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

Rhea-AI Summary

Flagstar Bancorp (NYSE: FBC) reported strong third-quarter 2021 results, with net income of $152 million, or $2.83 per diluted share, up from $147 million in Q2 2021. Year-to-date net income reached $448 million. Net interest income increased 7% to $195 million, benefiting from higher average loans held-for-sale and a stable net interest margin of 3.00%. The company’s capital ratios improved, with a total risk-based capital ratio of 14.55%. However, net income decreased from $222 million in Q3 2020. Flagstar also released $30 million from its allowance for credit losses.

Positive

• Net interest income increased 7% to $195 million from Q2 2021.
• Net income for Q3 2021 was $152 million, up from $147 million in Q2 2021.
• Total risk-based capital ratio increased to 14.55%.
• Strong return on average tangible common equity of 25.2%.

Negative

• Net income decreased from $222 million in Q3 2020.
• Noninterest expense remained high at $286 million.

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

Key Highlights - Third Quarter 2021

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

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

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

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

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

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

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

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

Income Statement Highlights
	Three Months Ended
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
	(Dollars in millions, except per share data)
Net interest income	$	195		$	183		$	189		$	189		$	180
(Benefit) provision for credit losses	(23)			(44)			(28)			2			32
Noninterest income	266			252			324			332			448
Noninterest expense	286			289			347			314			301
Income before income taxes	198			190			194			205			295
Provision for income taxes	46			43			45			51			73
Net income	$	152		$	147		$	149		$	154		$	222
Income per share:
Basic	$	2.87		$	2.78		$	2.83		$	2.86		$	3.90
Diluted	$	2.83		$	2.74		$	2.80		$	2.83		$	3.88

 

Adjusted Income Statement Highlights (Non-GAAP)(1)
	Three Months Ended
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
	(Dollars in millions, except per share data)
Net interest income	$	195		$	183		$	189		$	189		$	180
(Benefit) provision for credit losses	(23)			(44)			(28)			2			32
Noninterest income	266			252			324			332			448
Noninterest expense	281			290			312			314			301
Income before income taxes	203			189			229			205			295
Provision for income taxes	47			43			53			51			73
Net income	$	156		$	146		$	176		$	154		$	222
Income per share:
Basic	$	2.98		$	2.78		$	3.34		$	2.86		$	3.90
Diluted	$	2.94		$	2.73		$	3.31		$	2.83		$	3.88

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

 

Key Ratios
	Three Months Ended
	September 30, 2021		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020
Net interest margin	3.00	%	2.90	%	2.82	%	2.78	%	2.78	%
Adjusted net interest margin (1)	3.04	%	3.06	%	3.02	%	2.98	%	2.94	%
Return on average assets	2.2	%	2.1	%	2.0	%	2.1	%	3.1	%
Return on average common equity	23.4	%	24.0	%	25.7	%	27.6	%	41.5	%
Efficiency ratio	62.2	%	66.6	%	67.7	%	60.4	%	47.9	%
HFI loan-to-deposit ratio	68.8	%	71.8	%	74.4	%	74.5	%	75.9	%
Adjusted HFI loan-to-deposit ratio (2)	60.3	%	64.3	%	66.3	%	69.8	%	74.8	%

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

 

Average Balance Sheet Highlights
	Three Months Ended															% Change
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			Seq		Yr/Yr
	(Dollars in millions)
Average interest-earning assets	$	25,656		$	25,269		$	27,178		$	27,100		$	25,738		2	%	—	%
Average loans held-for-sale (LHFS)	7,839			6,902			7,464			5,672			5,602			14	%	40	%
Average loans held-for-investment (LHFI)	13,540			13,688			14,915			15,703			14,839			(1)	%	(9)	%
Average total deposits	19,686			19,070			20,043			21,068			19,561			3	%	1	%

Net Interest Income

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

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

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

Provision for Credit Losses

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

Noninterest Income

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

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

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

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

Mortgage Metrics
	As of/Three Months Ended															Change (% / bps)
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			Seq	Yr/Yr
	(Dollars in millions)
Mortgage rate lock commitments (fallout- adjusted) (1) (2)	$	11,300		$	12,400		$	12,300		$	12,000		$	15,000		(9)%	(25)%
Mortgage loans closed (1)	$	12,500		$	12,800		$	13,800		$	13,100		$	14,400		(2)%	(13)%
Net margin on mortgage rate lock commitments (fallout-adjusted) (2)	1.50		%	1.35		%	1.84		%	1.93		%	2.31		%	15	(81)
Net gain on loan sales	$	169		$	168		$	227		$	232		$	346		1%	(51)%
Net return (loss) on mortgage servicing rights (MSR)	$	9		$	(5)		$	—		$	—		$	12		N/M	(25)%
Gain on loan sales + net return on the MSR	$	178		$	163		$	227		$	232		$	358		9%	(50)%
Loans serviced (number of accounts - 000's) (3)	1,203			1,182			1,148			1,085			1,105			2%	9%
Capitalized value of MSRs	1.08		%	1.00		%	1.06		%	0.86		%	0.85		%	8	23

N/M

Not meaningful

(1)

Rounded to the nearest hundred million

(2)

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

(3)

