View all news

Flagstar Bancorp Reports First Quarter 2022 Net Income of $53 Million, or $0.99 Per Diluted Share

04/27/2022

Key Highlights - First Quarter 2022

  • Posted adjusted net income of $55 million, or $1.02 per diluted share, excluding merger-related costs.
  • Leveraged higher interest rates to grow net interest margin by 15 basis points to 3.11 percent and deliver a $29 million net return on mortgage servicing rights.
  • Grew annualized average commercial loans, excluding warehouse loans, by 28 percent.
  • Expanded portfolio of loans serviced or subserviced to 1.3 million, or $0.3 trillion in UPB.
  • Maintained strong asset quality with no delinquent commercial loans at quarter-end.

TROY, Mich., April 27, 2022 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported first quarter 2022 net income of $53 million, or $0.99 per diluted share, compared to fourth quarter 2021 net income of $85 million, or $1.60 per diluted share, and first quarter 2021 net income of $149 million, or $2.80 per diluted share. On an adjusted basis, Flagstar reported net income of $55 million, or 1.02 per diluted share, for the first quarter 2022.

"This quarter highlighted the resilience of our business model," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp. "It's a model designed for banking and servicing to prosper when rates rise, once we are through a transitionary period so that we continue to produce best in class earnings. And that's exactly what you can see happening in Q1, which clearly was a transitionary period. While mortgage revenue declined more than expected due to an unprecedented increase in mortgage rates, our net interest margin and MSR returns have already improved significantly even though the benefits only started to come through very late in the quarter.

"On an adjusted basis, net interest margin for Q1 was 3.12 percent—the highest adjusted net interest margin we have ever reported. Even more encouraging is that our net interest margin for March rose to 3.19 percent.  MSR returns also rose significantly, mostly late in the quarter, as we began to ease our hedging position.

"As intimated, gain on sale revenue was under significant pressure throughout the quarter as the velocity of the increase in mortgage rates rose at the fastest rate this century. While our channel margins held up fairly well, we experienced lower EBO revenue and competitive factors. We responded by cutting costs, including reducing our mortgage staff by 20 percent at the end of Q1. We remain focused on reinforcing mortgage profitability, and believe we can use our market position and scale to succeed in a mortgage market with fewer players.

"The cyclicality of today's market is not new to us. We've been navigating successfully through challenging mortgage markets for many years, and while we don't yet know how this cycle will unfold, we're going into it in a stronger position than in past cycles. This is thanks to our high levels of capital and liquidity, our diversified sources of revenue, our commitment to expense discipline, and our solid credit quality. Taken together, I'm excited about the prospects for our performance for full year 2022."

Income Statement Highlights






Three Months Ended


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021


(Dollars in millions, except per share data)

Net interest income

$                 165

$                 181

$                 195

$               183

$                 189

(Benefit) provision for credit losses

(4)

(17)

(23)

(44)

(28)

Noninterest income

160

202

266

252

324

Noninterest expense

261

291

286

289

347

Income before income taxes

68

109

198

190

194

Provision for income taxes

15

24

46

43

45

Net income

$                   53

$                   85

$                 152

$               147

$                 149







Income per share:






     Basic

$                0.99

$                1.62

$                2.87

$              2.78

$                2.83

     Diluted

$                0.99

$                1.60

$                2.83

$              2.74

$                2.80

 

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






Three Months Ended


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021


(Dollars in millions, except per share data)

Net interest income

$                 165

$                 181

$                 195

$               183

$                 189

(Benefit) provision for credit losses

(4)

(17)

(23)

(44)

(28)

Noninterest income

160

202

266

252

324

Noninterest expense

258

285

281

290

312

Income before income taxes

71

115

203

189

229

Provision for income taxes

16

25

47

43

53

Net income

$                   55

$                   90

$                 156

$               146

$                 176







Income per share:






     Basic

$                1.03

$                1.71

$                2.94

$              2.78

$                3.34

     Diluted

$                1.02

$                1.69

$                2.90

$              2.74

$                3.31



(1)

See Non-GAAP Reconciliation for further information.

