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TROY, Mich., July 28, 2021 /PRNewswire/ --
Key Highlights - Second Quarter 2021
Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported second quarter 2021 net income of $147 million, or $2.74 per diluted share, compared to first quarter 2021 net income of $149 million, or $2.80 per diluted share, which on an adjusted basis was $176 million, or $3.31 per diluted share. Second quarter 2020 net income was $116 million, or $2.03 per diluted share.
"We posted another solid quarter – our fifth consecutive quarter where diluted earnings exceeded $2.00 per share," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "Highlights included net interest margin expansion, strong asset quality, steady growth in our servicing portfolio, and excellent mortgage results that remain above historical averages. Of special note was our execution of four private label securitizations during the quarter, further demonstrating the versatility of our mortgage business and the optionality it provides – truly a differentiator for Flagstar in the industry. These positives combined to produce a 6 percent growth in tangible book value and continued a trend of achieving return on assets in excess of 2 percent. Our return on average tangible common equity in the last 12 months has been a remarkable 31 percent, and in the 12 months prior to that, an impressive 18 percent.
"Credit quality remained strong, and we continue to be encouraged by the low levels of nonperforming loans and net charge-offs. And I'm pleased to say that we have no commercial loans currently in deferral. This performance, along with an improved forecast for the macroeconomic environment, enabled us to release $45 million of our allowance for credit losses. Even with this release, excluding warehouse loans, our coverage ratio was 2.6 percent – among the strongest in the industry."
"As we move closer to completing our previously announced partnership with New York Community Bank, we are well positioned with strong fundamentals and a demonstrated power to generate capital. Until then, we are focusing on ensuring a smooth transition and continuing to execute on the business plan that has served our shareholders so well and brought us to this pivotal point in the history of our company."
Income Statement Highlights
Three Months Ended
June 30, 2021
March 31, 2021
December 31, 2020
September 30, 2020
June 30, 2020
(Dollars in millions, except per share data)
Net interest income
$
183
189
180
168
(Benefit) provision for credit losses
(44)
(28)
2
32
102
Noninterest income
252
324
332
448
375
Noninterest expense
289
347
314
301
293
Income before income taxes
190
194
205
295
148
Provision for income taxes
43
45
51
73
Net income
147
149
154
222
116
Income per share:
Basic
2.78
2.83
2.86
3.90
2.04
Diluted
2.74
2.80
3.88
2.03
Adjusted Income Statement Highlights (Non-GAAP) (1)
290
312
229
53
146
176
3.34
2.73
3.31
(1) See Non-GAAP Reconciliation for further information.
Key Ratios
Net interest margin
2.90
%
2.82
Adjusted net interest margin (1)
3.06
3.02
2.98
2.94
2.88
Return on average assets
2.1
2.0
3.1
1.8
Return on average common equity
24.0
25.7
27.6
41.5
23.5
Efficiency ratio
66.6
67.7
60.4
47.9
54.1
HFI loan-to-deposit ratio
71.8
74.4
74.5
75.9
76.7
Adjusted HFI loan-to-deposit ratio (2)
64.3
66.3
69.8
74.8
85.4
(1) Excludes loans with government guarantees available for repurchase. See Non-GAAP Reconciliation for further information.
(2) Excludes warehouse loans and custodial deposits. See Non-GAAP Reconciliation for further information.
Average Balance Sheet Highlights
% Change
Seq
Yr/Yr
(Dollars in millions)
Average interest-earning assets
25,269
27,178
27,100
25,738
23,692
(7)
7
Average loans held-for-sale (LHFS)
6,902
7,464
5,672
5,602
5,645
(8)
22
Average loans held-for-investment (LHFI)
13,688
14,915
15,703
14,839
13,596
1
Average total deposits
19,070
20,043
21,068
19,561
17,715
(5)
8
Net Interest Income
Net interest income in the second quarter was $183 million, a decrease of $6 million, or 3 percent as compared to the first quarter 2021. The results primarily reflect lower earning assets, the result of lower warehouse and loans held-for-sale (LHFS) balances during the quarter. Average earning assets declined $1.9 billion, or 7 percent, as warehouse balances were $1.0 billion, or 15 percent lower and LHFS declined $0.6 billion. These declines were, partially offset by a favorable decrease in funding costs and broad-based increases in loan yields.