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

Noninterest Expense

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

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

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

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

Income Taxes

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

Asset Quality

Credit Quality Ratios
	As of/Three Months Ended															Change (% / bps)
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			Seq	Yr/Yr
	(Dollars in millions)
Allowance for credit losses (1)	$	190		$	220		$	265		$	280		$	280		(14)%	(32)%
Credit reserves to LHFI	1.33		%	1.57		%	1.78		%	1.73		%	1.70		%	(24)	-37
Credit reserves to LHFI excluding warehouse	2.29		%	2.63		%	3.11		%	3.20		%	3.07		%	(34)	(78)
Net (recoveries) charge-offs	$	6		$	1		$	(13)		$	2		$	2		N/M	N/M
Total nonperforming LHFI and TDRs	$	96		$	75		$	60		$	56		$	45		28%	N/M
Net (recoveries) charge-offs to LHFI ratio (annualized)	0.19		%	0.01		%	(0.35)		%	0.04		%	0.05		%	18	14
Ratio of nonperforming LHFI and TDRs to LHFI	0.66		%	0.53		%	0.40		%	0.34		%	0.28		%	13	38
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):
Residential first mortgage	—		%	0.16		%	0.31		%	0.11		%	0.07		%	(16)	(7)
Home equity and other consumer	0.01		%	0.15		%	0.16		%	0.06		%	0.23		%	(14)	(22)
Commercial real estate	0.03		%	—		%	(0.01)		%	—		%	(0.01)		%	3	4
Commercial and industrial	1.87		%	0.04		%	(4.12)		%	0.21		%	0.06		%	183	181
N/M - Not meaningful

(1)	Includes the allowance for loan losses and the reserve on unfunded commitments.
(2)	Excludes loans carried under the fair value option.

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

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

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

Capital

Capital Ratios (Bancorp)																Change (% / bps)
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			Seq	Yr/Yr
Tier 1 leverage (to adj. avg. total assets)	9.72		%	9.21		%	8.11		%	7.71		%	8.04		%	51	168
Tier 1 common equity (to RWA)	11.95		%	11.38		%	10.31		%	9.15		%	9.21		%	57	274
Tier 1 capital (to RWA)	13.11		%	12.56		%	11.45		%	10.23		%	10.31		%	55	280
Total capital (to RWA)	14.55		%	14.13		%	13.18		%	11.89		%	11.29		%	42	326
Tangible common equity to asset ratio (1)	9.23		%	8.67		%	7.48		%	6.58		%	6.90		%	56	233
Tangible book value per share (1)	$	47.21		$	44.38		$	41.77		$	38.80		$	35.60		6%	33%

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

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

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

About Flagstar

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

Use of Non-GAAP Financial Measures

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

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

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

Cautionary Statements Regarding Forward-Looking Statements

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

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

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

Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Dollars in millions)
(Unaudited)
	September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2020
Assets
Cash	$	103			$	168			$	251			$	194
Interest-earning deposits	46				177				372				86
Total cash and cash equivalents	149				345				623				280
Investment securities available-for-sale	1,802				1,823				1,944				2,165
Investment securities held-to-maturity	236				270				377				440
Loans held-for-sale	6,378				6,138				7,098				5,372
Loans held-for-investment	14,268				14,052				16,227				16,476
Loans with government guarantees	1,945				2,226				2,516				2,500
Less: allowance for loan losses	(171)				(202)				(252)				(255)
Total loans held-for-investment and loans with government guarantees, net	16,042				16,076				18,491				18,721
Mortgage servicing rights	340				342				329				323
Federal Home Loan Bank stock	377				377				377				377
Premises and equipment, net	370				374				392				410
Goodwill and intangible assets	149				152				157				160
Other assets	1,199				1,168				1,250				1,228
Total assets	$	27,042			$	27,065			$	31,038			$	29,476
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	8,108			$	7,986			$	9,458			$	9,429
Interest-bearing deposits	11,228				10,675				10,515				10,516
Total deposits	19,336				18,661				19,973				19,945
Short-term Federal Home Loan Bank advances and other	1,870				2,095				3,900				2,226
Long-term Federal Home Loan Bank advances	1,400				1,200				1,200				1,200
Other long-term debt	396				396				641				493
Loan with government guarantee repurchase options	163				989				1,851				1,783
Other liabilities	1,232				1,226				1,272				1,634
Total liabilities	24,397				24,567				28,837				27,281
Stockholders' Equity
Common stock	1				1				1				1
Additional paid in capital	1,362				1,356				1,346				1,493
Accumulated other comprehensive income	38				45				47				46
Retained earnings	1,244				1,096				807				655
Total stockholders' equity	2,645				2,498				2,201				2,195
Total liabilities and stockholders' equity	$	27,042			$	27,065			$	31,038			$	29,476

 

Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
																	Change compared to:
	Three Months Ended																2Q21						3Q20
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020				Amount			Percent			Amount			Percent
Interest Income
Total interest income	$	209		$	198		$	208		$	212		$	206			$	11		6	%		$	3		1	%
Total interest expense	14			15			19			23			26				(1)			(7)	%		(12)			(46)	%
Net interest income	195			183			189			189			180				12			7	%		15			8	%
(Benefit) provision for credit losses	(23)			(44)			(28)			2			32				21			(48)	%		(55)			N/M
Net interest income after provision for credit losses	218			227			217			187			148				(9)			(4)	%		70			47	%
Noninterest Income
Net gain on loan sales	169			168			227			232			346				1			1	%		(177)			(51)	%
Loan fees and charges	33			37			42			48			41				(4)			(11)	%		(8)			(20)	%
Net return (loss) on the mortgage servicing rights	9			(5)			—			—			12				14			N/M			(3)			(25)	%
Loan administration income	31			28			27			25			26				3			11	%		5			19	%
Deposit fees and charges	9			8			8			8			8				1			13	%		1			13	%
Other noninterest income	15			16			20			19			15				(1)			(6)	%		—			—	%
Total noninterest income	266			252			324			332			448				14			6	%		(182)			(41)	%
Noninterest Expense
Compensation and benefits	130			122			144			125			123				8			7	%		7			6	%
Occupancy and equipment	46			50			46			44			47				(4)			(8)	%		(1)			(2)	%
Commissions	44			51			62			70			72				(7)			(14)	%		(28)			(39)	%
Loan processing expense	22			22			21			24			20				—			—	%		2			10	%
Legal and professional expense	12			11			8			11			9				1			9	%		3			33	%
Federal insurance premiums	6			4			6			5			6				2			50	%		—			—	%
Intangible asset amortization	3			3			3			3			3				—			—	%		—			—	%
Other noninterest expense	23			26			57			32			21				(3)			(12)	%		2			10	%
Total noninterest expense	286			289			347			314			301				(3)			(1)	%		(15)			(5)	%
Income before income taxes	198			190			194			205			295				8			4	%		(97)			(33)	%
Provision for income taxes	46			43			45			51			73				3			7	%		(27)			(37)	%
Net income	$	152		$	147		$	149		$	154		$	222			$	5		3	%		$	(70)		(32)	%
Income per share
Basic	$	2.87		$	2.78		$	2.83		$	2.86		$	3.90			$	0.09		3	%		$	(1.03)		(26)	%
Diluted	$	2.83		$	2.74		$	2.80		$	2.83		$	3.88			$	0.09		3	%		$	(1.05)		(27)	%
Cash dividends declared	$	0.06		$	0.06		$	0.06		$	0.05		$	0.05			$	—		—	%		$	0.01		20	%
N/M - Not meaningful

 

Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)
	Nine Months Ended								Change
	September 30, 2021				September 30, 2020				Amount			Percent
Interest Income
Total interest income	$	614			$	608			$	6		1	%
Total interest expense	48				112				(64)			(57)	%
Net interest income	566				496				70			14	%
(Benefit) provision for credit losses	(95)				148				(243)			N/M
Net interest income after provision for credit losses	661				348				313			N/M
Noninterest Income
Net gain on loan sales	564				739				(175)			(24)	%
Loan fees and charges	112				102				10			10	%
Net return on the mortgage servicing rights	4				10				(6)			N/M
Loan administration income	85				59				26			44	%
Deposit fees and charges	26				24				2			8	%
Other noninterest income	51				44				7			16	%
Total noninterest income	842				978				(136)			(14)	%
Noninterest Expense
Compensation and benefits	396				341				55			16	%
Occupancy and equipment	141				132				9			7	%
Commissions	156				162				(6)			(4)	%
Loan processing expense	65				59				6			10	%
Legal and professional expense	32				20				12			60	%
Federal insurance premiums	16				19				(3)			(16)	%
Intangible asset amortization	8				10				(2)			(20)	%
Other noninterest expense	108				84				24			29	%
Total noninterest expense	922				827				95			11	%
Income before income taxes	581				499				82			16	%
Provision for income taxes	133				115				18			16	%
Net income	$	448			$	384			$	64		17	%
Income per share
Basic	$	8.48			$	6.76			$	1.72		25	%
Diluted	$	8.37			$	6.71			$	1.66		25	%
Cash dividends declared	$	0.18			$	0.15			$	0.03		20	%
N/M - Not meaningful

 

Flagstar Bancorp, Inc.
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in millions, except share data)
(Unaudited)
	Three Months Ended												Nine Months Ended
	September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
Selected Mortgage Statistics (1):
Mortgage rate lock commitments (fallout-adjusted) (2)	$	11,300			$	12,400			$	15,000			$	36,000			$	40,000
Mortgage loans closed	$	12,500			$	12,800			$	14,400			$	39,100			$	35,200
Mortgage loans sold and securitized	$	12,400			$	14,000			$	14,500			$	40,100			$	34,900
Selected Ratios:
Interest rate spread (3)	2.84		%		2.70		%		2.44		%		2.70		%		2.41		%
Net interest margin	3.00		%		2.90		%		2.78		%		2.90		%		2.81		%
Net margin on loans sold and securitized	1.36		%		1.20		%		2.39		%		1.41		%		2.12		%
Return on average assets	2.16		%		2.09		%		3.15		%		2.08		%		1.97		%
Adjusted return on average assets (4)	2.21		%		2.08		%		3.15		%		2.22		%		1.97		%
Return on average common equity	23.40		%		23.97		%		41.54		%		24.32		%		25.71		%
Return on average tangible common equity (5)	25.18		%		25.92		%		45.42		%		24.65		%		28.58		%
Adjusted return on average tangible common equity (4) (5)	26.16		%		25.67		%		45.42		%		27.23		%		28.58		%
Efficiency ratio	62.2		%		66.6		%		47.9		%		65.5		%		56.1		%
Adjusted efficiency ratio (4)	61.1		%		66.8		%		47.9		%		62.8		%		56.1		%
Common equity-to-assets ratio (average for the period)	9.24		%		8.74		%		7.57		%		8.55		%		7.66		%
Average Balances:
Average interest-earning assets	$	25,656			$	25,269			$	25,738			$	26,029			$	23,535
Average interest-bearing liabilities	$	15,590			$	14,641			$	14,281			$	15,083			$	14,625
Average stockholders' equity	$	2,592			$	2,448			$	2,141			$	2,454			$	1,991

(1)	Rounded to nearest hundred million.
(2)	Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.
(3)	Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(4)	See Non-GAAP Reconciliation for further information.
(5)	Excludes goodwill, intangible assets and the associated amortization. See Non-GAAP Reconciliation for further information.