 

Key Ratios






Three Months Ended


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Net interest margin

3.11 %

2.96 %

3.00 %

2.90 %

2.82 %

Adjusted net interest margin (1)

3.12 %

2.98 %

3.04 %

3.06 %

3.02 %

Return on average assets

0.9 %

1.3 %

2.2 %

2.1 %

2.0 %

Return on average common equity

7.9 %

12.7 %

23.4 %

24.0 %

25.7 %

Efficiency ratio

80.4 %

75.9 %

62.2 %

66.6 %

67.7 %

HFI loan-to-deposit ratio

68.5 %

67.2 %

68.8 %

71.8 %

74.4 %

Adjusted HFI loan-to-deposit ratio (2)

64.1 %

60.5 %

60.3 %

64.3 %

66.3 %



(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


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$          21,569

$          24,291

$          25,656

$          25,269

$          27,178

(11) %

(21) %

Average loans held-for-sale (LHFS)

4,833

6,384

7,839

6,902

7,464

(24) %

(35) %

Average loans held-for-investment (LHFI)

12,384

13,314

13,540

13,688

14,915

(7) %

(17) %

Average total deposits

18,089

19,816

19,686

19,070

20,043

(9) %

(10) %

Net Interest Income

Net interest income in the first quarter was $165 million, a decrease of $16 million, or 9 percent, as compared to the fourth quarter 2021. The results primarily reflect a $2.7 billion, or 11 percent, net decrease in average earning assets primarily from mortgage loans held-for-sale and warehouse loans due to seasonality and a smaller mortgage origination market. These decreases were partially offset by growth in commercial and industrial loans.

Net interest margin in the first quarter was 3.11 percent, a 15 basis points increase compared to 2.96 percent in the prior quarter. The margin expansion was largely attributable to the impact from the Federal Reserve's March rate increase, income recognition resulting from the payoff of loans with government guarantees in forbearance, and higher rates on newly originated loans held-for-sale.

Average total deposits were $18.1 billion in the first quarter, down $1.7 billion, or 9 percent, from the fourth quarter 2021, largely due to a decrease of $1.3 billion, or 21 percent in average custodial deposits.

Provision for Credit Losses

The benefit from credit losses was $4 million for the first quarter, as compared to a $17 million benefit for the fourth quarter 2021, reflecting the clean performance of our portfolio, the low number of non-accrual loans and the resolution of an outstanding problem commercial credit during the quarter. At March 31, 2022, there were no commercial delinquencies.

Noninterest Income

Noninterest income decreased to $160 million in the first quarter, as compared to $202 million for the fourth quarter 2021, primarily due to lower gain on sale and loan administration income, partially offset by higher net return on mortgage servicing rights.

First quarter net gain on loan sales decreased $46 million, to $45 million, as compared to $91 million in the fourth quarter 2021. Gain on sale margins decreased 44 basis points to 58 basis points for the first quarter 2022, compared to 102 basis points for the fourth quarter 2021. The decrease was largely the result of fewer re-securitization gains from the EBO book and secondary marketing, which were impacted by the speed of rate changes in the quarter and volatility. Channel margins held up well and were driven slightly lower by competitive factors. Fallout adjusted lock volume declined to $7.7 billion from $8.9 billion for the fourth quarter 2021, reflecting lower refinance volumes due to increasing interest rates.

Net return on mortgage servicing rights increased $10 million, to $29 million for the first quarter 2022, compared to a $19 million net return for the fourth quarter 2021. During the quarter, we reduced our hedges on this portfolio to help mitigate the impact of higher mortgage rates on our mortgage origination revenue. The increase in interest rates during the quarter resulted in improved valuations and lower runoff. 

Loan administration income decreased $3 million, to $33 million for the first quarter 2022, compared to $36 million for the fourth quarter 2021, driven by a decrease in the average number of subserviced loans in forbearance which earn a higher rate.

Loan fees and charges decreased $2 million, to $27 million for the first quarter, compared to $29 million for the fourth quarter 2021, primarily due to a 23 percent decrease in mortgage loans closed. This decrease was partially offset by higher ancillary fee income from our servicing business.