The net interest margin in the second quarter was 2.90 percent, an 8 basis point increase from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 4 basis points to 3.06 percent in the second quarter, compared to adjusted net interest margin of 3.02 percent in the prior quarter. The expansion in net interest margin was largely attributable to an increase in LHFS yields due to a mix shift to higher yielding products supporting our residential mortgage-backed securities program, higher LHFI yields and lower deposit costs. Retail banking deposit rates decreased 4 basis points primarily driven by the maturity of higher cost time deposits.
Average total deposits were $19.1 billion in the second quarter, decreasing $1.0 billion, or 5 percent from the first quarter 2021. Average custodial deposits decreased $1.0 billion, or 14 percent primarily driven by decreasing mortgage payoff rates and actions taken to manage internal liquidity measures.
Provision for Credit Losses
The benefit for credit losses was $44 million for the second quarter, as compared to a $28 million benefit for credit losses for the first quarter 2021, reflecting the performance of our portfolio and improved economic forecasts. Additionally, net charge-offs remained low at $1 million for the quarter, or 1 basis point of LHFI.
Noninterest Income
Noninterest income decreased $72 million to $252 million in the second quarter, as compared to $324 million for the first quarter 2021, primarily due to lower mortgage revenues and loan fees and charges.
Second quarter net gain on loan sales decreased $59 million, to $168 million, as compared to $227 million in the first quarter 2021. Gain on sale margins decreased 49 basis points, to 1.35 percent for the second quarter 2021, as compared to 1.84 percent for the first quarter 2021. The decrease was primarily driven by competitive factors and channel-mix based margin compression.
Net loss on mortgage servicing rights was $5 million in the second quarter 2021, reflecting an $8 million write off of mortgage servicing right fair value for those loans with government guarantees that were repurchased during the quarter. In addition, mortgage refinance activity continued to be elevated compared to historical norms which impacted prepayment speeds and overall net return on mortgage servicing rights.
Loan fees and charges decreased $5 million, to $37 million for the second quarter, compared to $42 million for the first quarter 2021, primarily due to a 7 percent decrease in mortgage loans closed.
Mortgage Metrics
As of/Three Months Ended
Change (% / bps)
Mortgage rate lock commitments (fallout-adjusted) (1) (2)
12,400
12,300
12,000
15,000
13,800
1%
(10)%
Mortgage loans closed (1)
12,800
13,100
14,400
12,200
(7)%
5%
Net margin on mortgage rate lock commitments (fallout-adjusted) (2)
1.35
1.84
1.93
2.31
2.19
(49)
(84)
Net gain on loan sales
227
232
346
303
(26)%
(45)%
Net return (loss) on mortgage servicing rights (MSR)
—
12
N/M
(38)%
Gain on loan sales + net return on the MSR
163
358
(28)%
Loans serviced (number of accounts - 000's) (3)
1,182
1,148
1,085
1,105
1,042
3%
13%
Capitalized value of MSRs
1.00
1.06
0.86
0.85
0.87
(6)
13
N/M - Not meaningful
(1)
Rounded to the nearest hundred million
(2)
Fallout-adjusted mortgage rate lock commitments are adjusted by a percentage of mortgage loans in the pipeline that are not expected to close based on previous historical experience and the level of interest rates.
(3)
Includes loans serviced for Flagstar's own loan portfolio, serviced for others, and subserviced for others.
Noninterest Expense
Noninterest expense decreased to $289 million for the second quarter, compared to $347 million for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability in the first quarter 2021 and $9 million of merger expenses in the second quarter 2021, noninterest expense decreased $32 million, or 10 percent. The decrease in noninterest expense primarily reflects lower commissions as mortgage loan closings decreased 7 percent compared to the prior quarter and the prior quarter included expenses associated with seasonally higher payroll taxes which did not reoccur. The second quarter included a $10 million benefit from an agreement to reduce the 2009 former CEO supplemental executive retirement plan liability.
