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

07/28/2021

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

Key Highlights - Second Quarter 2021

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

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

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

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

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

Income Statement Highlights






Three Months Ended


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020


(Dollars in millions, except per share data)

Net interest income

$

183


$

189


$

189


$

180


$

168


(Benefit) provision for credit losses

(44)


(28)


2


32


102


Noninterest income

252


324


332


448


375


Noninterest expense

289


347


314


301


293


Income before income taxes

190


194


205


295


148


Provision for income taxes

43


45


51


73


32


Net income

$

147


$

149


$

154


$

222


$

116








Income per share:






Basic

$

2.78


$

2.83


$

2.86


$

3.90


$

2.04


Diluted

$

2.74


$

2.80


$

2.83


$

3.88


$

2.03


 

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






Three Months Ended


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020


(Dollars in millions, except per share data)

Net interest income

$

183


$

189


$

189


$

180


$

168


(Benefit) provision for credit losses

(44)


(28)


2


32


102


Noninterest income

252


324


332


448


375


Noninterest expense

290


312


314


301


293


Income before income taxes

189


229


205


295


148


Provision for income taxes

43


53


51


73


32


Net income

$

146


$

176


$

154


$

222


$

116








Income per share:






Basic

$

2.78


$

3.34


$

2.86


$

3.90


$

2.04


Diluted

$

2.73


$

3.31


$

2.83


$

3.88


$

2.03



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

 

Key Ratios






Three Months Ended


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Net interest margin

2.90

%

2.82

%

2.78

%

2.78

%

2.86

%

Adjusted net interest margin (1)

3.06

%

3.02

%

2.98

%

2.94

%

2.88

%

Return on average assets

2.1

%

2.0

%

2.1

%

3.1

%

1.8

%

Return on average common equity

24.0

%

25.7

%

27.6

%

41.5

%

23.5

%

Efficiency ratio

66.6

%

67.7

%

60.4

%

47.9

%

54.1

%

HFI loan-to-deposit ratio

71.8

%

74.4

%

74.5

%

75.9

%

76.7

%

Adjusted HFI loan-to-deposit ratio (2)

64.3

%

66.3

%

69.8

%

74.8

%

85.4

%


(1)     Excludes loans with government guarantees available for repurchase. See Non-GAAP Reconciliation for further information.

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

 

Average Balance Sheet Highlights








Three Months Ended

% Change


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

25,269


$

27,178


$

27,100


$

25,738


$

23,692


(7)

%

7

%

Average loans held-for-sale (LHFS)

6,902


7,464


5,672


5,602


5,645


(8)

%

22

%

Average loans held-for-investment (LHFI)

13,688


14,915


15,703


14,839


13,596


(8)

%

1

%

Average total deposits

19,070


20,043


21,068


19,561


17,715


(5)

%

8

%

Net Interest Income

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

The net interest margin in the second quarter was 2.90 percent, an 8 basis point increase from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 4 basis points to 3.06 percent in the second quarter, compared to adjusted net interest margin of 3.02 percent in the prior quarter. The expansion in net interest margin was largely attributable to an increase in LHFS yields due to a mix shift to higher yielding products supporting our residential mortgage-backed securities program, higher LHFI yields and lower deposit costs. Retail banking deposit rates decreased 4 basis points primarily driven by the maturity of higher cost time deposits. 

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

Provision for Credit Losses

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

Noninterest Income

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

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

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

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

Mortgage Metrics








As of/Three Months Ended

Change (% / bps)


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Seq

Yr/Yr


(Dollars in millions)



Mortgage rate lock commitments (fallout-
adjusted) (1) (2)

$

12,400


$

12,300


$

12,000


$

15,000


$

13,800


1%

(10)%

Mortgage loans closed (1)

$

12,800


$

13,800


$

13,100


$

14,400


$

12,200


(7)%

5%

Net margin on mortgage rate lock commitments
(fallout-adjusted) (2)

1.35

%

1.84

%

1.93

%

2.31

%

2.19

%

(49)

(84)

Net gain on loan sales

$

168


$

227


$

232


$

346


$

303


(26)%

(45)%

Net return (loss) on mortgage servicing rights
(MSR)

$

(5)


$


$


$

12


$

(8)


N/M

(38)%

Gain on loan sales + net return on the MSR

$

163


$

227


$

232


$

358


$

295


(28)%

(45)%

Loans serviced (number of accounts - 000's) (3)

1,182


1,148


1,085


1,105


1,042


3%

13%

Capitalized value of MSRs

1.00

%

1.06

%

0.86

%

0.85

%

0.87

%

(6)

13









N/M - Not meaningful

(1)

Rounded to the nearest hundred million

(2)

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

(3)

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

Noninterest Expense

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

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

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

Income Taxes

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

Asset Quality

Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Seq

Yr/Yr


(Dollars in millions)



