FBC
$29.11
Flagstar Bancorp
$.62
2.18%
Earnings Details
2nd Quarter June 2020
Tuesday, July 28, 2020 6:30:00 AM
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Summary

Flagstar Bancorp (FBC) Recent Earnings

Flagstar Bancorp (FBC) reported 2nd Quarter June 2020 earnings of $2.03 per share on revenue of $579.0 million. The consensus earnings estimate was $1.38 per share on revenue of $340.7 million. Revenue grew 58.2% on a year-over-year basis.

Flagstar Bancorp, Inc., is a savings and loan holding company. The Company through its subsidiaries is engaged in offering consumer and commercial financial products and services to individuals, and small and middle market businesses in Michigan.

Results
Reported Earnings
$2.03
Earnings Whisper
-
Consensus Estimate
$1.38
Reported Revenue
$579.0 Mil
Revenue Estimate
$340.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Flagstar Bancorp Reports Second Quarter 2020 Net Income of $116 Million, or $2.03 Per Diluted Share

TROY, Mich., July 28, 2020 /PRNewswire/ --

Key Highlights - Second Quarter 2020

  • Posted best results in company history, validating strength of business model
  • Expanded net interest margin by 5 basis points and increased net interest income by $20 million
  • Achieved mortgage revenues of $295 million, driven by strong gain on sale margin
  • Increased the allowance for credit losses, driving the coverage ratio to 1.69 percent; 2.60 percent, excluding warehouse
  • Achieved stable capital ratios from balance sheet growth in low-risk asset categories

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported second quarter 2020 net income of $116 million, or $2.03 per diluted share, compared to first quarter 2020 net income of $46 million, or $0.80 per diluted share and second quarter 2019 net income of $61 million, or $1.06 per diluted share.

"We posted outstanding results for the quarter, the best in the company's history," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "All cylinders were firing in mortgage as we got a lift from a market that was super-charged and banking and servicing continued to provide stable and consistent earnings.

"Results were further bolstered by the strategic way we managed volume and sales channels to maximize revenue. Banking came in strong, too, with net interest margin up an impressive 5 basis points, and a $20 million increase in net interest income, despite a difficult interest rate backdrop. And we held our ground in servicing, despite high levels of prepayments.

"It's important to note that we earned over $2.00 per share even while setting aside $100 million for loan losses, which raised our credit reserves to $250 million. This pushed our coverage ratio to 1.69 percent overall and 2.60 percent, excluding our warehouse business which has a history of virtually no losses.  This was a provision largely driven by the uncertainty around the pandemic and the conservative approach we took within the CECL framework of modeling-in economic variables.

"Our commercial customers are holding up well to this point and forbearance trends have been positive throughout the quarter. Also noteworthy is the growth in net interest margin in a challenging rate environment. Taken together, we believe these factors position us well for whatever COVID-19 may bring in the future. 

"Mortgage took center stage with revenue of $295 million, largely on the strength of gain on sale margin which expanded 139 basis points, to 219 basis points and a 24 percent increase in fallout adjusted locks from the prior quarter. We capitalized on market opportunities, leveraged the diversity of our platform and shifted our product and channel mix to optimize results. This, along with stronger secondary market performance resulted in net gain on loan sales of $303 million

"We closed the quarter servicing or subservicing slightly more than 1 million loans, which despite high prepayment activity, was generally consistent with the prior quarter. We did this by leveraging our ability to tap into our mortgage origination business to replace loans that prepaid. 

"Additionally, our expense discipline contributed to $180 million of pre-provision net revenue growth compared to the prior quarter. The expense increases we did have this quarter were largely attributable to variable costs associated with the strong performance in mortgage leading to our efficiency ratio of 54 percent.

"Like the first quarter, our results in the second quarter reflect the power of our business model. Mortgage was a standout, but the contribution of our warehouse business, our net interest income and margin in banking, and the consistency of our servicing business and the related fee income highlight our unique and diversified business mix. The combination of these items drove strong capital generation, resulting in a tangible book value per share of $31.74 at quarter end.

"I would be remiss if I didn't comment on the horrific events that gripped the nation during the quarter and how they have inspired us as a company to open a dialogue about social and racial inequities and be a catalyst for change. For starters, we realized that in order to create a work environment where employees could be themselves and do their best work we had to acknowledge what was happening in the outside world. So, we listened to our employees and did everything from pulling our advertising from Facebook in July to support the Stop Hate for Profit initiative, to holding "Let's Talk About It" panel discussions about current events. We're pledging $1 million dollars in grants to minority owned small businesses and another $1 million to nonprofits that support diversity, equity and inclusion. Additionally, our board of directors has approved adding two new directors to the board who will be women representing minority groups. Reversing decades of systemic inequities is a marathon and not a sprint, but we are committed to making our company and our communities fairer and more equitable for all. We're off and running.

"As for our financial performance, we don't know what lies ahead, but we continue to show the strength of our unique business model in a range of economic environments. This quarter was extraordinary, but it stands on the shoulders of many other quarters where we turned in solid, consistent results from a business model designed to do just that." 