Mortgage expenses were $131 million for the second quarter, a decrease of $17 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings – our mortgage expense ratio – was 1.03 percent, a decrease of 5 basis points quarter over quarter, primarily driven by lower commissions.
The efficiency ratio was 67 percent for the second quarter, as compared to 68 percent for the first quarter 2021. Excluding the $35 million expense related to the DOJ settlement liability, the adjusted efficiency ratio was 61 percent for the first quarter, primarily driven by the strength of mortgage revenue in the first quarter.
Income Taxes
The second quarter provision for income taxes totaled $43 million, with an effective tax rate of 22.5 percent, compared to $45 million and an effective tax rate of 23.0 percent for the first quarter 2021.
Asset Quality
Credit Quality Ratios
Allowance for credit losses (1)
220
265
280
250
(17)%
(12)%
Credit reserves to LHFI
1.57
1.78
1.73
1.70
1.69
(21)
-12
Credit reserves to LHFI excluding warehouse
2.63
3.11
3.20
3.07
2.60
(48)
3
Net (recoveries) charge-offs
(13)
(67)%
Total nonperforming LHFI and TDRs
74
60
56
33
23%
Net (recoveries) charge-offs to LHFI ratio (annualized)
0.01
(0.35)
0.04
0.05
0.11
36
(10)
Ratio of nonperforming LHFI and TDRs to LHFI
0.53
0.40
0.34
0.28
0.22
31
Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):
Residential first mortgage
0.16
0.31
0.07
0.26
(15)
Home equity and other consumer
0.15
0.06
0.23
Commercial real estate
(0.01)
Commercial and industrial
(4.12)
0.21
0.08
416
(4)
(1) Includes the allowance for loan losses and the reserve on unfunded commitments.
(2) Excludes loans carried under the fair value option.
The allowance for credit losses was $220 million and covered 1.57 percent of loans held-for-investment at June 30, 2021, a 21 basis point decrease from March 31, 2021. Excluding warehouse loans, the allowance coverage ratio was 2.63 percent, a 48 basis point decrease from March 31, 2021. The lower allowance for credit losses primarily reflects improvements in our economic forecasts and the performance of the LHFI portfolio throughout the pandemic.
Net charge-offs in the second quarter 2021 were $1 million, compared to $13 million of net recoveries in the prior quarter. Net charge-offs for the second quarter were 1 basis point of LHFI, compared to 8 basis points in the prior quarter when excluding the $16 million commercial loan recovery obtained in the quarter.
Nonperforming loans and troubled debt restructurings (TDRs) were $74 million and our ratio of nonperforming loans and TDRs to loans held-for-investment was 53 basis points at June 30, 2021, a 13 basis point increase compared to March 31, 2021 as nonperforming loans remained low and LHFI balances decreased $0.8 billion. At June 30, 2021, early stage loan delinquencies totaled $12 million, or 9 basis points of total loans, compared to $15 million, or 10 basis points, at March 31, 2021.
Capital
Capital Ratios (Bancorp)
Tier 1 leverage (to adj. avg. total assets)
9.21
8.11
7.71
8.04
7.76
110
145
Tier 1 common equity (to RWA)
11.38
10.31
9.15
9.11
107
Tier 1 capital (to RWA)
12.56
11.45
10.23
10.33
111
223
Total capital (to RWA)
14.13
13.18
11.89
11.29
11.32
95
281
Tangible common equity to asset ratio (1)
8.67
7.48
6.58
6.90
119
209
Tangible book value per share (1)
44.38
41.77
38.80
35.60
31.74
6%
40%
The Company maintained a solid capital position with regulatory ratios above current regulatory quantitative guidelines for "well capitalized" institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio – the largest component of the Company's held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 13.13 percent and a total risk-based capital ratio of 16.30 percent at June 30, 2021.