Allowance for credit losses (1)

$

220


$

265


$

280


$

280


$

250


(17)%

(12)%

Credit reserves to LHFI

1.57

%

1.78

%

1.73

%

1.70

%

1.69

%

(21)

-12

Credit reserves to LHFI excluding warehouse

2.63

%

3.11

%

3.20

%

3.07

%

2.60

%

(48)

3

Net (recoveries) charge-offs

$

1


$

(13)


$

2


$

2


$

3


N/M

(67)%

Total nonperforming LHFI and TDRs

$

74


$

60


$

56


$

45


$

33


23%

N/M

Net (recoveries) charge-offs to LHFI ratio (annualized)

0.01

%

(0.35)

%

0.04

%

0.05

%

0.11

%

36

(10)

Ratio of nonperforming LHFI and TDRs to LHFI

0.53

%

0.40

%

0.34

%

0.28

%

0.22

%

13

31









Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (2):



Residential first mortgage

0.16

%

0.31

%

0.11

%

0.07

%

0.26

%

(15)

(10)

Home equity and other consumer

0.15

%

0.16

%

0.06

%

0.23

%

0.28

%

(1)

(13)

Commercial real estate

%

(0.01)

%

%

(0.01)

%

0.01

%

1

(1)

Commercial and industrial

0.04

%

(4.12)

%

0.21

%

0.06

%

0.08

%

416

(4)









N/M - Not meaningful








          (1)    Includes the allowance for loan losses and the reserve on unfunded commitments.

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

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

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

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

Capital

Capital Ratios (Bancorp)


Change (% / bps)


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Seq

Yr/Yr

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

9.21

%

8.11

%

7.71

%

8.04

%

7.76

%

110

145

Tier 1 common equity (to RWA)

11.38

%

10.31

%

9.15

%

9.21

%

9.11

%

107

227

Tier 1 capital (to RWA)

12.56

%

11.45

%

10.23

%

10.31

%

10.33

%

111

223

Total capital (to RWA)

14.13

%

13.18

%

11.89

%

11.29

%

11.32

%

95

281

Tangible common equity to asset ratio (1)

8.67

%

7.48

%

6.58

%

6.90

%

6.58

%

119

209

Tangible book value per share (1)

$

44.38


$

41.77


$

38.80


$

35.60


$

31.74


6%

40%


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

The Company maintained a solid capital position with regulatory ratios above current regulatory quantitative guidelines for "well capitalized" institutions. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio – the largest component of the Company's held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 13.13 percent and a total risk-based capital ratio of 16.30 percent at June 30, 2021.

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

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $27.1 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 158 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 86 retail locations in 28 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $255.7 billion of loans representing almost 1.2 million borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

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

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

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

Cautionary Statements Regarding Forward-Looking Statements

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

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

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

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition 

(Dollars in millions)

(Unaudited)



June 30,
2021


March 31,
2021


December 31,
2020


June 30,
2020

Assets








Cash

$

168



$

106



$

251



$

204


Interest-earning deposits

177



343



372



23


  Total cash and cash equivalents

345



449



623



227


Securitized HFS loans not sold








Investment securities available-for-sale

1,823



1,764



1,944



2,348


Investment securities held-to-maturity

270



319



377



496


Loans held-for-sale

6,138



7,087



7,098



5,615


Loans held-for-investment

14,052



14,887



16,227



14,808


Loans with government guarantees

2,226



2,457



2,516



1,791


Less: allowance for loan losses

(202)



(241)



(252)



(229)


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

16,076



17,103



18,491



16,370


Mortgage servicing rights

342



428



329



261


Federal Home Loan Bank stock

377



377



377



377


Premises and equipment, net

374



393



392



410


Goodwill and intangible assets

152



155



157



164


Other assets

1,168



1,374



1,250



1,200


Total assets

$

27,065



$

29,449



$

31,038



$

27,468


Liabilities and Stockholders' Equity








Noninterest-bearing deposits

$

10,675



$

10,798



$

9,458



$

7,921


Interest-bearing deposits

7,986



8,622



10,515



9,977


  Total deposits

18,661



19,420



19,973



17,898


Short-term Federal Home Loan Bank advances and other

2,095



2,745



3,900



3,354


Long-term Federal Home Loan Bank advances

1,200



1,200



1,200



1,200


Other long-term debt

396



396



641



493


Loan with government guarantee repurchase options

989



1,780



1,851



1,067


Other liabilities

1,226



1,550



1,272



1,485


Total liabilities

24,567



27,091



28,837



25,497


Stockholders' Equity








Common stock

1



1



1



1


Additional paid in capital

1,356



1,350



1,346



1,488


Accumulated other comprehensive income

45



54



47



46


Retained earnings

1,096



953



807



436


  Total stockholders' equity

2,498



2,358



2,201



1,971


Total liabilities and stockholders' equity

$

27,065



$

29,449



$

31,038



$

27,468










 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)