Income Statement Highlights






Three Months Ended


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019


(Dollars in millions)

Net interest income

$

168


$

148


$

152


$

146


$

138


Provision for credit losses

102


14



1


17


Noninterest income

378


157


162


171


168


Noninterest expense

296


235


245


238


214


Income before income taxes

148


56


69


78


75


Provision for income taxes

32


10


11


15


14


Net income

$

116


$

46


$

58


$

63


$

61


Income per share:






Basic

$

2.04


$

0.80


$

1.01


$

1.12


$

1.08


Diluted

$

2.03


$

0.80


$

1.00


$

1.11


$

1.06


 

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






Three Months Ended


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019


(Dollars in millions)

Net interest income

$

168


$

148


$

152


$

146


$

138


Provision for credit losses

102


14



1


17


Noninterest income

378


157


162


171


143


Noninterest expense

296


235


245


238


214


Income before income taxes

148


56


69


78


50


Provision for income taxes

32


10


11


15


9


Net income

$

116


$

46


$

58


$

63


$

41








Income per share:






Basic

$

2.04


$

0.80


$

1.01


$

1.12


$

0.72


Diluted

$

2.03


$

0.80


$

1.00


$

1.11


$

0.71



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

 

Key Ratios






Three Months Ended


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Net interest margin

2.86

%

2.81

%

2.91

%

3.05

%

3.08

%

Return on average assets

1.8

%

0.8

%

1.0

%

1.2

%

1.2

%

Return on average common equity

23.5

%

9.8

%

12.7

%

14.7

%

14.6

%

Efficiency ratio

54.3

%

77.1

%

78.2

%

75.2

%

69.8

%

HFI loan-to-deposit ratio

76.7

%

74.9

%

76.5

%

74.2

%

75.0

%

Adjusted HFI loan-to-deposit ratio (1)

85.4

%

86.3

%

84.6

%

82.0

%

80.6

%


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

 

Average Balance Sheet Highlights








Three Months Ended

% Change


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

23,692


$

21,150


$

20,708


$

18,997


$

17,759


12

%

33

%

Average loans held-for-sale (LHFS)

5,645


5,248


5,199


3,786


3,539


8

%

60

%

Average loans held-for-investment (LHFI)

13,596


11,823


12,168


11,743


10,613


15

%

28

%

Average total deposits

17,715


15,795


15,904


15,817


14,159


12

%

25

%

Net Interest Income

Net interest income in the second quarter of 2020 was $168 million, an increase of $20 million (14 percent) compared to the first quarter 2020.  The increase was primarily driven by loan growth, the impact of lower interest rates on deposits, and lower borrowing costs, partially offset by lower yields on earnings assets. Average earnings assets increased $2.5 billion, reflecting increases of $2.2 billion in average total loans and $0.4 billion in average investment securities. 

The net interest margin in the second quarter of 2020 was 2.86 percent, a 5 basis point increase from the prior quarter. The increase in the net interest margin was primarily driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits, combined with lower short-term FHLB borrowing costs. This increase more than offset the impact declining interest rates and a lower yield curve had on the loans held-for-investment portfolio. Our cost of interest-bearing deposits in the second quarter of 2020 was 86 bps, which declined from 133 basis points in the prior quarter, representing a 47 basis point decrease.

Loans held-for-investment averaged $13.6 billion for the second quarter of 2020, increasing $1.8 billion (15 percent) from the prior quarter, primarily driven by $1.5 billion (64 percent) higher average warehouse loan balances as we grew our business and took advantage of the strong mortgage market and $0.3 billion of paycheck protection program loans.

Average total deposits were $17.7 billion in the second quarter 2020, increasing $1.9 billion (12 percent) from the first quarter 2020.  Average custodial deposits increased $1.4 billion (30 percent) due to higher prepayments from refinancing and average retail deposits increased $0.4 billion (4 percent) largely due to COVID-19 pandemic impact on the behavior and spending patterns for consumers and conservative commercial depositors carrying higher cash balances.  

Provision for Credit Losses

The provision for credit losses was $102 million for the second quarter 2020, as compared to $14 million for the first quarter 2020. The increase was primarily driven by our forecast of economic conditions.  These forecasts reflect our view that the economy will continue to be challenged by the response to the COVID-19 pandemic, especially in the commercial real estate sector, for an extended period of time.

Noninterest Income

Noninterest income increased $221 million to $378 million in the second quarter 2020, as compared to $157 million for the first quarter 2020, primarily due to higher mortgage revenues.

Second quarter 2020 net gain on loan sales increased $213 million, to $303 million, as compared to $90 million in the first quarter 2020.  The net gain on loan sale margin increased 139 basis points, to 2.19 percent for the second quarter 2020, as compared to 0.80 percent for the first quarter 2020.  The extraordinary gain on sale margin increase was primarily driven by our response to market conditions and higher originations in our retail channel.  Fallout-adjusted locks increased $2.7 billion, or 24 percent, to $13.8 billion, as historically low interest rates fueled a strong refinance market and state re-openings brought the purchase market to life.

Net return on mortgage servicing rights decreased $14 million, to an $8 million net loss for the second quarter of 2020, compared to a $6 million net gain for the first quarter 2020, primarily driven by higher prepayments. 

Loan fees and charges increased $15 million, to $41 million for the second quarter of 2020, compared to $26 million for the first quarter 2020, resulting from a 41 percent increase in mortgage closings. 

Mortgage Metrics








As of/Three months ended

Change (% / bps)


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Seq

Yr/Yr


(Dollars in millions)



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

$

13,811


$

11,154


$

8,179


$

9,197


$

8,344


24

%

66

%

Mortgage loans closed

$

12,156


$

8,591


$

9,303


$

9,263


$

8,641


41

%

41

%

Net margin on mortgage rate lock commitments (fallout-adjusted) (1)

2.19

%

0.80

%

1.23

%

1.20

%

0.89

%

139


130


Net gain on loan sales

$

303


$

90


$

101


$

110


$

75


N/M


N/M


Net return on mortgage servicing rights (MSR)

$

(8)


$

6


$

(3)


$

(2)


$

5


N/M


N/M


Gain on loan sales + net return on the MSR

$

295


$

96


$

98


$

108


$

80


N/M


N/M


Loans serviced (number of accounts - 000's) (2)

1,042


1,082


1,091


994


983


(4)

%

6

%

Capitalized value of MSRs

0.87

%

0.95

%

1.21

%

1.14

%

1.23

%

(8)


(36)


N/M - Not meaningful








(1)  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.

