagstar Bancorp reported a net income of $222 million for the third quarter of 2020.

How much did Flagstar Bancorp's net interest income increase in Q3 2020?

Net interest income increased by $12 million to $180 million in Q3 2020.

What was the mortgage revenue for Flagstar Bancorp in Q3 2020?

Flagstar Bancorp achieved mortgage revenue of $358 million in the third quarter of 2020.

How much did Flagstar increase its allowance for credit losses in Q3 2020?

Flagstar Bancorp increased its allowance for credit losses by $30 million to a total of $280 million.

What was the growth percentage of tangible book value for Flagstar Bancorp in 2020?

Tangible book value for Flagstar Bancorp grew by 25% through the first nine months of 2020.