Change compared to:


Three Months Ended


1Q21


2Q20


June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$

198


$

208


$

212


$

206


$

201



$

(10)


(5)

%


$

(3)


(1)

%

Total interest expense

15


19


23


26


33



(4)


(21)

%


(18)


(55)

%

  Net interest income

183


189


189


180


168



(6)


(3)

%


15


9

%

(Benefit) provision for
credit losses

(44)


(28)


2


32


102



(16)


57

%


N/M


N/M


  Net interest income after
  provision for credit losses

227


217


187


148


66



10


5

%


161


244

%

Noninterest Income












Net gain on loan sales

168


227


232


346


303



(59)


(26)

%


(135)


(45)

%

Loan fees and charges

37


42


48


41


38



(5)


(12)

%


(1)


(3)

%

Net return (loss) on the
mortgage servicing rights

(5)




12


(8)



(5)


N/M


3


(38)

%

Loan administration income

28


27


25


26


21



1


4

%


7


33

%

Deposit fees and charges

8


8


8


8


7




%


1


14

%

Other noninterest income

16


20


19


15


14



(4)


(20)

%


2


14

%

  Total noninterest income

252


324


332


448


375



(72)


(22)

%


N/M


N/M


Noninterest Expense












Compensation and benefits

122


144


125


123


116



(22)


(15)

%


6


5

%

Occupancy and equipment

50


46


44


47


44



4


9

%


6


14

%

Commissions

51


62


70


72


61



(11)


(18)

%


(10)


(16)

%

Loan processing expense

22


21


24


20


22



1


5

%



%

Legal and professional
expense

11


8


11


9


5



3


38

%


6


N/M

Federal insurance premiums

4


6


5


6


7



(2)


(33)

%


(3)


(43)

%

Intangible asset amortization

3


3


3


3


4




%


(1)


(25)

%

Other noninterest expense

26


57


32


21


34



(31)


(54)

%


(8)


(24)

%

  Total noninterest expense

289


347


314


301


293



(58)


(17)

%


(4)


(1)

%

Income before income taxes

190


194


205


295


148



(4)


(2)

%


42


28

%

Provision for income taxes

43


45


51


73


32



(2)


(4)

%


11


34

%

Net income

$

147


$

149


$

154


$

222


$

116



$

(2)


(1)

%


$

31


27

%

Income per share












Basic

$

2.78


$

2.83


$

2.86


$

3.90


$

2.04



$

(0.05)


(2)

%


$

0.74


36

%

Diluted

$

2.74


$

2.80


$

2.83


$

3.88


$

2.03



$

(0.06)


(2)

%


$

0.71


35

%













Cash dividends declared

$

0.06


$

0.06


$

0.05


$

0.05


$

0.05



$


%


$

0.01


20

%

N/M - Not meaningful












 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)



Six Months Ended


Change


June 30,
2021


June 30,
2020


Amount

Percent

Interest Income







Total interest income

$

405



$

402



$

3


1

%

Total interest expense

34



86



(52)


(60)

%

  Net interest income

371



316



55


17

%

(Benefit) provision for credit losses

(72)



116



(188)


N/M


  Net interest income after provision for credit losses

443



200



243


N/M


Noninterest Income







Net gain on loan sales

395



393



2


1

%

Loan fees and charges

79



61



18


30

%

Net return (loss) on the mortgage servicing rights

(5)



(2)



(3)


N/M


Loan administration income

54



33



21


64

%

Deposit fees and charges

17



16



1


6

%

Other noninterest income

36



28



8


29

%

  Total noninterest income

576



529



47


9

%

Noninterest Expense







Compensation and benefits

266



218



48


22

%

Occupancy and equipment

95



85



10


12

%

Commissions

112



90



22


24

%

Loan processing expense

43



39



4


10

%

Legal and professional expense

20



11



9


82

%

Federal insurance premiums

10



13



(3)


(23)

%

Intangible asset amortization

5



7



(2)


(29)

%

Other noninterest expense

85



63



22


35

%

  Total noninterest expense

636



526



110


21

%

Income before income taxes

383



203



180


89

%

Provision for income taxes

87



42



45


107

%

Net income

$

296



$

161



$

135


84

%

Income per share







Basic

$

5.61



$

2.85



$

2.76


97

%

Diluted

$

5.54



$

2.83



$

2.71


96

%








Cash dividends declared

$

0.12



$

0.10



$

0.02


20

%

N/M - Not meaningful







 

Flagstar Bancorp, Inc.