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

Noninterest Expense

Noninterest expense increased to $296 million for the second quarter 2020, compared to $235 million for the first quarter 2020, primarily reflecting a $53 million increase in mortgage-related expenses due to higher mortgage volumes. Mortgage expense relative to closings increased during the quarter due to higher retail channel mix. Additionally, compensation and benefits expense increased $14 million from the prior quarter, primarily driven by higher variable compensation attributed to stronger financial results.

The Company's efficiency ratio was 54 percent for the second quarter 2020, as compared to 77 percent for the first quarter 2020.

Income Taxes

The second quarter 2020 provision for income taxes totaled $32 million, with an effective tax rate of 21.5 percent, compared to $10 million and an effective tax rate of 18.4 percent for the first quarter 2020.  The higher rate was the result of our higher level of income in the second quarter, which is taxed at higher marginal tax rates. Also contributing to the higher rate is a greater percentage of earnings in higher state tax jurisdictions, lower tax benefits for stock-based compensation and higher FDIC expenses, which are not deductible.

Asset Quality

Credit Quality Ratios










As of/Three Months Ended

Change (% / bps)


June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Seq


Yr/Yr


(Dollars in millions)





Allowance for credit losses

$

250


$

152


$

110


$

113


$

113


64

%

N/M


Credit reserves to LHFI

1.69

%

1.10

%

0.91

%

0.90

%

0.97

%

59


72


Charge-offs, net of recoveries

$

3


$

2


$

3


$

1


$

34


50

%

(91)

%

Total nonperforming LHFI and TDRs

$

33


$

29


$

26


$

26


$

63


14

%

(48)

%

Net charge-offs to LHFI ratio (annualized)

0.11

%

0.08

%

0.10

%

0.02

%

1.29

%

3


(118)


Ratio of nonperforming LHFI and TDRs to LHFI

0.22

%

0.21

%

0.21

%

0.21

%

0.54

%

1


(32)












Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):





Residential first mortgage

0.26

%

0.08

%

0.08

%

0.07

%

0.11

%

N/M


N/M


Home equity and other consumer

0.28

%

0.28

%

0.49

%

0.27

%

0.71

%


(61)


Commercial real estate

0.01

%

(0.01)

%

%

%

%

N/M


N/M


Commercial and industrial

0.08

%

0.09

%

0.07

%

(0.22)

%

7.11

%

(11)


N/M


N/M - Not meaningful
















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






The allowance for credit losses was $250 million and covered 1.69 percent of loans held-for-investment at June 30, 2020, a 59 basis point increase from March 31, 2020.  The increase in the allowance coverage reflects our forecast of economic conditions and reflects our view that the economy will continue to be challenged by the response to the COVID-19 pandemic for an extended period of time.  Excluding warehouse loans, the allowance coverage ratio was 2.60 percent, a 106 basis point increase from March 31, 2020.

Net charge-offs in the second quarter 2020 were negligible at $3 million, or 11 basis points of LHFI, compared to $2 million, or 8 basis points in the prior quarter.

Nonperforming loans were $33 million and our ratio of nonperforming loans to loans held-for-investment was 22 basis points at June 30, 2020, flat compared to March 31, 2020.  There were no nonperforming commercial loans.  At June 30, 2020, early stage loan delinquencies totaled $15 million, or 0.10 percent, of total loans, compared to $26 million, or 0.19 percent, at March 31, 2020.

Capital

Capital Ratios (Bancorp)



Change (% / bps)


June 30,

2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019

Seq

Yr/Yr

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

7.76

%

8.09

%

7.57

%

7.98

%

7.94

%

(33)


(18)


Tier 1 common equity (to RWA)

9.11

%

9.17

%

9.32

%

9.25

%

9.08

%

(6)


3


Tier 1 capital (to RWA)

10.33

%

10.52

%

10.83

%

10.81

%

10.73

%

(19)


(40)


Total capital (to RWA)

11.32

%

11.18

%

11.52

%

11.54

%

11.51

%

14


(19)


Tangible common equity to asset ratio (1)

6.58

%

6.25

%

6.95

%

7.08

%

7.31

%

33


(73)


Tangible book value per share (1)

$

31.74


$

29.52


$

28.57


$

27.62


$

26.16


8

%

21

%
















(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. At the end of the quarter, the balance sheet increased by $1.0 billion to include loans previously sold into GNMA securities. Although we have not repurchased these loans and they are not delinquent, they are in forbearance. At a certain point, the accounting rules require us to include these as "Loans with Government Guarantees" with an offsetting amount included in "Other Liabilities." The Company does not have exposure to credit risk from these loans. Excluding these loans that are in forbearance, the Company had a Tier 1 common equity ratio of 10.52 percent, a total risk-based capital ratio of 11.52 percent, and a tangible common equity to assets ratio of 7.47 percent at June 30, 2020.

Importantly, tangible book value per share grew to $31.74, up $2.22 from last quarter and $5.58 from one year ago, which represents a 21 percent increase.

Earnings Conference Call

As previously announced, the Company's second quarter 2020 earnings call will be held Tuesday, July 28, 2020 at 11 a.m. (ET).

To join the call, please dial (800) 458-4121 toll free or (323) 794-2597 and use passcode 8266062. 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 8266062.