 

	September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2020
Selected Statistics:
Book value per common share	$	50.04			$	47.26			$	41.79			$	38.41
Tangible book value per share (1)	$	47.21			$	44.38			$	38.80			$	35.60
Number of common shares outstanding	52,862,383				52,862,264				52,656,067				57,150,470
Number of FTE employees	5,461				5,503				5,214				4,871
Number of bank branches	158				158				158				160
Ratio of nonperforming assets to total assets (2)	0.37		%		0.30		%		0.21		%		0.17		%
Common equity-to-assets ratio	9.78		%		9.23		%		7.09		%		7.45		%
MSR Key Statistics and Ratios:
Weighted average service fee (basis points)	32.1				32.6				34.3				35.0
Capitalized value of mortgage servicing rights	1.08		%		1.00		%		0.86		%		0.85		%

(1)	Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.
(2)	Ratio excludes LHFS.

 

Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
	Three Months Ended
	September 30, 2021									June 30, 2021									September 30, 2020
	Average Balance			Interest			Annualized Yield/Rate			Average Balance			Interest			Annualized Yield/Rate			Average Balance			Interest			Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	7,839		$	63		3.22%			$	6,902		$	53		3.05%			$	5,602		$	45		3.21%
Loans held-for-investment
Residential first mortgage	1,706			14			3.14%			1,887			15			3.27%			2,584			21			3.24%
Home equity	686			6			3.64%			748			7			3.64%			951			9			3.77%
Other	1,177			14			4.76%			1,101			13			4.80%			950			13			5.28%
Total consumer loans	3,569			34			3.77%			3,736			35			3.79%			4,485			43			3.78%
Commercial real estate	3,238			28			3.43%			3,093			26			3.37%			3,007			27			3.47%
Commercial and industrial	1,341			12			3.56%			1,449			14			3.72%			1,650			14			3.25%
Warehouse lending	5,392			52			3.76%			5,410			53			3.95%			5,697			56			3.92%
Total commercial loans	9,971			92			3.62%			9,952			93			3.74%			10,354			97			3.68%
Total loans held-for-investment	13,540			126			3.66%			13,688			128			3.75%			14,839			140			3.71%
Loans with government guarantees	2,046			8			1.61%			2,344			5			0.79%			2,122			5			0.89%
Investment securities	2,058			12			2.15%			2,123			12			2.19%			2,807			16			2.29%
Interest-earning deposits	173			—			0.18%			212			—			0.13%			368			—			0.11%
Total interest-earning assets	25,656			$	209		3.22%			25,269			$	198		3.12%			25,738			$	206		3.16%
Other assets	2,391									2,742									2,539
Total assets	$	28,047								$	28,011								$	28,277
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,603		$	—		0.05%			$	1,686		$	—		0.06%			$	1,824		$	—		0.09%
Savings deposits	4,144			2			0.14%			4,084			1			0.14%			3,675			3			0.34%
Money market deposits	840			—			0.08%			762			—			0.07%			733			—			0.09%
Certificates of deposit	1,038			1			0.50%			1,126			2			0.62%			1,672			8			1.62%
Total retail deposits	7,625			3			0.16%			7,658			3			0.18%			7,904			11			0.53%
Government deposits	2,148			1			0.17%			1,795			1			0.19%			1,403			1			0.35%
Wholesale deposits and other	1,342			3			0.99%			1,170			4			1.33%			953			4			1.77%
Total interest-bearing deposits	11,115			7			0.26%			10,623			8			0.31%			10,260			16			0.62%
Short-term FHLB advances and other	2,736			1			0.18%			2,422			1			0.17%			2,328			2			0.20%
Long-term FHLB advances	1,343			3			0.92%			1,200			3			1.03%			1,200			3			1.03%
Other long-term debt	396			3			3.16%			396			3			3.19%			493			5			4.52%
Total interest-bearing liabilities	15,590			14			0.38%			14,641			15			0.43%			14,281			26			0.72%
Noninterest-bearing deposits
Retail deposits and other	2,391									2,259									1,954
Custodial deposits (1)	6,180									6,188									7,347
Total noninterest-bearing deposits	8,571									8,447									9,301
Other liabilities	1,294									2,476									2,554
Stockholders' equity	2,592									2,448									2,141
Total liabilities and stockholders' equity	$	28,047								$	28,012								$	28,277
Net interest-earning assets	$	10,066								$	10,628								$	11,457
Net interest income				$	195								$	183								$	180
Interest rate spread (2)							2.84%									2.70%									2.44%
Net interest margin (3)							3.00%									2.90%									2.78%
Ratio of average interest-earning assets to interest-bearing liabilities							164.6	%								172.6	%								180.2	%
Total average deposits	$	19,686								$	19,070								$	19,561

(1)	Approximately 80 percent of custodial deposits from loans subserviced for which LIBOR based fees are recognized as an offset in net loan administration income.
(2)	Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
(3)	Net interest margin is net interest income divided by average interest-earning assets.