Summary of Selected Consolidated Financial and Statistical Data

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,
2021


March 31,
2021


June 30,
2020


June 30,
2021


June 30,
2020

Selected Mortgage Statistics (1):










Mortgage rate lock commitments (fallout-adjusted) (2)

$

12,400



$

12,300



$

13,800



$

24,800



$

25,000


Mortgage loans closed

$

12,800



$

13,800



$

12,200



$

26,600



$

20,700


Mortgage loans sold and securitized

$

14,100



$

13,700



$

12,900



$

27,800



$

20,400


Selected Ratios:










Interest rate spread (3)

2.70

%


2.55

%


2.52

%


2.62

%


2.41

%

Net interest margin

2.90

%


2.82

%


2.86

%


2.86

%


2.83

%

Net margin on loans sold and securitized

1.20

%


1.65

%


2.35

%


1.42

%


1.93

%

Return on average assets

2.09

%


1.98

%


1.77

%


2.04

%


1.30

%

Adjusted return on average assets (4) (5)

2.09

%


2.34

%


1.77

%


2.19

%


1.30

%

Return on average common equity

23.97

%


25.73

%


23.47

%


12.41

%


16.86

%

Return on average tangible common equity (5)

25.92

%


27.99

%


26.16

%


13.46

%


19.07

%

Adjusted return on average tangible common equity (4) (5)

25.68

%


32.97

%


26.16

%


30.63

%


19.07

%

Efficiency ratio

66.6

%


67.7

%


54.1

%


67.2

%


62.2

%

Adjusted efficiency ratio (4)

66.8

%


60.8

%


54.1

%


70.7

%


62.2

%

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

8.74

%


7.71

%


7.53

%


8.21

%


15.42

%

Average Balances:










Average interest-earning assets

$

25,269



$

27,178



$

23,692



$

26,218



$

22,421


Average interest-bearing liabilities

$

14,641



$

15,011



$

15,119



$

14,825



$

14,800


Average stockholders' equity

$

2,448



$

2,319



$

1,977



$

2,384



$

1,915




(1)

Rounded to nearest hundred million.

(2)

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

(3)

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

(4)

See Non-GAAP Reconciliation for further information.

(5)

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

 


June 30,
2021


March 31,
2021


December 31,
2020


June 30,
2020

Selected Statistics:








Book value per common share

$

47.26



$

44.71



$

41.79



$

34.62


Tangible book value per share (1)

$

44.38



$

41.77



$

38.80



$

31.74


Number of common shares outstanding

52,862,264



52,752,600



52,656,067



56,943,979


Number of FTE employees

5,503



5,418



5,214



4,641


Number of bank branches

158



158



158



160


Ratio of nonperforming assets to total assets (2)

0.30

%


0.23

%


0.21

%


0.14

%

Common equity-to-assets ratio

9.23

%


8.01

%


7.09

%


7.18

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

32.6



33.2



34.3



37.0


Capitalized value of mortgage servicing rights

1.00

%


1.06

%


0.86

%


0.87

%



(1)

Excludes goodwill and intangibles. See Non-GAAP Reconciliation for further information.

(2)

Ratio excludes LHFS.