Importantly, tangible book value per share grew to $44.38, up $2.61, or 6 percent from last quarter.
About Flagstar
Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.1 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 86 retail locations in 28 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $255.7 billion of loans representing almost 1.2 million borrowers. For more information, please visit flagstar.com.
Use of Non-GAAP Financial Measures
In addition to results presented in accordance with GAAP, this news release includes certain non-GAAP financial measures. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.
Non-GAAP financial measures have inherent limitations. Readers should be aware of these limitations and should be cautious with respect to the use of such measures. To compensate for these limitations, we use non-GAAP measures as comparative tools, together with GAAP measures, to assist in the evaluation of our operating performance or financial condition. Also, we ensure that these measures are calculated using the appropriate GAAP or regulatory components in their entirety and that they are computed in a manner intended to facilitate consistent period-to-period comparisons. Flagstar's method of calculating these non-GAAP measures may differ from methods used by other companies. These non-GAAP measures should not be considered in isolation or as a substitute for those financial measures prepared in accordance with GAAP or in-effect regulatory requirements.
Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website at flagstar.com.
Cautionary Statements Regarding Forward-Looking Statements
Certain statements in this press release may constitute "forward–looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, with respect to New York Community Banks ("NYCB") and Flagstar's beliefs, goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; NYCB's and Flagstar's estimates of future costs and benefits of the actions each company may take; NYCB's and Flagstar's assessments of probable losses on loans; NYCB's and Flagstar's assessments of interest rate and other market risks; and NYCB's and Flagstar's ability to achieve their respective financial and other strategic goals.
Forward–looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. These forward-looking statements include, without limitation, those relating to the terms, timing and closing of the proposed transaction.
Additionally, forward–looking statements speak only as of the date they are made; NYCB and Flagstar do not assume any duty, and do not undertake, to update such forward–looking statements. Furthermore, because forward–looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those indicated in such forward-looking statements as a result of a variety of factors, many of which are beyond the control of NYCB and Flagstar. The factors that could cause actual results to differ materially include the following: the occurrence of any event, change or other circumstances that could give rise to the right of one or both of the parties to terminate the definitive merger agreement among NYCB, 615 Corp. and Flagstar; the outcome of any legal proceedings that may be instituted against NYCB or Flagstar; the possibility that the proposed transaction will not close when expected or at all because required regulatory, shareholder or other approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all, or are obtained subject to conditions that are not anticipated; the ability of NYCB and Flagstar to meet expectations regarding the timing, completion and accounting and tax treatments of the proposed transaction; the risk that any announcements relating to the proposed transaction could have adverse effects on the market price of the common stock of NYCB or Flagstar; the possibility that the anticipated benefits of the proposed transaction will not be realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where NYCB and Flagstar do business; certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions; the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; diversion of management's attention from ongoing business operations and opportunities; the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in the proposed transaction within the expected timeframes or at all and to successfully integrate Flagstar's operations and those of NYCB; such integration may be more difficult, time consuming or costly than expected; revenues following the proposed transaction may be lower than expected; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; NYCB's and Flagstar's success in executing their respective business plans and strategies and managing the risks involved in the foregoing; the dilution caused by NYCB's issuance of additional shares of its capital stock in connection with the proposed transaction; and other factors that may affect future results of NYCB and Flagstar; and the other factors discussed in the "Risk Factors" section NYCB's Annual Report on Form 10–K for the year ended December 31, 2020 and in other reports NYCB files with the U.S. Securities and Exchange Commission (the "SEC"), which are available at http://www.sec.gov and in the "SEC Filings" section of NYCB's website, https://ir.mynycb.com, under the heading "Financial Information," and in Flagstar's Annual Report on Form 10-K for the year ended December 31, 2020 and in Flagstar's other filings with SEC, which are available at http://www.sec.gov and in the "Documents" section of Flagstar's website, https://investors.flagstar.com.
Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition
(Unaudited)
Assets
Cash
106
251
204
Interest-earning deposits
177
343
372
23
Total cash and cash equivalents
345
449
623
Securitized HFS loans not sold
Investment securities available-for-sale
1,823
1,764
1,944
2,348
Investment securities held-to-maturity
270
319
377
496
Loans held-for-sale
6,138
7,087
7,098
5,615
Loans held-for-investment
14,052
14,887
16,227
14,808
Loans with government guarantees
2,226
2,457
2,516
1,791
Less: allowance for loan losses
(202)
(241)
(252)
(229)
Total loans held-for-investment and loans with government guarantees, net
16,076
17,103
18,491
16,370
Mortgage servicing rights
342
428
329
261
Federal Home Loan Bank stock
Premises and equipment, net
374
393
392
410
Goodwill and intangible assets
152
155
157
164
Other assets
1,168
1,374
1,250
1,200
Total assets
27,065
29,449
31,038
27,468
Liabilities and Stockholders' Equity
Noninterest-bearing deposits
10,675
10,798
9,458
7,921
Interest-bearing deposits
7,986
8,622
10,515
9,977
Total deposits
18,661
19,420
19,973
17,898
Short-term Federal Home Loan Bank advances and other
2,095
2,745
3,900
3,354
Long-term Federal Home Loan Bank advances
Other long-term debt
396
641
493
Loan with government guarantee repurchase options
989
1,780
1,851
1,067
Other liabilities
1,226
1,550
1,272
1,485
Total liabilities
24,567
27,091
28,837
25,497
Stockholders' Equity
Common stock
Additional paid in capital
1,356
1,350
1,346
1,488
Accumulated other comprehensive income
54
47
46
Retained earnings
1,096
953
807
436
Total stockholders' equity
2,498
2,358
2,201
1,971
Total liabilities and stockholders' equity
Condensed Consolidated Statements of Operations
Change compared to:
1Q21
2Q20
Amount
Percent
Interest Income
Total interest income
198
208
212
206
201
Total interest expense
15
19
26
(18)
(55)
9
(16)
57
Net interest income after provision for credit losses
217
187
66
10
5
161
244
(59)
(26)
(135)
(45)
Loan fees and charges
37
42
48
41
38
(12)
Net return (loss) on the mortgage servicing rights
(38)
Loan administration income
28
27
25
21
4
Deposit fees and charges
14
Other noninterest income
16
20
(20)
Total noninterest income
(72)
(22)
Compensation and benefits
122
144
125
123
6
Occupancy and equipment
50
44
Commissions
62
70
72
61
(11)
Loan processing expense
24
Legal and professional expense
11
Federal insurance premiums
(33)
(43)
Intangible asset amortization
(25)
Other noninterest expense
34
(31)
(54)
(24)
Total noninterest expense
(58)
(17)
Income per share
(0.05)
0.74
(0.06)
0.71
35
Cash dividends declared
Six Months Ended
Change
405
402
86
(52)
(60)
371
316
55
17
(188)
443
200
243
395
79
18
30
64
29
576
529
266
218
85
112
90
39
82
(23)
(29)
63
636
526
383
203
89
87
296
135
84
5.61
2.85
2.76
97
5.54
2.71
96
0.12
0.10
0.02
Summary of Selected Consolidated Financial and Statistical Data
(Dollars in millions, except share data)
Selected Mortgage Statistics (1):
Mortgage rate lock commitments (fallout-adjusted) (2)
24,800
25,000
Mortgage loans closed
26,600
20,700
Mortgage loans sold and securitized
14,100
13,700
12,900
27,800
20,400
Selected Ratios:
Interest rate spread (3)
2.70
2.55
2.52
2.62
2.41
Net margin on loans sold and securitized
1.20
1.65
2.35
1.42
2.09
1.98
1.77
1.30
Adjusted return on average assets (4) (5)
2.34
23.97
25.73
23.47
12.41
16.86
Return on average tangible common equity (5)
25.92
27.99
26.16
13.46
19.07
Adjusted return on average tangible common equity (4) (5)
25.68
32.97
30.63
67.2
62.2
Adjusted efficiency ratio (4)
66.8
60.8
70.7
Common equity-to-assets ratio (average for the period)
8.74
7.53
8.21
15.42
Average Balances:
26,218
22,421
Average interest-bearing liabilities
14,641
15,011
15,119
14,825
14,800
Average stockholders' equity
2,448
2,319
1,977
2,384
1,915
Rounded to nearest hundred million.