 

Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)
	Nine Months Ended
	September 30, 2021									September 30, 2020
	Average Balance			Interest			Annualized Yield/Rate			Average Balance			Interest			Annualized Yield/Rate
Interest-Earning Assets
Loans held-for-sale	$	7,403		$	169		3.04%			$	5,499		$	142		3.44%
Loans held-for-investment
Residential first mortgage	1,907			46			3.21%			2,822			72			3.40%
Home equity	751			20			3.59%			990			30			4.10%
Other	1,106			40			4.78%			882			36			5.47%
Total consumer loans	3,764			106			3.75%			4,694			138			3.94%
Commercial real estate	3,125			80			3.38%			3,019			90			3.90%
Commercial and industrial	1,425			39			3.60%			1,774			50			3.68%
Warehouse lending	5,729			170			3.91%			3,937			119			3.98%
Total commercial loans	10,279			289			3.71%			8,730			259			3.89%
Total loans held-for-investment	14,043			395			3.72%			13,424			397			3.91%
Loans with government guarantees	2,295			15			0.95%			1,267			12			1.23%
Investment securities	2,130			35			2.19%			3,094			56			2.40%
Interest-earning deposits	158			—			0.15%			251			1			0.56%
Total interest-earning assets	26,029			$	614		3.13%			23,535			$	608		3.42%
Other assets	2,672									2,457
Total assets	$	28,701								$	25,992
Interest-Bearing Liabilities
Retail deposits
Demand deposits	$	1,713		$	1		0.06%			$	1,737		$	4		0.33%
Savings deposits	4,058			4			0.14%			3,513			17			0.63%
Money market deposits	763			—			0.07%			712			1			0.17%
Certificates of deposit	1,152			6			0.71%			1,970			29			1.98%
Total retail deposits	7,686			11			0.20%			7,932			51			0.86%
Government deposits	1,907			3			0.19%			1,208			6			0.68%
Wholesale deposits and other	1,182			11			1.27%			758			12			2.03%
Total interest-bearing deposits	10,775			25			0.32%			9,898			69			0.93%
Short-term FHLB advances and other	2,646			3			0.17%			3,212			16			0.65%
Long-term FHLB advances	1,248			9			0.99%			1,021			9			1.13%
Other long-term debt	414			11			3.50%			494			18			4.94%
Total interest-bearing liabilities	15,083			48			0.43%			14,625			112			1.01%
Noninterest-bearing deposits
Retail deposits and other	2,307									1,680
Custodial deposits (1)	6,517									6,120
Total noninterest-bearing deposits	8,824									7,800
Other liabilities	2,340									1,576
Stockholders' equity	2,454									1,991
Total liabilities and stockholders' equity	$	28,701								$	25,992
Net interest-earning assets	$	10,946								$	8,910
Net interest income				$	566								$	496
Interest rate spread (2)							2.70%									2.41%
Net interest margin (3)							2.90%									2.81%
Ratio of average interest-earning assets to interest-bearing liabilities							172.6	%								160.9	%
Total average deposits	$	19,598								$	17,698

a.	Approximately 80 percent of custodial deposits are from subserviced loans for which LIBOR based fees are recognized as an offset in net loan administration income.
b.	Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
c.	Net interest margin is net interest income divided by average interest-earning assets.

 

Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)
	Three Months Ended												Nine Months Ended
	September 30, 2021				June 30 2021				September 30, 2020				September 30, 2021				September 30, 2020
Net income	$	152			$	147			$	222			$	448			$	384
Weighted average common shares outstanding	52,862,288				52,763,868				57,032,746				52,767,923				56,827,171
Stock-based awards	797,134				772,801				347,063				731,366				404,518
Weighted average diluted common shares	53,659,422				53,536,669				57,379,809				53,499,289				57,231,689
Basic earnings per common share	$	2.87			$	2.78			$	3.90			$	8.48			$	6.76
Stock-based awards	(0.04)				(0.04)				(0.02)				(0.11)				(0.05)
Diluted earnings per common share	$	2.83			$	2.74			$	3.88			$	8.37			$	6.71

 

Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)
	September 30, 2021						June 30, 2021						December 31, 2020						September 30, 2020
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,709		9.72	%		$	2,562		9.21	%		$	2,270		7.71	%		$	2,256		8.04	%
Total adjusted avg. total asset base	$	27,863					$	27,828					$	29,444					$	28,069
Tier 1 common equity (to risk weighted assets)	$	2,469		11.95	%		$	2,322		11.38	%		$	2,030		9.15	%		$	2,016		9.21	%
Tier 1 capital (to risk weighted assets)	$	2,709		13.11	%		$	2,562		12.56	%		$	2,270		10.23	%		$	2,256		10.31	%
Total capital (to risk weighted assets)	$	3,006		14.55	%		$	2,882		14.13	%		$	2,638		11.89	%		$	2,471		11.29	%
Risk-weighted asset base	$	20,664					$	20,399					$	22,190					$	21,882

 

Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)
	September 30, 2021						June 30, 2021						December 31, 2020						September 30, 2020
	Amount			Ratio			Amount			Ratio			Amount			Ratio			Amount			Ratio
Tier 1 leverage (to adjusted avg. total assets)	$	2,619		9.40	%		$	2,464		8.88	%		$	2,390		8.12	%		$	2,212		7.89	%
Total adjusted avg. total asset base	$	27,851					$	27,767					$	29,437					$	28,051
Tier 1 common equity (to risk weighted assets)	$	2,619		12.71	%		$	2,464		12.08	%		$	2,390		10.77	%		$	2,212		10.11	%
Tier 1 capital (to risk weighted assets)	$	2,619		12.71	%		$	2,464		12.08	%		$	2,390		10.77	%		$	2,212		10.11	%
Total capital (to risk weighted assets)	$	2,766		13.42	%		$	2,634		12.92	%		$	2,608		11.75	%		$	2,427		11.09	%
Risk-weighted asset base	$	20,609					$	20,395					$	22,194					$	21,882

 

Loans Serviced
(Dollars in millions)
(Unaudited)
	September 30, 2021						June 30, 2021						December 31, 2020						September 30, 2020
	Unpaid Principal Balance (1)			Number of accounts			Unpaid Principal Balance (1)			Number of accounts			Unpaid Principal Balance (1)			Number of accounts			Unpaid Principal Balance (1)			Number of accounts
Subserviced for others (2)	$	230,045		1,007,557			$	211,775		975,467			$	178,606		867,799			$	180,981		893,559
Serviced for others (3)	31,354			124,665			34,263			139,029			38,026			151,081			37,908			148,868
Serviced for own loan portfolio (4)	10,410			70,738			9,685			67,988			10,079			66,519			8,469			62,486
Total loans serviced	$	271,809		1,202,960			$	255,723		1,182,484			$	226,711		1,085,399			$	227,358		1,104,913

(1)	UPB, net of write downs, does not include premiums or discounts.
(2)	Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes temporary short-term subservicing performed as a result of sales of servicing-released MSRs.
(3)	Loans for which Flagstar owns the MSR.
(4)	Includes LHFI (residential first mortgage, home equity and other consumer), LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

 

Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
	September 30, 2021						June 30, 2021						December 31, 2020						September 30, 2020
Consumer loans
Residential first mortgage	$	1,626		11.5	%		$	1,794		12.8	%		$	2,266		14.0	%		$	2,472		15.0	%
Home equity	657			4.6	%		717			5.1	%		856			5.3	%		924			5.6	%
Other	1,203			8.3	%		1,133			8.0	%		1,004			6.1	%		973			5.9	%
Total consumer loans	3,486			24.4	%		3,644			25.9	%		4,126			25.4	%		4,369			26.5	%
Commercial loans
Commercial real estate	3,216			22.6	%		3,169			22.6	%		3,061			18.9	%		2,996			18.2	%
Commercial and industrial	1,387			9.7	%		1,376			9.8	%		1,382			8.5	%		1,520			9.2	%
Warehouse lending	6,179			43.3	%		5,863			41.7	%		7,658			47.2	%		7,591			46.1	%
Total commercial loans	10,782			75.6	%		10,408			74.1	%		12,101			74.6	%		12,107			73.5	%
Total loans held-for-investment	$	14,268		100.0	%		$	14,052		100.0	%		$	16,227		100.0	%		$	16,476		100.0	%

 

Other Consumer Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
	September 30, 2021						June 30, 2021						December 31, 2020						September 30, 2020
Indirect lending	$	916		76.1	%		$	866		76.4	%		$	713		71.0	%		$	710		73.0	%
Point of sale	248			20.6	%		225			19.9	%		211			21.0	%		202			20.7	%
Other	39			3.2	%		42			3.7	%		80			8.0	%		61			6.3	%
Total other consumer loans	$	1,203		100.0	%		$	1,133		100.0	%		$	1,004		100.0	%		$	973		100.0	%

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
	September 30, 2021				June 30, 2021				September 30, 2020
Residential first mortgage	$	43			$	48			$	52
Home equity	15				17				29
Other	32				38				38
Total consumer loans	90				103				119
Commercial real estate	35				58				89
Commercial and industrial	43				38				42
Warehouse lending	3				3				5
Total commercial loans	81				99				136
Allowance for loan losses	171				202				255
Reserve for unfunded commitments	19				18				25
Allowance for credit losses	$	190			$	220			$	280

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
	Three Months Ended September 30, 2021
	Residential First Mortgage			Home Equity			Other Consumer			Commercial Real Estate			Commercial and Industrial			Warehouse Lending			Total LHFI Portfolio (1)			Unfunded Commitments
Beginning balance	$	48		$	17		$	38		$	58		$	38		$	3		$	202		$	18
Provision (benefit) for credit losses:
Loan volume	(1)			(1)			2			1			—			—			1			1
Economic forecast (2)	(2)			(1)			—			(3)			(4)			—			(10)			—
Credit (3)	(1)			1			—			(11)			17			—			6			—
Qualitative factor adjustments (4)	(1)			(1)			(8)			(10)			(8)			—			(28)			—
Charge-offs	(1)			—			(1)			—			(6)			—			(8)			—
Recoveries	1			1			—			—			—			—			2			—
Provision for net charge-offs	—			(1)			1			—			6			—			6			—
Ending allowance balance	$	43		$	15		$	32		$	35		$	43		$	3		$	171		$	19