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Three Months Ended


June 30, 2021


March 31, 2021


June 30, 2020


Average
Balance

Interest

Annualized

Yield/Rate


Average
Balance

Interest

Annualized

Yield/Rate


Average
Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

6,902


$

53


3.05%


$

7,464


$

53


2.83%


$

5,645


$

48


3.42%

Loans held-for-investment












  Residential first mortgage

1,887


15


3.27%


2,132


17


3.20%


2,822


24


3.41%

  Home equity

748


7


3.64%


820


7


3.50%


1,001


9


3.78%

  Other

1,101


13


4.80%


1,040


12


4.79%


881


12


5.42%

Total consumer loans

3,736


35


3.79%


3,992


36


3.68%


4,704


45


3.87%

  Commercial real estate

3,093


26


3.37%


3,042


26


3.36%


3,101


28


3.64%

  Commercial and industrial

1,449


14


3.72%


1,486


13


3.53%


2,006


17


3.34%

  Warehouse lending

5,410


54


3.95%


6,395


64


4.00%


3,785


38


3.88%

Total commercial loans

9,952


94


3.74%


10,923


103


3.76%


8,892


83


3.67%

Total loans held-for-investment

13,688


129


3.75%


14,915


139


3.73%


13,596


128


3.74%

Loans with government guarantees

2,344


5


0.79%


2,502


4


0.56%


858


4


1.97%

Investment securities

2,123


12


2.19%


2,210


12


2.21%


3,417


21


2.42%

Interest-earning deposits

212



0.13%


87



0.14%


176



0.11%

  Total interest-earning assets

25,269


$

199


3.12%


27,178


$

208


3.06%


23,692


$

201


3.38%

Other assets

2,742





2,887





2,569




Total assets

$

28,011





$

30,065





$

26,261




Interest-Bearing Liabilities












Retail deposits












  Demand deposits

$

1,686


$


0.06%


$

1,852


$


0.07%


$

1,800


$

1


0.22%

  Savings deposits

4,084


1


0.14%


3,945


1


0.14%


3,476


4


0.52%

  Money market deposits

762



0.07%


685



0.06%


716



0.12%

  Certificates of deposit

1,126


3


0.62%


1,293


4


0.96%


1,987


10


2.00%

Total retail deposits

7,658


4


0.18%


7,775


5


0.25%


7,979


15


0.78%

Government deposits

1,795


1


0.19%


1,773


1


0.22%


1,088


2


0.63%

Wholesale deposits and other

1,170


4


1.33%


1,031


4


1.59%


738


4


2.07%

Total interest-bearing deposits

10,623


9


0.31%


10,579


10


0.38%


9,805


21


0.86%

Short-term FHLB advances and other

2,422


1


0.17%


2,779


1


0.17%


3,753


2


0.26%

Long-term FHLB advances

1,200


3


1.03%


1,200


3


1.03%


1,068


3


1.13%

Other long-term debt

396


3


3.19%


453


5


4.11%


493


7


4.99%

  Total interest-bearing liabilities

14,641


16


0.43%


15,011


19


0.51%


15,119


33


0.86%

Noninterest-bearing deposits












  Retail deposits and other

2,259





2,270





1,687




  Custodial deposits (1)

6,188





7,194





6,223




Total noninterest-bearing deposits

8,447





9,464





7,910




Other liabilities

2,476





3,271





1,255




Stockholders' equity

2,448





2,319





1,977




Total liabilities and stockholders'
equity

$

28,012





$

30,065





$

26,261




Net interest-earning assets

$

10,628





$

12,167





$

8,573




  Net interest income


$

183





$

189





$

168



Interest rate spread (2)



2.70%




2.55%




2.52%

Net interest margin (3)



2.90%




2.82%




2.86%

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



172.6%




181.1%




156.7%

Total average deposits

$

19,070





$

20,043





$

17,715































(1)

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

(2)

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

(3)

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

 

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Six Months Ended


June 30, 2021


June 30, 2020


Average
Balance

Interest

Annualized

Yield/Rate


Average
Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

7,181


$

105


2.94%


$

5,447


$

97


3.56%

Loans held-for-investment








  Residential first mortgage

2,009


33


3.23%


2,942


51


3.46%

  Home equity

784


14


3.56%


1,010


21


4.26%

  Other

1,071


25


4.80%


848


24


5.59%

Total consumer loans

3,864


72


3.73%


4,800


96


4.01%

  Commercial real estate

3,068


52


3.36%


3,025


63


4.11%

  Commercial and industrial

1,467


27


3.62%


1,836


36


3.88%

  Warehouse lending

5,900


118


3.98%


3,048


62


4.04%

Total commercial loans

10,435


197


3.75%


7,909


161


4.03%

Total loans held-for-investment

14,299


269


3.74%


12,709


257


4.02%

Loans with government guarantees

2,422


8


0.67%


834


7


1.68%

Investment securities

2,166


24


2.20%


3,239


40


2.45%

Interest-earning deposits

150



0.14%


192


1


1.00%

  Total interest-earning assets

26,218


$

406


3.09%


22,421


$

402


3.57%

Other assets

2,814





2,416




Total assets

$

29,032





$

24,837




Interest-Bearing Liabilities








Retail deposits








  Demand deposits

$

1,768


$


0.07%


$

1,693


$

4


0.47%

  Savings deposits

4,015


3


0.14%


3,433


14


0.79%

  Money market deposits

724



0.06%


701


1


0.22%

  Certificates of deposit

1,209


5


0.80%


2,120


22


2.13%

Total retail deposits

7,716


8


0.22%


7,947


41


1.03%

Government deposits

1,784


2


0.21%


1,110


5


0.89%

Wholesale deposits and other

1,101


8


1.47%


659


7


2.21%

Total interest-bearing deposits

10,601


18


0.35%


9,716


53


1.09%

Short-term FHLB advances and other

2,600


2


0.17%


3,659


14


0.79%

Long-term FHLB advances

1,200


6


1.03%


931


6


1.20%

Other long-term debt

424


8


3.68%


494


13


5.16%

  Total interest-bearing liabilities

14,825


34


0.47%


14,800


86


1.16%

Noninterest-bearing deposits








  Retail deposits and other

2,264





1,541




  Custodial deposits (1)

6,688





5,499




Total noninterest-bearing deposits

8,952





7,040




Other liabilities

2,871





1,082




Stockholders' equity

2,384





1,915




Total liabilities and stockholders' equity

$

29,032





$

24,837




Net interest-earning assets

$

11,393





$

7,621




  Net interest income


$

372





$

316



Interest rate spread (2)



2.62%




2.41%

Net interest margin (3)



2.86%




2.83%

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



176.9%




145.9%

Total average deposits

$

19,554





$

16,755






















a.