Interest rate spread is the difference between rate of interest earned on interest-earning assets and rate of interest paid on interest-bearing liabilities.
See Non-GAAP Reconciliation for further information.
Excludes goodwill, intangible assets and the associated amortization. See Non-GAAP Reconciliation for further information.
Selected Statistics:
Book value per common share
47.26
44.71
41.79
34.62
Number of common shares outstanding
52,862,264
52,752,600
52,656,067
56,943,979
Number of FTE employees
5,503
5,418
5,214
4,641
Number of bank branches
158
160
Ratio of nonperforming assets to total assets (2)
0.30
0.14
Common equity-to-assets ratio
9.23
8.01
7.09
7.18
MSR Key Statistics and Ratios:
Weighted average service fee (basis points)
32.6
33.2
34.3
37.0
Capitalized value of mortgage servicing rights
Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.
Ratio excludes LHFS.
Average Balances, Yields and Rates
Average Balance
Interest
Annualized
Yield/Rate
AverageBalance
Interest-Earning Assets
3.05%
2.83%
3.42%
1,887
3.27%
2,132
3.20%
2,822
3.41%
Home equity
748
3.64%
820
3.50%
1,001
3.78%
Other
1,101
4.80%
1,040
4.79%
881
5.42%
Total consumer loans
3,736
3.79%
3,992
3.68%
4,704
3.87%
3,093
3.37%
3,042
3.36%
3,101
1,449
3.72%
1,486
3.53%
2,006
3.34%
Warehouse lending
5,410
3.95%
6,395
4.00%
3,785
3.88%
Total commercial loans
9,952
94
3.74%
10,923
103
3.76%
8,892
83
3.67%
Total loans held-for-investment
129
3.75%
139
3.73%
128
2,344
0.79%
2,502
0.56%
858
1.97%
Investment securities
2,123
2.19%
2,210
2.21%
3,417
2.42%
0.13%
0.14%
0.11%
Total interest-earning assets
199
3.12%
3.06%
3.38%
2,742
2,887
2,569
28,011
30,065
26,261
Interest-Bearing Liabilities
Retail deposits
Demand deposits
1,686
0.06%
1,852
0.07%
1,800
0.22%
Savings deposits
4,084
3,945
3,476
0.52%
Money market deposits
762
685
716
0.12%
Certificates of deposit
1,126
0.62%
1,293
0.96%
1,987
2.00%
Total retail deposits
7,658
0.18%
7,775
0.25%
7,979
0.78%
Government deposits
1,795
0.19%
1,773
1,088
0.63%
Wholesale deposits and other
1,170
1.33%
1,031
1.59%
738
2.07%
Total interest-bearing deposits
10,623
0.31%
10,579
0.38%
9,805
0.86%
Short-term FHLB advances and other
2,422
0.17%
2,779
3,753
0.26%
Long-term FHLB advances
1.03%
1,068
1.13%
3.19%
453
4.11%
4.99%
Total interest-bearing liabilities
0.43%
0.51%
Retail deposits and other
2,259
2,270
1,687
Custodial deposits (1)
6,188
7,194
6,223
Total noninterest-bearing deposits
8,447
9,464
7,910
2,476
3,271
1,255
Stockholders' equity
28,012
Net interest-earning assets
10,628
12,167
8,573
Interest rate spread (2)
2.70%
2.55%
2.52%
Net interest margin (3)
2.90%
2.82%
2.86%
Ratio of average interest-earning assets to interest-bearing liabilities
172.6%
181.1%
156.7%
Total average deposits
Approximately 80 percent of custodial deposits from loans subserviced which pay interest is recognized as an offset in net loan administration income.