(1)	Excludes loans carried under the fair value option.
(2)	Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.
(3)	Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.
(4)	Includes $6 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)
	Nine Months Ended September 30, 2021
	Residential First Mortgage			Home Equity			Other Consumer			Commercial Real Estate			Commercial and Industrial			Warehouse Lending			Total LHFI Portfolio (1)			Unfunded Commitments
Beginning balance	$	49		$	25		$	39		$	84		$	51		$	4		$	252		$	28
Provision (benefit) for credit losses:
Loan volume	2			(3)			5			4			1			(1)			8			(9)
Economic forecast (2)	(6)			(4)			(1)			(5)			(13)			—			(29)			—
Credit (3)	5			3			1			(33)			16			—			(8)			—
Qualitative factor adjustments (4)	(7)			(6)			(12)			(15)			(12)			—			(52)			—
Charge-offs	(4)			(1)			(3)			—			(7)			—			(15)			—
Recoveries	2			1			2			—			16			—			21			—
Provision for net charge-offs	2			—			1			—			(9)			—			(6)			—
Ending allowance balance	$	43		$	15		$	32		$	35		$	43		$	3		$	171		$	19

(1)	Excludes loans carried under the fair value option.
(2)	Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.
(3)	Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.
(4)	Includes $6 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)
	September 30, 2021				June 30, 2021				December 31, 2020				September 30, 2021
Nonperforming LHFI	$	82			$	63			$	46			$	36
Nonperforming TDRs	5				6				4				4
Nonperforming TDRs at inception but performing for less than six months	9				7				6				5
Total nonperforming LHFI and TDRs (1)	96				76				56				45
Other nonperforming assets, net	6				6				8				6
LHFS	10				9				9				6
Total nonperforming assets	$	112			$	91			$	73			$	57
Ratio of nonperforming assets to total assets (2)	0.37		%		0.30		%		0.21		%		0.17		%
Ratio of nonperforming LHFI and TDRs to LHFI	0.66		%		0.53		%		0.34		%		0.28		%
Ratio of nonperforming assets to LHFI and repossessed assets (2)	0.70		%		0.57		%		0.40		%		0.31		%

(1)	Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.
(2)	Ratio excludes nonperforming LHFS.

 

Asset Quality - Loans Held-for-Investment
(Dollars in millions)
(Unaudited)
	30-59 Days Past Due				60-89 Days Past Due				Greater than 90 days (1)				Total Past Due				Total LHFI
September 30, 2021
Consumer loans	$	12			$	2			$	58			$	72			$	3,486
Commercial loans	—				—				35				35				10,782
Total loans	$	12			$	2			$	93			$	107			$	14,268
June 30, 2021
Consumer loans	$	8			$	4			$	55			$	67			$	3,644
Commercial loans	—				—				20				20				10,408
Total loans	$	8			$	4			$	75			$	87			$	14,052
December 31, 2020
Consumer loans	$	9			$	6			$	38			$	53			$	4,126
Commercial loans	21				—				18				39				12,101
Total loans	$	30			$	6			$	56			$	92			$	16,227
September 30, 2020
Consumer loans	$	9			$	4			$	36			$	49			$	4,369
Commercial loans	—				—				10				10				12,107
Total loans	$	9			$	4			$	46			$	59			$	16,476

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

 

Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)
	TDRs
	Performing				Nonperforming				Total
September 30, 2021
Consumer loans	$	34			$	14			$	48
Commercial loans	—				2				2
Total TDR loans	$	34			$	14			$	50
June 30, 2021
Consumer loans	$	31			$	11			$	42
Commercial loans	—				2				2
Total TDR loans	$	31			$	13			$	44
December 31, 2020
Consumer loans	$	31			$	10			$	41
Commercial loans	5				—				5
Total TDR loans	$	36			$	10			$	46
September 30, 2020
Consumer loans	$	34			$	9			$	43
Commercial loans	5				—				5
Total TDR loans	$	39			$	9			$	48

 

Non-GAAP Reconciliation

(Unaudited)

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

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

 

Tangible book value per share and tangible common equity to assets ratio.
	September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
	(Dollars in millions, except share data)
Total stockholders' equity	$	2,645			$	2,498			$	2,358			$	2,201			$	2,195
Less: Goodwill and intangible assets	149				152				155				157				160
Tangible book value	$	2,496			$	2,346			$	2,203			$	2,044			$	2,035
Number of common shares outstanding	52,862,383				52,862,264				52,752,600				52,656,067				57,150,470
Tangible book value per share	$	47.21			$	44.38			$	41.77			$	38.80			$	35.60
Total assets	$	27,042			$	27,065			$	29,449			$	31,038			$	29,476
Tangible common equity to assets ratio	9.23		%		8.67		%		7.48		%		6.58		%		6.90		%

 