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

b.

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

c.

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

 

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


Six Months Ended


June 30,
2021


March 31
2021


June 30,
2020


June 30,
2021


June 30,
2020

Net income

$

147



$

149



$

116



$

296



$

161


Weighted average common shares outstanding

52,763,868



52,675,562



56,790,642



52,719,959



56,723,254


Stock-based awards

772,801


622,241


333,064



697,937



433,561


  Weighted average diluted common shares

53,536,669



53,297,803



57,123,706



53,417,896



57,156,815


Basic earnings per common share

$

2.78



$

2.83



$

2.04



$

5.61



$

2.85


Stock-based awards

(0.04)



(0.03)



(0.01)



(0.07)



(0.02)


  Diluted earnings per common share

$

2.74



$

2.80



$

2.03



$

5.54



$

2.83


 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)



June 30, 2021


March 31, 2021


December 31, 2020


June 30, 2020


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,562


9.21

%


$

2,423


8.11

%


$

2,270


7.71

%


$

2,021


7.76

%

Total adjusted avg. total asset base

$

27,828




$

29,881




$

29,444




$

26,040



Tier 1 common equity (to risk weighted assets)

$

2,322


11.38

%


$

2,183


10.31

%


$

2,030


9.15

%


$

1,781


9.11

%

Tier 1 capital (to risk weighted assets)

$

2,562


12.56

%


$

2,423


11.45

%


$

2,270


10.23

%


$

2,021


10.33

%

Total capital (to risk weighted assets)

$

2,882


14.13

%


$

2,790


13.18

%


$

2,638


11.89

%


$

2,214


11.32

%

Risk-weighted asset base

$

20,399




$

21,164




$

22,190




$

19,562



 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)



June 30, 2021


March 31, 2021


December 31, 2020


June 30, 2020


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,464


8.88

%


$

2,523


8.45

%


$

2,390


8.12

%


$

1,969


7.57

%

Total adjusted avg. total asset base

$

27,767




$

29,866




$

29,437




$

26,020



Tier 1 common equity (to risk weighted assets)

$

2,464


12.08

%


$

2,523


11.93

%


$

2,390


10.77

%


$

1,969


10.07

%

Tier 1 capital (to risk weighted assets)

$

2,464


12.08

%


$

2,523


11.93

%


$

2,390


10.77

%


$

1,969


10.07

%

Total capital (to risk weighted assets)

$

2,634


12.92

%


$

2,740


12.96

%


$

2,608


11.75

%


$

2,161


11.05

%

Risk-weighted asset base

$

20,395




$

21,141




$

22,194




$

19,559



 

Loans Serviced

(Dollars in millions)

(Unaudited)


June 30, 2021


March 31, 2021


December 31, 2020


June 30, 2020


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts

Subserviced for others (2)

$

211,775


975,467



$

197,053


921,126



$

178,606


867,799



$

174,517


854,693


Serviced for others (3)

34,263


139,029



40,402


160,511



38,026


151,081



29,846


122,779


Serviced for own loan portfolio (4)

9,685


67,988



9,965


66,363



10,079


66,519



9,211


64,142


Total loans serviced

$

255,723


1,182,484



$

247,420


1,148,000



$

226,711


1,085,399



$

213,574


1,041,614




(1)

UPB, net of write downs, does not include premiums or discounts.

(2)

Loans subserviced for a fee for non-Flagstar owned loans or MSRs. Includes temporary short-term subservicing performed as a result of sales of servicing-released MSRs.

(3)

Loans for which Flagstar owns the MSR.

(4)

Includes LHFI (residential first mortgage, home equity and other consumer), LHFS (residential first mortgage), loans with government guarantees (residential first mortgage), and repossessed assets.

 

Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



June 30, 2021


March 31, 2021


December 31, 2020


June 30, 2020

Consumer loans












Residential first mortgage

$

1,794


12.8

%


$

1,998


13.4

%


$

2,266


14.0

%


$

2,716


18.3

%

Home equity

717


5.1

%


781


5.2

%


856


5.3

%


978


6.6

%

Other

1,133


8.0

%


1,049


7.0

%


1,004


6.1

%


898


6.1

%

  Total consumer loans

3,644


25.9

%


3,828


25.6

%


4,126


25.4

%


4,592


31.0

%

Commercial loans












Commercial real estate

3,169


22.6

%


3,084


20.7

%


3,061


18.9

%


3,016


20.4

%

Commercial and industrial

1,376


9.8

%


1,424


9.6

%


1,382


8.5

%


1,968


13.3

%

Warehouse lending

5,863


41.7

%


6,551


44.1

%


7,658


47.2

%


5,232


35.3

%

  Total commercial loans

10,408


74.1

%


11,059


74.4

%


12,101


74.6

%


10,216


69.0

%

Total loans held-for-investment

$

14,052


100.0

%


$

14,887


100.0

%


$

16,227


100.0

%


$

14,808


100.0

%

 