Net interest margin is net interest income divided by average interest-earning assets.
7,181
105
2.94%
5,447
3.56%
2,009
3.23%
2,942
3.46%
784
1,010
4.26%
1,071
848
5.59%
3,864
4,800
4.01%
3,068
52
3,025
1,467
3.62%
1,836
5,900
118
3.98%
3,048
4.04%
10,435
197
7,909
4.03%
14,299
269
12,709
257
4.02%
0.67%
834
1.68%
2,166
2.20%
3,239
40
2.45%
150
192
1.00%
406
3.09%
3.57%
2,814
2,416
29,032
24,837
1,768
1,693
0.47%
4,015
3,433
724
701
1,209
0.80%
2,120
2.13%
7,716
7,947
1,784
0.21%
1,110
0.89%
1.47%
659
10,601
0.35%
9,716
1.09%
2,600
3,659
931
1.20%
424
494
5.16%
1.16%
2,264
1,541
6,688
5,499
8,952
7,040
2,871
1,082
11,393
7,621
2.62%
2.41%
176.9%
145.9%
19,554
16,755
a.
b.
c.
Earnings Per Share
March 31 2021
Weighted average common shares outstanding
52,763,868
52,675,562
56,790,642
52,719,959
56,723,254
Stock-based awards
772,801
622,241
333,064
697,937
433,561
Weighted average diluted common shares
53,536,669
53,297,803
57,123,706
53,417,896
57,156,815
Basic earnings per common share
(0.04)
(0.03)
(0.07)
(0.02)
Diluted earnings per common share
Regulatory Capital - Bancorp
Ratio
Tier 1 leverage (to adjusted avg. total assets)
2,562
2,423
2,021
Total adjusted avg. total asset base
27,828
29,881
29,444
26,040
Tier 1 common equity (to risk weighted assets)
2,322
2,183
2,030
1,781
Tier 1 capital (to risk weighted assets)
Total capital (to risk weighted assets)
2,882
2,790
2,638
2,214
Risk-weighted asset base
20,399
21,164
22,190
19,562
Regulatory Capital - Bank
2,464
8.88
2,523
8.45
2,390
8.12
1,969
7.57
27,767
29,866
29,437
26,020
12.08
11.93
10.77
10.07
2,634
12.92
2,740
12.96
2,608
11.75
2,161
11.05
20,395
21,141
22,194
19,559
Loans Serviced
Unpaid PrincipalBalance (1)
Number of accounts
Unpaid Principal Balance (1)
Subserviced for others (2)
211,775
975,467
197,053
921,126
178,606
867,799
174,517
854,693
Serviced for others (3)
34,263
139,029
40,402
160,511
38,026
151,081
29,846
122,779
Serviced for own loan portfolio (4)
9,685
67,988
9,965
66,363
10,079
66,519
9,211
64,142
Total loans serviced
255,723
1,182,484
247,420
1,148,000
226,711
1,085,399
213,574
1,041,614
UPB, net of write downs, does not include premiums or discounts.
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.
Loans for which Flagstar owns the MSR.
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
Consumer loans
1,794
12.8
1,998
13.4
2,266
14.0
2,716
18.3
717
5.1
781
5.2
856
5.3
978
6.6
1,133
8.0
1,049
7.0
1,004
6.1
898
3,644
25.9
3,828
25.6
4,126
25.4
4,592
31.0
Commercial loans
3,169
22.6
3,084
20.7
3,061
18.9
3,016
20.4
1,376
9.8
1,424
9.6
1,382
8.5
1,968
13.3
5,863
41.7
6,551
44.1
47.2
5,232
35.3
10,408
74.1
11,059
12,101
74.6
10,216
69.0
100.0
Other Consumer Loans Held-for-Investment
Indirect lending
866
76.4
791
75.4
713
71.0
647
72.0
Point of sale
225
19.9
214
211
21.0
181
20.2
3.7
4.2
80
7.8
Total other consumer loans
Allowance for Credit Losses
98
58
99
143
Allowance for loan losses
202
241
Reserve for unfunded commitments
Allowance for credit losses
Three Months Ended June 30, 2021
ResidentialFirst Mortgage
Home Equity
Other Consumer
CommercialReal Estate
Commercial andIndustrial
WarehouseLending
Total LHFI Portfolio (1)
Unfunded Commitments
Adjusted beginning balance
Provision (benefit) for credit losses:
Loan volume
Economic forecast (2)
Credit (3)
(14)
(9)
Qualitative factor adjustments (4)
Charge-offs
Recoveries
Provision for net charge-offs
Ending allowance balance
Excludes loans carried under the fair value option.
Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.
Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.
Includes $9 million of unallocated reserves attributed to various portfolios for presentation purposes.
Six Months Ended June 30, 2021
Residential First Mortgage
HomeEquity
Commercial Real Estate
Commercialand Industrial
Warehouse Lending
UnfundedCommitments
49
(19)
Nonperforming Loans and Assets
Nonperforming LHFI
Nonperforming TDRs
Nonperforming TDRs at inception but performing for less than six months
Total nonperforming LHFI and TDRs (1)
Other nonperforming assets, net
LHFS
Total nonperforming assets
76
Ratio of nonperforming assets to LHFI and repossessed assets (2)
0.57
0.45
0.27
Includes less than 90 day past due performing loans placed on nonaccrual. Interest is not being accrued on these loans.
Asset Quality - Loans Held-for-Investment
30-59 Days Past Due
60-89 Days Past Due
Greater than 90 days (1)
Total Past Due
Total LHFI
67
Total loans
75
92
Includes performing nonaccrual loans that are less than 90 days delinquent and for which interest cannot be accrued.
Troubled Debt Restructurings
TDRs
Performing
Nonperforming
Total
Total TDR loans
Non-GAAP Reconciliation
In addition to analyzing the Company's results on a reported basis, management reviews the Company's results and the results on an adjusted basis. The non-GAAP measures presented in the tables below reflect the adjustments of the reported U.S.GAAP results for significant items that management does not believe are reflective of the Company's current and ongoing operations. The DOJ benefit and loans with government guarantees that have not been repurchased and don't accrue interest are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, adjusted return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic earnings per share, adjusted diluted earnings per share, adjusted net interest margin and adjusted efficiency ratio provide a meaningful representation of its operating performance on an ongoing basis.
The following tables provide a reconciliation of non-GAAP financial measures.
Tangible book value per share and tangible common equity to assets ratio.
2,195
Less: Goodwill and intangible assets
Tangible book value
2,346
2,203
2,044
2,035
1,807
57,150,470
Tangible book value per share
29,476
Tangible common equity to assets ratio
Adjusted return on average common equity, adjusted return on average tangible common equity and adjusted return on average assets.
Add: Intangible asset amortization, net of tax
Tangible net income
151
298
167
Total average equity
Less: Average goodwill and intangible assets
153
156
165
Total tangible average equity
2,295
2,163
1,812
2,229
1,748
Return on average tangible common equity
26.89
Adjustment to remove DOJ settlement expense
4.98
3.86
Adjustment for former CEO SERP agreement
(2.14)
(1.10)
Adjustment for merger costs
1.89
0.97
Adjusted return on average tangible common equity
25.67
30.62
Adjustment to remove DOJ
0.36
Adjustment for former CEO SERP settlement agreement
(0.11)
Adjusted return on average assets
2.08
Adjusted HFI loan-to-deposit ratio.
Average LHFI
Less: Average warehouse loans
6,948
5,697
Adjusted average LHFI
8,278
8,520
8,755
9,142
9,811
Average deposits
Less: Average custodial deposits
8,527
7,347
Adjusted average deposits
12,882
12,849
12,541
12,214
11,492
Adjusted HFI loan-to-deposit ratio
Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, net interest margin and efficiency ratio.
(Dollar in millions)