Adjusted return on average tangible common equity and adjusted return on average assets.
	Three Months Ended												Nine Months Ended
	September 30, 2021				June 30, 2021				September 30, 2020				September 30, 2021				September 30, 2020
	(Dollars in millions)
Net income	$	152			$	147			$	222			$	448			$	384
Add: Intangible asset amortization, net of tax	2				2				3				6				7
Tangible net income	$	154			$	149			$	225			$	454			$	391
Total average equity	$	2,592			$	2,448			$	2,141			$	2,454			$	1,991
Less: Average goodwill and intangible assets	151				153				162				—				165
Total tangible average equity	$	2,441			$	2,295			$	1,979			$	2,454			$	1,826
Return on average tangible common equity	25.18		%		25.92		%		45.42		%		24.65		%		28.58		%
Adjustment to remove DOJ settlement expense	—		%		—		%		—		%		2.34		%		—		%
Adjustment for former CEO SERP agreement	—		%		(2.14)		%		—		%		(0.67)		%		—		%
Adjustment for merger costs	0.98		%		1.89		%		—		%		0.91		%		—		%
Adjusted return on average tangible common equity	26.16		%		25.67		%		45.42		%		27.23		%		28.58		%
Return on average assets	2.16		%		2.09		%		3.15		%		2.08		%		1.97		%
Adjustment to remove DOJ	—		%		—		%		—		%		0.13		%		—		%
Adjustment for former CEO SERP settlement agreement	—		%		(0.11)		%		—		%		(0.04)		%		—		%
Adjustment for merger costs	0.05		%		0.10		%		—		%		0.05		%		—		%
Adjusted return on average assets	2.21		%		2.08		%		3.15		%		2.22		%		1.97		%

 

Adjusted HFI loan-to-deposit ratio.
	September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
	(Dollars in millions)
Average LHFI	$	13,540			$	13,688			$	14,915			$	15,703			$	14,839
Less: Average warehouse loans	5,392				5,410				6,395				6,948				5,697
Adjusted average LHFI	$	8,148			$	8,278			$	8,520			$	8,755			$	9,142
Average deposits	$	19,686			$	19,070			$	20,043			$	21,068			$	19,561
Less: Average custodial deposits	6,180				6,188				7,194				8,527				7,347
Adjusted average deposits	$	13,506			$	12,882			$	12,849			$	12,541			$	12,214
HFI loan-to-deposit ratio	68.8		%		71.8		%		74.4		%		74.5		%		75.9		%
Adjusted HFI loan-to-deposit ratio	60.3		%		64.3		%		66.3		%		69.8		%		74.8		%

 

Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, and efficiency ratio.
	Three Months Ended												Nine Months Ended
	September 30, 2021				June 30, 2021				March 31, 2021				September 30, 2021
	(Dollar in millions)
Noninterest expense	$	286			$	289			$	347			$	922
Adjustment to remove DOJ settlement expense	—				—				35				35
Adjustment for former CEO SERP agreement	—				(10)				—				(10)
Adjustment for merger costs	5				9				—				14
Adjusted noninterest expense	$	281			$	290			$	312			$	883
Income before income taxes	$	198			$	190			$	194			$	581
Adjustment to remove DOJ settlement expense	—				—				35				35
Adjustment for former CEO SERP agreement	—				(10)				—				(10)
Adjustment for merger costs	5				9				—				14
Adjusted income before income taxes	$	203			$	189			$	229			$	620
Provision for income taxes	$	46			$	43			$	45			$	133
Adjustment to remove DOJ settlement expense	—				—				(8)				(8)
Adjustment for former CEO SERP agreement	—				2				—				2
Adjustment for merger costs	(1)				(2)				—				(3)
Adjusted provision for income taxes	$	47			$	43			$	53			$	142
Net income	$	152			$	147			$	149			$	448
Adjusted net income	$	156			$	146			$	176			$	478
Weighted average common shares outstanding	52,862,288				52,763,868				52,675,562				52,767,923
Weighted average diluted common shares	53,659,422				53,536,669				53,297,803				53,499,289
Adjusted basic earnings per share	$	2.98			$	2.78			$	3.34			$	9.04
Adjusted diluted earnings per share	$	2.94			$	2.73			$	3.31			$	8.92
Efficiency ratio	62.2		%		66.6		%		67.7		%		65.5		%
Adjustment to remove DOJ settlement expense	—		%		—		%		(6.8)		%		(2.5)		%
Adjustment for former CEO SERP agreement	—		%		1.6		%		—		%		0.7		%
Adjustment for merger costs	(1.1)		%		(1.4)		%		—		%		(1.0)		%
Adjusted efficiency ratio	61.1		%		66.8		%		60.9		%		62.7		%

 

Adjusted net interest margin
	Three Months Ended
	September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020
Average interest earning assets	$	25,656			$	25,269			$	27,178			$	27,100			$	25,738
Net interest margin	3.00		%		2.90		%		2.82		%		2.78		%		2.78		%
Adjustment to LGG loans available for repurchase	0.04		%		0.16		%		0.20		%		0.20		%		0.16		%
Adjusted net interest margin	3.04		%		3.06		%		3.02		%		2.98		%		2.94		%

 

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

View original content:https://www.prnewswire.com/news-releases/flagstar-bancorp-reports-third-quarter-2021-net-income-of-152-million-or-2-83-per-diluted-share-301409349.html

SOURCE Flagstar Bancorp, Inc.

FAQ

What were Flagstar Bancorp's net income results for Q3 2021?

Flagstar Bancorp reported a net income of $152 million, or $2.83 per diluted share, for Q3 2021.

How much did Flagstar Bancorp's net interest income increase in Q3 2021?

Net interest income increased by 7%, reaching $195 million in Q3 2021.

What is Flagstar Bancorp's total risk-based capital ratio as of September 30, 2021?

The total risk-based capital ratio for Flagstar Bancorp increased to 14.55% as of September 30, 2021.

How does Flagstar Bancorp's Q3 2021 net income compare to Q3 2020?

Net income for Q3 2021 was $152 million, down from $222 million in Q3 2020.