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



June 30, 2021


March 31, 2021


December 31, 2020


June 30, 2020

Indirect lending

$

866


76.4

%


$

791


75.4

%


$

713


71.0

%


$

647


72.0

%

Point of sale

225


19.9

%


214


20.4

%


211


21.0

%


181


20.2

%

Other

42


3.7

%


44


4.2

%


80


8.0

%


70


7.8

%

Total other consumer loans

$

1,133


100.0

%


$

1,049


100.0

%


$

1,004


100.0

%


$

898


100.0

%

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



June 30, 2021


March 31, 2021


June 30, 2020

Residential first mortgage

$

48



$

45



$

60


Home equity

17



20



28


Other

38



33



34


Total consumer loans

103



98



122


Commercial real estate

58



84



83


Commercial and industrial

38



55



23


Warehouse lending 

3



4



1


Total commercial loans

99



143



107


  Allowance for loan losses

202



241



229


  Reserve for unfunded commitments

18



24



21


Allowance for credit losses

$

220



$

265



$

250


 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



Three Months Ended June 30, 2021


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Adjusted beginning balance

$

45


$

20


$

33


$

84


$

55


$

4


$

241


$

24


Provision (benefit) for credit losses:









  Loan volume

6


(1)


2


2



(1)


8


(6)


  Economic forecast (2)

(1)


(1)


2


(13)


(4)



(17)



  Credit (3)

3


1


1


(14)




(9)



  Qualitative factor adjustments (4)

(5)


(2)



(1)


(13)



(21)



Charge-offs

(1)



(1)





(2)



Recoveries


1






1



Provision for net charge-offs

1


(1)


1





1



Ending allowance balance

$

48


$

17


$

38


$

58


$

38


$

3


$

202


$

18




(1)

Excludes loans carried under the fair value option.

(2)

Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

(3)

Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4)

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

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



Six Months Ended June 30, 2021


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Adjusted beginning balance

$

49


$

25


$

39


$

84


$

51


$

4


$

252


$

28


Provision (benefit) for credit losses:









  Loan volume

3


(2)


3


3


1


(1)


7


(10)


  Economic forecast (2)

(4)


(3)


(1)


(2)


(9)



(19)



  Credit (3)

6


2


1


(22)


(1)



(14)



  Qualitative factor adjustments (4)

(6)


(5)


(4)


(5)


(4)



(24)



Charge-offs

(3)



(2)



(1)



(6)



Recoveries

1


(1)


2



16



18



Provision for net charge-offs

2


1




(15)



(12)



Ending allowance balance

$

48


$

17


$

38


$

58


$

38


$

3


$

202


$

18




(1)

Excludes loans carried under the fair value option.

(2)

Includes changes in the lifetime loss rate based on current economic forecasts as compared to forecasts used in the prior quarter.

(3)

Includes changes in the probability of default and severity of default based on current borrower and guarantor characteristics, as well as individually evaluated reserves.

(4)

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

 

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)



June 30,
2021


March 31,
2021


December 31,
2020


June 30,
2021

Nonperforming LHFI

$

63



$

49



$

46



$

23


Nonperforming TDRs

6



5



4



4


Nonperforming TDRs at inception but performing for less than six months

5



6



6



6


Total nonperforming LHFI and TDRs (1)

74



60



56



33


Other nonperforming assets, net

6



7



8



7


LHFS

9



9



9



7


Total nonperforming assets

$

89



$

76



$

73



$

47










Ratio of nonperforming assets to total assets (2)

0.30

%


0.23

%


0.21

%


0.14

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.53

%


0.40

%


0.34

%


0.22

%

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

0.57

%


0.45

%


0.40

%


0.27

%



(1)

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

(2)

Ratio excludes LHFS.