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 $27.5 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 89 retail locations in 28 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 $214 billion of loans representing slightly over 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 non-GAAP financial measures for tangible book value per share, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest income, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, and adjusted basic and diluted earnings per share. 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)




June 30,
2020


March 31,
2020


December 31,
2019


June 30,
2019

Assets








Cash

$

204



$

216



$

220



$

268


Interest-earning deposits

23



126



206



51


  Total cash and cash equivalents

227



342



426



319


Trading securities



2,058






Investment securities available-for-sale

2,348



2,446



2,116



1,718


Investment securities held-to-maturity

496



554



598



661


Loans held-for-sale

5,615



4,389



5,258



3,345


Loans held-for-investment

14,808



13,795



12,129



11,655


Loans with government guarantees

1,791



814



736



507


Less: allowance for loan losses

(229)



(132)



(107)



(110)


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

16,370



14,477



12,758



12,052


Mortgage servicing rights

261



223



291



316


Federal Home Loan Bank stock

377



306



303



303


Premises and equipment, net

410



413



416



415


Goodwill and intangible assets

164



167



170



178


Other assets

1,200



1,430



930



899


Total assets

$

27,468



$

26,805



$

23,266



$

20,206


Liabilities and Stockholders' Equity










Noninterest-bearing deposits

$

7,921



$

6,551



$

5,467



$

4,784


Interest-bearing deposits

9,977



9,501



9,679



9,632


  Total deposits

17,898



16,052



15,146



14,416


Short-term Federal Home Loan Bank advances and other

3,354



5,841



4,165



2,550


Long-term Federal Home Loan Bank advances

1,200



1,000



650



500


Other long-term debt

493



493



496



495


Other liabilities

2,552



1,577



1,021



589


Total liabilities

25,497



24,963



21,478



18,550


Stockholders' Equity










Common stock

1



1



1



1


Additional paid in capital

1,488



1,487



1,483



1,477


Accumulated other comprehensive income (loss)

46



31



1



(8)


Retained earnings

436



323



303



186


  Total stockholders' equity

1,971



1,842



1,788



1,656


Total liabilities and stockholders' equity

$

27,468



$

26,805



$

23,266



$

20,206


 

Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)






Change compared to:


Three Months Ended


1Q20


2Q19


June 30,

2020

March 31,
2020

December 31,
2019

September 30,
2019

June 30,
2019


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$

201


$

201


$

213


$

203


$

198



$


%


$

3


2

%

Total interest expense

33


53


61


57


60



(20)


(38)

%


(27)


(45)

%

Net interest income

168


148


152


146


138



20


14

%


30


22

%

Provision for credit losses

102


14



1


17



88


N/M


85


N/M

  Net interest income after provision for credit losses

66


134


152


145


121



(68)


(51)

%


(55)


(45)

%

Noninterest Income












Net gain on loan sales

303


90


101


110


75



213


N/M


228


N/M

Loan fees and charges

41


26


30


29


24



15


58

%


17


71

%

Net return (loss) on the mortgage servicing rights

(8)


6


(3)


(2)


5



(14)


N/M


(13)


N/M

Loan administration income

21


12


8


5


6



9


75

%


15


N/M

Deposit fees and charges

7


9


10


10


10



(2)


(22)

%


(3)


(30)

%

Other noninterest income

14


14


16


19


48




%


(34)


(71)

%

  Total noninterest income

378


157


162


171


168



221


N/M


210


N/M

Noninterest Expense












Compensation and benefits

116


102


102


98


90



14


14

%


26


29

%

Occupancy and equipment

44


41


43


40


40



3


7

%


4


10

%

Commissions

61


29


35


38


25



32


N/M


36


N/M

Loan processing expense

25


20


20


22


21



5


25

%


4


19

%

Legal and professional expense

5


6


9


6


6



(1)


(17)

%


(1)


(17)

%

Federal insurance premiums

7


6


6


5


5



1


17

%


2


40

%

Intangible asset amortization

4


3


4


3


4



1


33

%



%

Other noninterest expense

34


28


26


26


23



6


21

%


11


48

%

  Total noninterest expense

296


235


245


238


214



61


26

%


82


38

%

Income before income taxes

148


56


69


78


75



92


164

%


73


97

%

Provision for income taxes

32


10


11


15


14



22


N/M


18


N/M

Net income

$

116


$

46


$

58


$

63


$

61



$

70


N/M


$

55


90

%

Income per share












Basic

$

2.04


$

0.80


$

1.01


$

1.12


$

1.08



$

1.24


155

%


$

0.96


89

%

Diluted

$

2.03


$

0.80


$

1.00


$

1.11


$

1.06



$

1.23


154

%


$

0.97


92

%













Cash dividends declared

$

0.05


$

0.05


$

0.04


$

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)




Six Months Ended


Change


June 30,
2020


June 30,
2019


Amount

Percent

Interest Income







Total interest income

$

402



$

378



$

24


6

%

Total interest expense

86



114



(28)


(25)

%

  Net interest income

316



264



52


20

%

Provision for credit losses

116



17



99


N/M


  Net interest income after provision for credit losses

200



247



(47)


(19)

%

Noninterest Income







Net gain on loan sales

393



124



269


N/M


Loan fees and charges

67



41



26


63

%

Net return (loss) on the mortgage servicing rights

(2)



11



(13)


N/M


Loan administration income

33



17



16


94

%

Deposit fees and charges

16



18



(2)


(11)

%

Other noninterest income

28



66



(38)


(58)

%

  Total noninterest income

535



277



258


93

%

Noninterest Expense







Compensation and benefits

218



177



41


23

%

Occupancy and equipment

85



78



7


9

%

Commissions

90



38



52


N/M


Loan processing expense

45



38



7


18

%

Legal and professional expense

11



12



(1)


(8)

%

Federal insurance premiums

13



9



4


44

%

Intangible asset amortization

7



8



(1)


(13)

%

Other noninterest expense

63



45



18


40

%

  Total noninterest expense

532



405



127


31

%

Income before income taxes

203



119



84


71

%

Provision for income taxes

42



22



20


91

%

Net income

$

161



$

97



$

64


66

%

Income per share







Basic

$

2.85



$

1.71



$

1.14


67

%

Diluted

$

2.83



$

1.69



$

1.14


67

%








Cash dividends declared

$

0.10



$

0.08



$

0.02


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


Six Months Ended


June 30, 2020

March 31, 2020

June 30, 2019


June 30, 2020

June 30, 2019

Selected Mortgage Statistics:







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

$

13,811


$

11,154


$

8,344



$

24,965


$

14,946


Mortgage loans closed

$

12,156


$

8,591


$

8,641



$

20,747


$

14,154


Mortgage loans sold and securitized

$

12,874


$

7,487


$

8,838



$

20,361


$

14,008


Selected Ratios:







Interest rate spread (2)

2.52

%

2.31

%

2.57

%


2.41

%

2.63

%

Net interest margin

2.86

%

2.81

%

3.08

%


2.83

%

3.08

%

Net margin on loans sold and securitized

2.35

%

1.19

%

0.84

%


1.93

%

0.87

%

Return on average assets

1.77

%

0.78

%

1.22

%


1.30

%

1.01

%

Adjusted return on average assets (3) (4)

1.77

%

0.78

%

0.81

%


1.30

%

0.81

%

Return on average common equity

23.47

%

9.82

%

14.58

%


16.86

%

11.94

%

Return on average tangible common equity (4)

26.16

%

11.46

%

17.14

%


19.07

%

14.33

%

Adjusted return on average tangible common equity (3) (4)

26.16

%

11.46

%

11.69

%


19.07

%

11.63

%

Efficiency ratio

54.3

%

77.1

%

69.8

%


62.5

%

74.8

%

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

7.53

%

7.92

%

8.35

%


15.42

%

16.93

%

Average Balances:







Average interest-earning assets

$

23,692


$

21,150


$

17,759



$

22,421


$

17,030


Average interest-bearing liabilities

$

15,119


$

14,480


$

12,898



$

14,800


$

12,702


Average stockholders' equity

$

1,977


$

1,854


$

1,668



$

1,915


$

1,626




(1)

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. 

(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)

See Non-GAAP Reconciliation for further information.

(4)

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

 


June 30,
2020


March 31,
2020


December 31,
2019


June 30,
2019

Selected Statistics:








Book value per common share

$

34.62



$

32.46



$

31.57



$

29.31


Tangible book value per share (1)

$

31.74



$

29.52



$

28.57



$

26.16


Number of common shares outstanding

56,943,979



56,729,789



56,631,236



56,483,937


Number of FTE employees

4,641



4,415



4,453



4,026


Number of bank branches

160



160



160



160


Ratio of nonperforming assets to total assets (2)

0.14

%


0.14

%


0.15

%


0.36

%

Common equity-to-assets ratio

7.18

%


6.87

%


7.68

%


8.19

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

37.0



38.8



39.7



39.7


Capitalized value of mortgage servicing rights

0.87

%


0.95

%


1.21

%


1.23

%



(1)

Excludes goodwill and intangibles of $164 million, $167 million, $170 million and $182 million at June 30, 2020, March 31, 2020, December 31, 2019, and June 30, 2019, respectively. See Non-GAAP Reconciliation for further information.

(2)

Ratio excludes LHFS.


 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)




Three Months Ended


June 30, 2020


March 31, 2020


June 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

$

5,645


$48


3.42

%


$

5,248


$

49


3.72

%


$

3,539


$

40


4.55

%

Loans held-for-investment












  Residential first mortgage

2,822


24


3.41

%


3,062


27


3.51

%


3,146


28


3.61

%

  Home equity

1,001


9


3.78

%


1,019


12


4.73

%


814


11


5.54

%

  Other

881


12


5.42

%


816


12


5.77

%


518


9


6.78

%

Total consumer loans

4,704


45


3.87

%


4,897


51


4.14

%


4,478


48


4.33

%

  Commercial real estate

3,101


28


3.64

%


2,949


34


4.61

%


2,394


35


5.65

%

  Commercial and industrial

2,006


17


3.34

%


1,667


19


4.52

%


1,744


23


5.26

%

  Warehouse lending

3,785


38


3.88

%


2,310


25


4.30

%


1,997


27


5.21

%

Total commercial loans

8,892


83


3.67

%


6,926


78


4.48

%


6,135


85


5.40

%

Total loans held-for-investment

13,596


128


3.74

%


11,823


129


4.34

%


10,613


133


4.97

%

Loans with government guarantees

858


4


1.97

%


811


3


1.38

%


502


4


2.94

%

Investment securities

3,417


21


2.42

%


3,060


19


2.47

%


2,907


20


2.75

%

Interest-earning deposits

176



0.11

%


208


1


1.75

%


198


1


2.23

%

  Total interest-earning assets

23,692


201


3.38

%


21,150


$

201


3.78

%


17,759


$

198


4.42

%

Other assets

2,569





2,263





2,207




Total assets

$

26,261





$

23,413





$

19,966




Interest-Bearing Liabilities












Retail deposits












  Demand deposits

$

1,800


$1


0.22

%


$

1,587


$

3


0.75

%


$

1,323


$

3


0.84

%

  Savings deposits

3,476


4


0.52

%


3,384


9


1.07

%


3,191


9


1.16

%

  Money market deposits

716



0.12

%


687


1


0.32

%


745


1


0.32

%

  Certificates of deposit

1,987


11


2.00

%


2,254


12


2.24

%


2,611


15


2.34

%

Total retail deposits

7,979


16


0.78

%


7,912


25


1.28

%


7,870


28


1.42

%

Government deposits

1,088


2


0.63

%


1,131


3


1.15

%


1,128


5


1.51

%

Wholesale deposits and other

738


4


2.07

%


581


4


2.39

%


417


2


2.35

%

Total interest-bearing deposits

9,805


22


0.86

%


9,624


32


1.33

%


9,415


35


1.47

%

Short-term FHLB advances and other

3,753


2


0.26

%


3,566


12


1.35

%


2,633


17


2.53

%

Long-term FHLB advances

1,068


3


1.13

%


794


3


1.29

%


354


1


1.72

%

Other long-term debt

493


6


4.99

%


496


6


5.33

%


496


7


5.77

%

  Total interest-bearing liabilities

15,119


33


0.86

%


14,480


53


1.46

%


12,898


60


1.85

%

Noninterest-bearing deposits












  Retail deposits and other

1,687





1,395





1,275




  Custodial deposits (1)

6,223





4,776





3,469




Total noninterest-bearing deposits

7,910





6,171





4,744




Other liabilities

1,255





908





656




Stockholders' equity

1,977





1,854





1,668




Total liabilities and stockholders' equity

$

26,261





$

23,413





$

19,966




Net interest-earning assets

$

8,573





$

6,671





$

4,861




  Net interest income


$

168





$

148





$

138



Interest rate spread (2)



2.52

%




2.31

%




2.57

%

Net interest margin (3)



2.86

%




2.81

%




3.08

%

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



156.7

%




146.1

%




137.7

%

Total average deposits

$

17,715





$

15,795





$

14,159































(1)

Approximately 80 percent of custodial deposits from loans subserviced which pay interest is recognized as an offset in net loan administration income.  