Mortgage Metrics








As of/Three Months Ended

Change (% / bps)


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Seq

Yr/Yr


(Dollars in millions)



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

$        7,700

$         8,900

$       11,300

$       12,400

$       12,300

(13)%

(37)%

Mortgage loans closed (1)

$        8,200

$       10,700

$       12,500

$       12,800

$       13,800

(23)%

(40)%

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

0.58 %

1.02 %

1.50 %

1.35 %

1.84 %

(44)

(126)

Net gain on loan sales

$             45

$             91

$           169

$           168

$           227

(51)%

(80)%

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

$             29

$             19

$               9

$              (5)

$             —

N/M

N/M

Gain on loan sales + net return on the MSR

$             74

$           110

$           178

$           163

$           227

(33)%

(67)%

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

1,256

1,234

1,203

1,182

1,148

2%

9%

Capitalized value of MSRs

1.31 %

1.12 %

1.08 %

1.00 %

1.06 %

19

25

     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 $261 million for the first quarter, compared to $291 million for the fourth quarter 2021. Excluding $3 million of merger costs in the first quarter 2022 and $6 million of merger expenses in the fourth quarter 2021, noninterest expense decreased $27 million, or 9 percent. Commissions were $12 million lower due to a 23 percent decrease in mortgage loan closings. Compensation and benefits were $10 million lower due to a decrease in incentive compensation and reductions in the number of full time equivalent employees, partially offset by seasonally higher payroll taxes and benefits.

Mortgage expenses were $102 million for the first quarter, a decrease of $19 million compared to the prior quarter. The ratio of mortgage noninterest expense to closings—our mortgage expense ratio— was 1.24 percent, an increase of 10 basis points from the fourth quarter 2021. We took action to cut mortgage costs, including staff reductions, at the end of the first quarter. The impact from the actions taken will be realized in the second quarter.

The efficiency ratio was 80 percent for the first quarter, as compared to 76 percent for the fourth quarter 2021. Excluding $3 million of merger expenses in the first quarter 2021 and $6 million of merger expenses in the fourth quarter 2021, the adjusted efficiency ratio was 80 percent and 74 percent, respectively. The higher efficiency ratio was primarily driven by lower gain on sale revenue and net interest income compared to the fourth quarter which impacted the full quarter while cost reduction actions occurred at the end of the first quarter.

Income Taxes

The first quarter provision for income taxes totaled $15 million, with an effective tax rate of 22.0 percent, in-line with the effective tax rate for the fourth quarter 2021.

Asset Quality

Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Seq

Yr/Yr


(Dollars in millions)



Allowance for credit losses (1)

$           145

$           170

$           190

$           220

$           265

(15)%

(45)%

Credit reserves to LHFI

1.10 %

1.27 %

1.33 %

1.57 %

1.78 %

(17)

-68

Credit reserves to LHFI excluding warehouse

1.64 %

1.96 %

2.29 %

2.63 %

3.11 %

(32)

(147)

Net charge-offs

$             21

$               3

$               6

$               1

$            (13)

600%

(262)%

Total nonperforming LHFI and TDRs

$           107

$             94

$             96

$             75

$             60

14%

78%

Net charge-offs to LHFI ratio (annualized)

0.69 %

0.08 %

0.19 %

0.01 %

(0.35) %

61

104

Ratio of nonperforming LHFI and TDRs to LHFI

0.80 %

0.70 %

0.66 %

0.53 %

0.40 %

10

40









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



Residential first mortgage

0.31 %

0.04 %

— %

0.16 %

0.31 %

27

Home equity and other consumer

0.07 %

0.14 %

0.01 %

0.15 %

0.16 %

(7)

(9)

Commercial real estate

— %

— %

0.03 %

— %

(0.01) %

1

Commercial and industrial

4.31 %

0.53 %

1.87 %

0.04 %

(4.12) %

378

843

N/M - Not meaningful








(1)

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

(2)

Excludes loans carried under the fair value option.

 

Our portfolio has held up well following the economic stress posed by the pandemic, resulting in net charge-offs of $21 million, or 69 basis points of LHFI in the first quarter 2022, substantially all from the $20 million charge-off associated with one commercial borrower, compared to net charge-offs of $3 million, or 8 basis points in the prior quarter. We had a specific reserve of $18 million for this charge-off at December 31, 2022.

Nonperforming loans held-for-investment and troubled debt restructurings (TDRs) were $107 million and our ratio of nonperforming loans held-for-investment and TDRs to loans held-for-investment was 0.80 basis points at March 31, 2022, a 10 basis point increase compared to December 31, 2021. At March 31, 2022, early stage loan delinquencies totaled $22 million, or 17 basis points of total loans, compared to $62 million, or 46 basis points, at December 31, 2021.