 

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



30-59 Days
Past Due


60-89 Days
Past Due


Greater than
90 days (1)


Total Past
Due


Total LHFI

June 30, 2021










Consumer loans

$

8



$

4



$

55



$

67



$

3,644


Commercial loans





20



20



10,408


  Total loans

$

8



$

4



$

75



$

87



$

14,052


March 31, 2021










Consumer loans

$

10



$

5



$

42



$

57



$

3,828


Commercial loans





18



18



11,059


       Total loans

$

10



$

5



$

60



$

75



$

14,887


December 31, 2020










Consumer loans

$

9



$

6



$

38



$

53



$

4,126


Commercial loans

21





18



39



12,101


       Total loans

$

30



$

6



$

56



$

92



$

16,227


June 30, 2020










Consumer loans

$

9



$

6



$

33



$

48



$

4,592


Commercial loans









10,216


  Total loans

$

9



$

6



$

33



$

48



$

14,808




(1)

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

 

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)



TDRs


Performing


Nonperforming


Total

June 30, 2021


Consumer loans

$

31



$

11



$

42


Commercial loans

2





2


  Total TDR loans

$

33



$

11



$

44


March 31, 2021






Consumer loans

$

31



$

11



$

42


Commercial loans

5





5


  Total TDR loans

$

36



$

11



$

47


December 31, 2020






Consumer loans

$

31



$

10



$

41


Commercial loans

5





5


  Total TDR loans

$

36



$

10



$

46


June 30, 2020






Consumer loans

$

35



$

10



$

45


Commercial loans

5





5


  Total TDR loans

$

40



$

10



$

50


 

Non-GAAP Reconciliation

(Unaudited)


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


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


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



June 30,
2021


March 31,
2021


December 31,
2020


September 30,
2020


June 30,
2020


(Dollars in millions, except share data)

Total stockholders' equity

$

2,498



$

2,358



$

2,201



$

2,195



$

1,971


Less: Goodwill and intangible assets

152



155



157



160



164


Tangible book value

$

2,346



$

2,203



$

2,044



$

2,035



$

1,807












Number of common shares outstanding

52,862,264



52,752,600



52,656,067



57,150,470



56,943,979


Tangible book value per share

$

44.38



$

41.77



$

38.80



$

35.60



$

31.74












Total assets

$

27,065



$

29,449



$

31,038



$

29,476



$

27,468


Tangible common equity to assets ratio

8.67

%


7.48

%


6.58

%


6.90

%


6.58

%

 

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



Three Months Ended


Six Months Ended


June 30,
2021


March 31,
2021


June 30,
2020


June 30,
2021


June 30,
2020


(Dollars in millions)

Net income

$

147



$

149



$

116



$

296



$

161


Add: Intangible asset amortization, net of tax

2



2



3



2



6


Tangible net income

$

149



$

151



$

119



$

298



$

167












Total average equity

$

2,448



$

2,319



$

1,977



$

2,384



$

1,915


Less: Average goodwill and intangible assets

153



156



165



155



167


Total tangible average equity

$

2,295



$

2,163



$

1,812



$

2,229



$

1,748












Return on average tangible common equity

25.92

%


27.99

%


26.16

%


26.89

%


19.07

%

Adjustment to remove DOJ settlement expense

%


4.98

%


%


3.86

%


%

Adjustment for former CEO SERP agreement

(2.14)

%


%


%


(1.10)

%


%

Adjustment for merger costs

1.89

%


%


%


0.97

%


%

Adjusted return on average tangible common
equity

25.67

%


32.97

%


26.16

%


30.62

%


19.07

%











Return on average assets

2.09

%


1.98

%


1.77

%


2.04

%


1.30

%

Adjustment to remove DOJ

%


0.36

%


%


0.16

%


%

Adjustment for former CEO SERP settlement
agreement

(0.11)

%


%


%


(0.05)

%


%

Adjustment for merger costs

0.10

%


%


%


0.04

%


%

Adjusted return on average assets

2.08

%


2.34

%


1.77

%


2.19

%


1.30

%

 

Adjusted HFI loan-to-deposit ratio.



June 30,
2021


March 31,
2021


December 31,
2020


September 30,
2020


June 30,
2020


(Dollars in millions)

Average LHFI

$

13,688



$

14,915



$

15,703



$

14,839



$

13,596


Less: Average warehouse loans

5,410



6,395



6,948



5,697



3,785


Adjusted average LHFI

$

8,278



$

8,520



$

8,755



$

9,142



$

9,811












Average deposits

$

19,070



$

20,043



$

21,068



$

19,561



$

17,715


Less: Average custodial deposits

6,188



7,194



8,527



7,347



6,223


Adjusted average deposits

$

12,882



$

12,849



$

12,541



$

12,214



$

11,492












HFI loan-to-deposit ratio

71.8

%


74.4

%


74.5

%


75.9

%


76.7

%

Adjusted HFI loan-to-deposit ratio

64.3

%


66.3

%


69.8

%


74.8

%


85.4

%

 

Adjusted noninterest expense, income before income taxes, provision for income taxes, net income, basic earnings per share, diluted earnings per share, net interest margin and efficiency ratio.



Three Months Ended


June 30,
2021


March 31,
2021


December 31,
2020


September 30,
2020


June 30,
2020


(Dollar in millions)

Noninterest expense

$

289



$

347



$

314