(2)

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

(3)

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

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)




Six Months Ended,


June 30, 2020


June 30, 2019


Average
Balance

Interest

Annualized
Yield/Rate


Average
Balance

Interest

Annualized
Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

5,447


$

97


3.56

%


$

3,403


$

79


4.63

%

Loans held-for-investment








  Residential first mortgage

2,942


51


3.46

%


3,095


56


3.63

%

  Home equity

1,010


21


4.26

%


780


22


5.58

%

  Other

848


24


5.59

%


438


15


6.91

%

Total consumer loans

4,800


96


4.01

%


4,313


93


4.32

%

  Commercial real estate

3,025


63


4.11

%


2,322


66


5.66

%

  Commercial and industrial

1,836


36


3.88

%


1,669


45


5.32

%

  Warehouse lending

3,048


62


4.04

%


1,589


42


5.30

%

Total commercial loans

7,909


161


4.03

%


5,580


153


5.46

%

Total loans held-for-investment

12,709


257


4.02

%


9,893


246


4.96

%

Loans with government guarantees

834


7


1.68

%


478


7


2.95

%

Investment securities

3,239


40


2.45

%


3,081


44


2.83

%

Interest-earning deposits

192


1


1.00

%


175


2


2.47

%

  Total interest-earning assets

22,421


402


3.57

%


17,030


378


4.43

%

Other assets

2,416





2,176




Total assets

$

24,837





$

19,206




Interest-Bearing Liabilities








Retail deposits








  Demand deposits

$

1,693


$

4


0.47

%


$

1,271


$

5


0.76

%

  Savings deposits

3,433


14


0.79

%


3,140


17


1.06

%

  Money market deposits

701


1


0.22

%


762


1


0.30

%

  Certificates of deposit

2,120


22


2.13

%


2,550


28


2.24

%

Total retail deposits

7,947


41


1.03

%


7,723


51


1.32

%

Government deposits

1,110


5


0.89

%


1,149


9


1.51

%

Wholesale deposits and other

659


7


2.21

%


402


4


2.30

%

Total interest-bearing deposits

9,716


53


1.09

%


9,274


64


1.39

%

Short-term FHLB advances and other

3,659


14


0.79

%


2,679


34


2.53

%

Long-term FHLB advances

931


6


1.20

%


254


2


1.67

%

Other long-term debt

494


13


5.16

%


495


14


5.84

%

  Total interest-bearing liabilities

14,800


86


1.16

%


12,702


114


1.80

%

Noninterest-bearing deposits








  Retail deposits and other

1,541





1,258




  Custodial deposits (1)

5,499





3,004




Total noninterest-bearing deposits

7,040





4,262




Other liabilities

1,082





616




Stockholders' equity

1,915





1,626




Total liabilities and stockholders' equity

$

24,837





$

19,206




Net interest-earning assets

$

7,622





$

4,328




  Net interest income


$

316





$

264



Interest rate spread (2)



2.41

%




2.63

%

Net interest margin (3)



2.83

%




3.08

%

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



145.9

%




134.1

%

Total average deposits

16,755





13,536






(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


Six Months Ended


June 30, 2020


March 31, 2020


June 30, 2019


June 30, 2020


June 30, 2019

Net Income

$

116



$

46



$

61



$

161



$

97


Weighted average common shares outstanding

56,790,642



56,655,865



56,446,077



56,723,254



56,670,690


Stock-based awards

333,064



534,058



615,745



433,561



651,823


  Weighted average diluted common shares

57,123,706



57,189,923



57,061,822



218,156,815



154,322,513


Basic earnings per common share

$

2.04



$

0.80



$

1.08



$

2.85



$

1.71


Stock-based awards

(0.01)





(0.02)



(0.02)



(0.02)


  Diluted earnings per common share

$

2.03



$

0.80



$

1.06



$

2.83



$

1.69


 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)




June 30, 2020


March 31, 2020


December 31, 2019


June 30, 2019


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,021


7.76

%


$

1,879


8.09

%


$

1,826


8.00

%


$

1,561


7.94

%

Total adjusted avg. total asset base

$

26,040




$

23,212




$

22,830




$

19,659



Tier 1 common equity (to risk weighted assets)

$

1,781


9.11

%


$

1,639


9.17

%


$

1,586


9.62

%


$

1,321


9.08

%

Tier 1 capital (to risk weighted assets)

$

2,021


10.33

%


$

1,879


10.52

%


$

1,826


11.07

%


$

1,561


10.73

%

Total capital (to risk weighted assets)

$

2,214


11.32

%


$

1,997


11.18

%


$

1,936


11.74

%


$

1,674


11.51

%

Risk-weighted asset base

$

19,562




$

17,863




$

16,493




$

14,551



 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)




June 30, 2020


March 31, 2020


December 31, 2019


June 30, 2019


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

1,969


7.57

%


$

1,900


8.19

%


$

1,752


7.71

%


$

1,632


8.32

%

Total adjusted avg. total asset base

$

26,020




$

23,194




22,727




$

19,614



Tier 1 common equity (to risk weighted assets)