The allowance for credit losses was $145 million and covered 1.10 percent of loans held-for-investment at March 31, 2022, a 17 basis point decrease from December 31, 2021. Excluding warehouse loans, the allowance coverage ratio was 1.64 percent, a 32 basis point decrease from December 31, 2021. The decrease in the allowance for credit losses primarily reflects the aforementioned charge-off of a commercial credit that had a specific reserve. Overall, our portfolio quality remains solid with low levels of nonperforming loans and low delinquency levels, including no commercial delinquencies.

Capital

Capital Ratios (Bancorp)


Change (% / bps)


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021

Seq

Yr/Yr

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

11.83 %

10.54 %

9.72 %

9.21 %

8.11 %

129

372

Tier 1 common equity (to RWA)

13.79 %

13.19 %

11.95 %

11.38 %

10.31 %

60

348

Tier 1 capital (to RWA)

15.06 %

14.43 %

13.11 %

12.56 %

11.45 %

63

361

Total capital (to RWA)

16.47 %

15.88 %

14.55 %

14.13 %

13.18 %

59

329

Tangible common equity to asset ratio (1)

11.13 %

10.09 %

9.23 %

8.67 %

7.48 %

104

365

Tangible book value per share (1)

$         48.61

$         48.33

$         47.21

$         44.38

$         41.77

1%

16%

(1)

See Non-GAAP Reconciliation for further information.

 

We maintained a strong capital position with regulatory ratios above current regulatory quantitative guidelines for "well capitalized" institutions. The risk-based capital ratios all increased more than 100 basis points compared to the prior quarter end. Further demonstrating our capital strength, the capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio—the largest component of the held-for-investment portfolio. Adjusting the risk-weighting of warehouse loans to 50 percent because of historically low levels of losses from this portfolio, coupled with the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, we would have had a tier 1 common equity ratio of 15.54 percent and a total risk-based capital ratio of 18.57 percent at March 31, 2022.

Importantly, tangible book value per share grew to $48.61, up $0.28, or 1 percent from last quarter.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $23.2 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 82 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 $300 billion of loans representing almost 1.3 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 Flagstar's beliefs, goals, intentions, and expectations regarding revenues, earnings, loan production, asset quality, capital levels, and acquisitions, among other matters; Flagstar's estimates of future costs and benefits of the actions each company may take; Flagstar's assessments of probable losses on loans; Flagstar's assessments of interest rate and other market risks; and Flagstar's ability to achieve their respective financial and other strategic goals. Forward‐looking statements speak only as of the date they are made; Flagstar does not assume any duty, and does 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 depending upon various factors as described in the "Risk Factors" section in Flagstar's Annual Report on Form 10-K for the year ended December 31, 2021 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.

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.

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)



March 31,
2022


December 31,
2021


March 31,
2021

Assets






  Cash

$                   174


$                   277


$                   106

  Interest-earning deposits

231


774


343

     Total cash and cash equivalents

405


1,051


449

  Investment securities available-for-sale

2,010


1,804


1,764

  Investment securities held-to-maturity

190


205


319

  Loans held-for-sale

3,475


5,054


7,087

  Loans held-for-investment

13,236


13,408


14,887

  Loans with government guarantees

1,256


1,650


2,457

  Less: allowance for loan losses

(131)


(154)


(241)

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

14,361


14,904


17,103

  Mortgage servicing rights

523


392


428

  Federal Home Loan Bank stock

329


377


377

  Premises and equipment, net

354


360


393

  Goodwill and intangible assets

145


147


155

  Bank-owned life insurance

367


365


359

  Other assets

1,085


824


1,015

          Total assets

$              23,244


$              25,483


$              29,449

Liabilities and Stockholders' Equity






  Noninterest-bearing deposits

$                6,827


$                7,088


$                8,622

  Interest-bearing deposits

10,521


10,921


10,798

     Total deposits

17,348


18,009


19,420

  Short-term Federal Home Loan Bank advances and other

200


1,880


2,745

  Long-term Federal Home Loan Bank advances

1,200


1,400


1,200

  Other long-term debt

396


396


396

  Loan with government guarantees repurchase liability

63


200


1,780

  Other liabilities

1,304


880


1,550

          Total liabilities

20,511


22,765


27,091

Stockholders' Equity






  Common stock

1


1


1

  Additional paid in capital

1,357


1,355


1,350

  Accumulated other comprehensive income

(2)


35


54

  Retained earnings

1,377


1,327


953

     Total stockholders' equity

2,733


2,718


2,358

          Total liabilities and stockholders' equity

$              23,244


$              25,483


$              29,449

 

Flagstar Bancorp, Inc.

Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)





Change compared to:


Three Months Ended


4Q21


1Q21


March 31,
2022

December 31,
2021

September 30,
2021

June 30,
2021

March 31,
2021


Amount

Percent


Amount

Percent

Interest Income












     Total interest income

$              177

$              196

$              209

$              198

$              208


$     (19)

(10) %


$     (31)

(15) %

     Total interest expense

12

15

14

15

19


(3)

(20) %


(7)

(37) %

       Net interest income

165

181

195

183

189


(16)

(9) %


(24)

(13) %

     (Benefit) provision for
     credit losses

(4)

(17)

(23)

(44)

(28)


13

(76) %


24

N/M

       Net interest income after
        provision for credit losses

169

198

218

227

217


(29)

(15) %


(48)

(22) %

Noninterest Income












     Net gain on loan sales

45

91

169

168

227


(46)

(51) %


(182)

(80) %

     Loan fees and charges

27

29

33

37

42


(2)

(7) %


(15)

(36) %

     Net return (loss) on the
     mortgage servicing rights

29

19

9

(5)


10

N/M


29

N/M

     Loan administration income

33

36

31

28

27


(3)

(8) %


6

22 %

     Deposit fees and charges

9

8

9

8

8


1

13 %


1

13 %

     Other noninterest income

17

19

15

16

20


(2)

(11) %


(3)

(15) %

       Total noninterest income

160

202

266

252

324


(42)

(21) %


(164)

(51) %

Noninterest Expense












     Compensation and benefits

127

137

130

122

144


(10)

(7) %


(17)

(12) %

     Occupancy and equipment

45

47

46

50

46


(2)

(4) %


(1)

(2) %

     Commissions

26

38

44

51

62


(12)

(32) %


(36)

(58) %

     Loan processing expense

21

21

22

22

21


— %


— %

     Legal and professional expense

11

13

12

11

8


(2)

(15) %


3

38 %

     Federal insurance premiums

4

4

6

4

6


— %


(2)

(33) %

     Intangible asset amortization

2

3

3

3

3


(1)

(33) %


(1)

(33) %

     Other noninterest expense

25

28

23

26

57


(3)

(11) %


(32)

(56) %

       Total noninterest expense

261

291

286

289

347


(30)

(10) %


(86)

(25) %

     Income before income taxes

68

109

198

190

194


(41)

(38) %


(126)

(65) %

     Provision for income taxes

15

24

46

43

45


(9)

(38) %


(30)

(67) %

          Net income

$                53

$                85

$              152

$              147

$              149


$     (32)

(38) %


$     (96)

(64) %

Income per share












     Basic

$             0.99

$             1.62

$             2.87

$             2.78

$             2.83


$   (0.63)

(39) %


$  (1.84)

(65) %

     Diluted

$             0.99

$             1.60

$             2.83

$             2.74

$             2.80


$   (0.61)

(38) %


$  (1.81)

(65) %













Cash dividends declared

$             0.06

$             0.06

$             0.06

$             0.06

$             0.06


$      —

— %


$      —

— %

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


March 31,
2022


December 31,
2021


March 31,
2021

Selected Mortgage Statistics (1):






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

$            7,700


$            8,900


$          12,300

     Mortgage loans closed

$            8,200


$          10,700


$          13,800

     Mortgage loans sold and securitized

$            9,900


$          12,100


$          13,700

Selected Ratios:






     Interest rate spread (3)

2.91 %


2.79 %


2.55 %

     Net interest margin

3.11 %


2.96 %


2.82 %

     Net margin on loans sold and securitized

0.45 %


0.75 %


1.65 %

     Return on average assets

0.87 %


1.28 %


1.98 %

     Adjusted return on average assets (4)

0.92 %


1.35 %


2.34 %

     Return on average common equity

7.87 %


12.74 %


25.73 %

     Return on average tangible common equity (5)

8.61 %


13.79 %


27.99 %

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

9.10 %


14.90 %


32.97 %

     Efficiency ratio

80.4 %


75.9 %


67.7 %

     Adjusted efficiency ratio (4)

79.6 %


74.4 %


60.8 %

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

11.12 %


10.08 %


7.71 %

Average Balances:






     Average interest-earning assets

$          21,569


$          24,291


$          27,178

     Average interest-bearing liabilities

$          12,959


$          14,093


$          15,011

     Average stockholders' equity

$            2,687


$            2,692


$            2,319





(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.

 


March 31,
2022


December 31,
2021


March 31,
2021

Selected Statistics:






     Book value per common share

$              51.33


$              51.09


$              44.71

     Tangible book value per share (1)

$              48.61


$              48.33


$              41.77

     Number of common shares outstanding

53,236,067


53,197,650


52,752,600

     Number of FTE employees

5,341


5,395


5,418

     Number of bank branches

158


158


158

     Ratio of nonperforming assets to total assets (2)

0.48 %


0.39 %


0.23 %

     Common equity-to-assets ratio

11.75 %


10.67 %


8.01 %

MSR Key Statistics and Ratios:






     Weighted average service fee (basis points)

31.2


31.5


33.2

     Capitalized value of mortgage servicing rights

1.31 %


1.12 %


1.06 %



(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


March 31, 2022


December 31, 2021


March 31, 2021


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

$       4,833

$           40

3.31 %


$      6,384

$          49

3.10 %


$      7,464

$          53

2.83 %

  Loans held-for-investment












     Residential first mortgage

1,500

13

3.35 %


1,569

13

3.22 %


2,132

17

3.20 %

     Home equity

598

6

4.05 %


635

6

3.93 %


820

7

3.50 %

     Other

1,253

15

4.86 %


1,229

16

4.80 %


1,040

12

4.79 %

       Total consumer loans

3,351

34

4.04 %


3,433

35

3.92 %


3,992

36

3.68 %

     Commercial real estate

3,226

29

3.60 %


3,260

29

3.45 %


3,042

26

3.36 %

     Commercial and industrial

1,834

16

3.52 %


1,473

14

3.69 %


1,486

13

3.53 %

     Warehouse lending

3,973

32

3.25 %


5,148

47

3.54 %


6,395

64

4.00 %

       Total commercial loans

9,033

77

3.43 %


9,881

90

3.53 %


10,923

103

3.76 %

          Total loans held-for-investment

12,384

111

3.59 %


13,314

125

3.63 %


14,915

139

3.73 %

  Loans with government guarantees

1,402

15

4.40 %


1,742

11

2.62 %


2,502

4

0.56 %

  Investment securities

2,021

11

2.19 %


2,104

11

2.09 %


2,210

12

2.21 %

  Interest-earning deposits

929

0.16 %


747

0.15 %


87

0.14 %

     Total interest-earning assets

21,569

$          177

3.30 %


24,291

$        196

3.18 %


27,178

$        208

3.06 %

  Other assets

2,592




2,408




2,887



       Total assets

$     24,161




$    26,699




$    30,065



Interest-Bearing Liabilities












  Retail deposits












     Demand deposits

$       1,626

$           —

0.09 %


$      1,692

$          —

0.05 %


$      1,852

$          —

0.07 %

     Savings deposits

4,253

2

0.14 %


4,211

2

0.14 %


3,945

1

0.14 %

     Money market deposits

887

0.09 %


927

0.09 %


685

0.06 %

     Certificates of deposit

929

1

0.35 %


973

1

0.44 %


1,293

4

0.96 %

       Total retail deposits

7,695

3

0.15 %


7,803

3

0.15 %


7,775

5

0.25 %

  Government deposits

1,879

1

0.17 %


1,998

1

0.17 %


1,773

1

0.22 %

  Wholesale deposits and other

1,071

2

0.89 %


1,238

3

0.93 %


1,031

4

1.59 %

     Total interest-bearing deposits

10,645

6

0.23 %


11,039

7

0.25 %


10,579

10

0.38 %

  Short-term FHLB advances and other

658

0.22 %


1,258

1

0.19 %


2,779

1

0.17 %

  Long-term FHLB advances

1,260

3

0.98 %


1,400

4

0.88 %


1,200

3

1.03 %

  Other long-term debt

396

3

3.23 %


396

3

3.16 %


453

5

4.11 %

     Total interest-bearing liabilities

12,959

$           12

0.39 %


14,093

$          15

0.39 %


15,011

19

0.51 %

  Noninterest-bearing deposits












     Retail deposits and other

2,474




2,468




2,270



     Custodial deposits (1)