$

1,969


10.07

%


$

1,900


10.64

%


$

1,752


11.04

%


$

1,632


11.23

%

Tier 1 capital (to risk weighted assets)

$

1,969


10.07

%


$

1,900


10.64

%


$

1,752


11.04

%


$

1,632


11.23

%

Total capital (to risk weighted assets)

$

2,161


11.05

%


$

2,019


11.30

%


$

1,862


11.73

%


$

1,745


12.00

%

Risk-weighted asset base

$

19,559




$

17,857




15,873




$

14,538



 

Loans Serviced

(Dollars in millions)

(Unaudited)




June 30, 2020


March 31, 2020


December 31, 2019


June 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)

$

174,517


854,693


$

193,037


916,989



$

194,638


918,662



$

170,139


816,743


Serviced for others

29,846


122,779


23,439


102,338



24,003


105,469



25,774


106,334


Serviced for own loan portfolio (3)

9,211


64,142


8,539


63,085



9,536


66,526



7,264


59,873


Total loans serviced

$

213,574


1,041,614



$

225,015


1,082,412



$

228,177


1,090,657



$

203,177


982,950


























(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)




June 30, 2020


March 31, 2020


December 31, 2019


June 30, 2019

Consumer loans












Residential first mortgage

$

2,716


18.3

%


$

2,964


21.5

%


$

3,154


26.0

%


$

3,241


27.8

%

Home equity

978


6.6

%


1,028


7.5

%


1,024


8.4

%


922


7.9

%

Other

898


6.1

%


858


6.2

%


729


6.0

%


576


4.9

%

  Total consumer loans

4,592


31.0

%


4,850


35.2

%


4,907


40.4

%


4,739


40.7

%

Commercial loans












Commercial real estate

3,016


20.4

%


3,092


22.4

%


2,828


23.3

%


2,463


21.1

%

Commercial and industrial

1,968


13.3

%


1,880


13.6

%


1,634


13.5

%


1,821


15.6

%

Warehouse lending

5,232


35.3

%


3,973


28.8

%


2,760


22.8

%


2,632


22.5

%

  Total commercial loans

10,216


69.0

%


8,945


64.8

%


7,222


59.5

%


6,916


59.3

%

Total loans held-for-investment

$

14,808


100.0

%


$

13,795


100.0

%


$

12,129


100

%


$

11,655


100.0

%

 

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)




June 30, 2020


March 31, 2020


December 31, 2019


June 30, 2019

Indirect Lending

$

647


72.0

%


$

620


72.3

%


$

578


79.3

%


$

408


70.8

%

Point of Sale

181

20.2

%


159


18.5

%


63


8.6

%


51


8.9

%

Other

70

7.8

%


79


9.2

%


88


12.1

%


117


20.3

%

Total other consumer loans

$

898


100.0

%


$

858


100.0

%


$

729


100.0

%


$

576


100.0

%

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)




June 30, 2020


March 31, 2020


June 30, 2019

Residential first mortgage

$

60



$

46



$

26


Home equity

28



23



16


Other

34



16



5


Total consumer loans

122



85



47


Commercial real estate

83



28



34


Commercial and industrial

23



18



24


Warehouse lending 

1



1



5


Total commercial loans

107



47



63


  Allowance for loan losses

229



132



110


  Reserve for unfunded commitments

21



20



3


Allowance for credit losses

$

250



$

152



$

113


 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)




Three Months Ended June 30, 2020


Residential
First
Mortgage

Home

Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (2)

Unfunded
Commitments

Beginning balance

$

46


$

23


$

16


$

28


$

18


$

1


$

132


$

20


Provision (benefit) for credit losses:









  Loan volume

(2)


(1)


4



1



2



  Economic forecast

9


3


6


14


(2)



30


1


  Credit (1)

5


2


7


10




24



  Qualitative factor adjustments

2




31


6



39



Charge-offs

(2)


(1)


(2)





(5)



Provision for charge-offs

2


1


2





5



Recoveries


1


1





2



Ending allowance balance

$

60


$

28


$

34


$

83


$

23


$

1


$

229


$

21











(1) Includes changes in the individually evaluated reserve
(2) Excludes loans carried under the fair value option

 

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)




June 30,
2020


March 31,
2020


December 31,
2019


June 30,
2019

Nonperforming LHFI

$

23



$

19



16



52


Nonperforming TDRs

4



4



3



4


Nonperforming TDRs at inception but performing for less than six months

6



6



7



7


Total nonperforming LHFI and TDRs (1)

33



29



26



63


Other nonperforming assets, net

7



10



10



9


LHFS

7



5



5



15


Total nonperforming assets

$

47



$

44



$

41



$

87










Ratio of nonperforming assets to total assets (2)

0.14

%


0.14

%


0.15

%


0.36

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.22

%


0.21

%


0.21

%


0.54

%

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

0.27

%


0.28

%


0.30

%


0.62

%

















(1)

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

(2)

Ratio excludes LHFS.

 

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)




30-59 Days
Past Due


60-89 Days
Past Due


Greater than

90 days (1)


Total Past
Due


Total LHFI

June 30, 2020










Consumer loans

$

9



$

6



$

33



$

48



$

4,592


Commercial loans









10,216


  Total loans

$

9



$

6



$

33



$

48



$

14,808


March 31, 2020










Consumer loans

$

14



$

5



$

29



$

48



$

4,850


Commercial loans

7







7



8,945


       Total loans

$

21



$

5



$

29



$

55



$

13,795


December 31, 2019










Consumer loans

$

9



$

5



$

26



$

40



$

4,907


Commercial loans









7,222


  Total loans

$

9



$

5



$

26



$

40



$

12,129


June 30, 2019










Consumer loans

$

5



$

2



$

26



$

33



$

4,739


Commercial loans

1





37



38



6,916


  Total loans

$

6



$

2



$

63



$

71



$

11,655




(1)

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


 

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)




TDRs


Performing


Nonperforming


Total

June 30, 2020


Consumer loans

$

35



$

10



$

45


Commercial loans

5



$



5


  Total TDR loans

$

40



$

10



$

50


March 31, 2020






Consumer loans

$

37



$

10



$

47


  Total TDR loans

$

37



$

10



$

47


December 31, 2019






Consumer loans

$

38



$

10



$

48


  Total TDR loans

$

38



$

10



$

48


June 30, 2019






Consumer loans

$

41



$

11



$

52


  Total TDR loans

$

41



$

11



$

52


 

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 acquisition related expenses recognized in conjunction with the Well Fargo branch acquisition from 2018 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, adjusted noninterest income, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, and adjusted basic and diluted earnings per share provide a meaningful representation of its operating performance on an ongoing basis.