4,970




6,309




7,194



       Total noninterest-bearing deposits

7,444




8,777




9,464



  Other liabilities

1,071




1,137




3,271



  Stockholders' equity

2,687




2,692




2,319



       Total liabilities and stockholders' equity

$     24,161




$    26,699




$    30,065



       Net interest-earning assets

$       8,610




$    10,198




$    12,167



          Net interest income


$          165




$        181




$        189


  Interest rate spread (2)



2.91 %




2.79 %




2.55 %

  Net interest margin (3)



3.11 %




2.96 %




2.82 %

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



166.4 %




172.4 %




181.1 %

          Total average deposits

$     18,089




$    19,816




$    20,043







(1)

Approximately 80 percent of custodial deposits from loans subserviced for which LIBOR based fees are recognized as an offset in net loan administration income.  


(2)

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


(3)

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

 

Earnings Per Share

(Dollars in millions, except share data)

(Unaudited)



Three Months Ended


March 31,
2022


December 31,
2021


March 31,
2021

Net income

$                        53


$                      85


$                      149

  Weighted average common shares outstanding

53,219,866


52,867,138


52,675,562

  Stock-based awards

358,135


710,694


622,241

     Weighted average diluted common shares

53,578,001


53,577,832


53,297,803

  Basic earnings per common share

$                     0.99


$                   1.62


$                     2.83

  Stock-based awards


(0.02)


(0.03)

     Diluted earnings per common share

$                     0.99


$                   1.60


$                     2.80

 

Regulatory Capital - Bancorp

(Dollars in millions)

(Unaudited)



March 31, 2022


December 31, 2021


March 31, 2021


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$          2,843

11.83 %


$          2,798

10.54 %


$          2,423

8.11 %

     Total adjusted avg. total asset base

$         24,026



$         26,545



$         29,881


Tier 1 common equity (to risk weighted assets)

$          2,603

13.79 %


$          2,558

13.19 %


$          2,183

10.31 %

Tier 1 capital (to risk weighted assets)

$          2,843

15.06 %


$          2,798

14.43 %


$          2,423

11.45 %

Total capital (to risk weighted assets)

$          3,110

16.47 %


$          3,080

15.88 %


$          2,790

13.18 %

     Risk-weighted asset base

$         18,877



$         19,397



$         21,164


 

Regulatory Capital - Bank

(Dollars in millions)

(Unaudited)



March 31, 2022


December 31, 2021


March 31, 2021


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$          2,758

11.50 %


$          2,706

10.21 %


$          2,523

8.45 %

     Total adjusted avg. total asset base

$         23,984



$         26,502



$         29,866


Tier 1 common equity (to risk weighted assets)

$          2,758

14.62 %


$          2,706

13.96 %


$          2,523

11.93 %

Tier 1 capital (to risk weighted assets)

$          2,758

14.62 %


$          2,706

13.96 %


$          2,523

11.93 %

Total capital (to risk weighted assets)

$          2,875

15.24 %


$          2,839

14.65 %


$          2,740

12.96 %

     Risk-weighted asset base

$         18,861



$         19,383



$         21,141


 

Loans Serviced

(Dollars in millions)

(Unaudited)



March 31, 2022


December 31, 2021


March 31, 2021


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)

$     253,013

1,041,251


$     246,858

1,032,923


$     197,053

921,126

Serviced for others (3)

40,065

154,404


35,074

137,243


40,402

160,511

Serviced for own loan portfolio (4)

7,215

60,167


8,793

63,426


9,965

66,363

     Total loans serviced

$     300,293

1,255,822


$     290,725

1,233,592


$     247,420

1,148,000





(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)



March 31, 2022


December 31, 2021


March 31, 2021

Consumer loans









     Residential first mortgage

$         1,499

11.3 %


$         1,536

11.5 %


$         1,998

13.4 %

     Home equity

596

4.5 %


613

4.6 %


781

5.2 %

     Other

1,267

9.6 %


1,236

9.2 %


1,049

7.0 %

       Total consumer loans

3,362

25.4 %


3,385

25.3 %


3,828

25.6 %

Commercial loans









     Commercial real estate

3,254

24.6 %


3,223

24.0 %


3,084

20.7 %

     Commercial and industrial

1,979

15.0 %


1,826

13.6 %


1,424

9.6 %

     Warehouse lending

4,641

35.1 %


4,974

37.1 %


6,551

44.1 %

       Total commercial loans

9,874

74.7 %


10,023

74.7 %


11,059

74.4 %

          Total loans held-for-investment

$       13,236

100.1 %


$       13,408

100.0 %


$       14,887

100.0 %

 