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


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



June 30,
2020


March 31,
2020


December 31,
2019


September 30,
2019


June 30,
2019


(Dollars in millions, except share data)

Total stockholders' equity

$

1,971



$

1,842



$

1,788



$

1,734



$

1,656


Less: Goodwill and intangible assets

164



167



170



174



178


Tangible book value

$

1,807



$

1,675



$

1,618



$

1,560



$

1,478












Number of common shares outstanding

56,943,979



56,729,789



56,631,236



56,510,341



56,483,937


Tangible book value per share

$

31.74



$

29.52



$

28.57



$

27.62



$

26.16












Total assets

$

27,468



$

26,805



$

23,266



$

22,048



$

20,206


Tangible common equity to assets ratio

6.58

%


6.25

%


6.95

%


7.08

%


7.31

%

 

Return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.



Three Months Ended


Six Months Ended


June 30, 2020


December 31, 2019


June 30, 2019


June 30, 2020


June 30, 2019


(Dollars in millions)





Net income

$

116



$

58



$

61



$

161



$

97


Add: Intangible asset amortization, net of tax

3



3



3



6



6


Tangible net income

$

119



$

61



$

64



$

167



$

103












Total average equity

$

1,977



$

1,803



$

1,668



$

1,915



$

1,626


Less: Average goodwill and intangible assets

165



172



180



167



184


Total tangible average equity

$

1,812



$

1,631



$

1,488



$

1,748



$

1,442












Return on average common equity

23.47

%


12.69

%


14.58

%


16.86

%


11.94

%

Adjustment to remove DOJ adjustment

%


%


(1.22)

%


%


(2.49)

%

Adjustment to remove Wells Fargo acquisition costs

%


%


%


%


0.10

%

Adjusted return on average common equity

23.47

%


12.69

%


13.36

%


16.86

%


9.55

%











Return on average tangible common equity

26.16

%


14.76

%


17.14

%


19.07

%


14.33

%

Adjustment to remove DOJ adjustment

%


%


(5.45)

%


%


(2.81)

%

Adjustment to remove Wells Fargo acquisition costs

%


%


%


%


0.11

%

Adjusted return on average tangible common equity

26.16

%


14.76

%


11.69

%


19.07

%


11.63

%











Return on average assets

1.77

%


0.99

%


1.22

%


1.30

%


1.01

%

Adjustment to remove DOJ adjustment

%


%


(0.41)

%


%


(0.21)

%

Adjustment to remove Wells Fargo acquisition costs

%


%


%


%


0.01

%

Adjusted return on average assets

1.77

%


0.99

%


0.81

%


1.30

%


0.81

%

 

Adjusted HFI loan-to-deposit ratio.



June 30,
2020


March 31,
2020


December 31,
2019


September 30,

2019


June 30,
2019


(Dollars in millions, except share data)

Average LHFI

$

13,596



$

11,823



$

12,168



$

11,743



$

10,613


Less: Average warehouse loans

3,785



2,310



2,747



2,508



1,997


Adjusted average LHFI

$

9,811



$

9,513



$

9,421



$

9,235



$

8,616












Average deposits

$

17,715



$

15,795



$

15,904



$

15,817



$

14,159


Less: Average custodial deposits

6,223



4,776



4,772



4,550



3,469


Adjusted average deposits

$

11,492



$

11,019



$

11,132



$

11,267



$

10,690












HFI loan-to-deposit ratio

76.7

%


74.9

%


76.5

%


74.2

%


75.0

%

Adjusted HFI loan-to-deposit ratio

85.4

%


86.3

%


84.6

%


82.0

%


80.6

%

 

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



Three Months Ended


June 30,
2020


March 31,
2020


December 31,
2019


September 30,
2019


June 30,
2019


(Dollars in millions)

Noninterest income

$

378



$

157



$

162



$

171



$

168


DOJ benefit









(25)


Adjusted noninterest income

$

378



$

157



$

162



$

171



$

143












Income before income taxes

$

148



$

56



$

69



$

78



$

75


Adjustment for DOJ benefit









(25)


Adjusted income before income taxes

$

148



$

56



$

69



$

78



$

50












Provision for income taxes

$

32



$

10



$

11



$

15



$

14


Tax impact on adjustment for DOJ benefit









(5)


Adjusted provision for income taxes

$

32



$

10



$

11



$

15



$

9












Net income

$

116



$

46



$

58



$

63



$

61


Adjusted net income

$

116



$

46



$

58



$

63



$

41












Weighted average common shares outstanding

56,790,642



56,655,865



56,513,890



56,484,499



56,446,077


Weighted average diluted common shares

57,123,706



57,189,923



57,198,734



57,110,796



57,061,822


Adjusted basic earnings per share

$

2.04



$

0.80



$

1.01



$

1.12



$

0.72


Adjusted diluted earnings per share

$

2.03



$

0.80



$

1.00



$

1.11



$

0.71


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

Cision View original content:http://www.prnewswire.com/news-releases/flagstar-bancorp-reports-second-quarter-2020-net-income-of-116-million-or-2-03-per-diluted-share-301100741.html

SOURCE Flagstar Bancorp, Inc.