Other Consumer Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



March 31, 2022


December 31, 2021


March 31, 2021

Indirect lending

$            935

73.8 %


$            925

74.8 %


$            791

75.4 %

Point of sale

295

23.3 %


271

22.0 %


214

20.4 %

Other

37

2.9 %


40

3.2 %


44

4.2 %

     Total other consumer loans

$         1,267

100.0 %


$         1,236

100.0 %


$         1,049

100.0 %

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



March 31, 2022


December 31, 2021


March 31, 2021

Residential first mortgage

$                               43


$                               40


$                               45

Home equity

16


14


20

Other

34


36


33

  Total consumer loans

93


90


98

Commercial real estate

22


28


84

Commercial and industrial

13


32


55

Warehouse lending 

3


4


4

  Total commercial loans

38


64


143

     Allowance for loan losses

131


154


241

     Reserve for unfunded commitments

14


16


24

          Allowance for credit losses

$                             145


$                             170


$                             265

 

Allowance for Credit Losses

(Dollars in millions)

(Unaudited)



Three Months Ended March 31, 2022


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Beginning balance

$            40

$          14

$            36

$            28

$            32

$              4

$          154

$                16

  Provision (benefit) for credit losses:









     Loan volume

1

3

4

(2)

     Economic forecast (2)

1

2

1

(2)

2

     Credit (3)

2

(3)

(6)

2

(1)

(6)

     Qualitative factor adjustments

(1)

(4)

(5)

  Charge-offs

(1)

(2)

(20)

(23)

  Recoveries

1

1

2

  Provision for net charge-offs

1

(1)

1

2

3

       Ending allowance balance

$            43

$          16

$            34

$            22

$            13

$              3

$          131

$                14





(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.

 

Nonperforming Loans and Assets

(Dollars in millions)

(Unaudited)



March 31,
2022


December 31,
2021


March 31,
2021

Nonperforming LHFI

$                   95


$                   81


$                   49

Nonperforming TDRs

7


8


5

Nonperforming TDRs at inception but performing for less than six months

5


5


6

     Total nonperforming LHFI and TDRs (1)

107


94


60

Other nonperforming assets, net

4


6


7

LHFS

24


17


9

     Total nonperforming assets

$                 135


$                 117


$                   76







Ratio of nonperforming assets to total assets (2)

0.48 %


0.39 %


0.23 %

Ratio of nonperforming LHFI and TDRs to LHFI

0.80 %


0.70 %


0.40 %

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

0.84 %


0.74 %


0.45 %



(1)

Includes one commercial loan less than 90 days past due in nonaccrual and $33 million of first residential mortgage loans that are current in accordance with their forbearance exit plan and not yet returned to accrual status as of March 31, 2022.

(2)

Ratio excludes nonperforming LHFS.

 

Asset Quality - Loans Held-for-Investment

(Dollars in millions)

(Unaudited)



30-59 Days
Past Due


60-89 Days
Past Due


Greater than 90
days


Total Past
Due


Total LHFI

March 31, 2022










  Consumer loans (1)

$               12


$               10


$               98


$             120


$          3,362

  Commercial loans





9,874

     Total loans

$               12


$               10


$               98


$             120


$        13,236

December 31, 2021










  Consumer loans

$               26


$               36


$               62


$             124


$          3,385

  Commercial loans



32


32


10,023

     Total loans

$               26


$               36


$               94


$             156


$        13,408

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





(1)

Includes $33 million of first residential mortgage loans that are current in accordance with their forbearance exit plan and not yet returned to accrual status as of March 31, 2022.

 

Troubled Debt Restructurings

(Dollars in millions)

(Unaudited)



TDRs


Performing


Nonperforming


Total

March 31, 2022


  Consumer loans

$                             23


$                             12


$                             35

  Commercial loans



     Total TDR loans

$                             23


$                             12


$                             35

December 31, 2021






  Consumer loans

$                             22


$                             13


$                             35

  Commercial loans

2



2

     Total TDR loans

$                             24


$                             13


$                             37

March 31, 2021






  Consumer loans

$                             31


$                             11


$                             42

  Commercial loans

5



5

     Total TDR loans

$                             36


$                             11


$                             47

 

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 settlement expense and loans with government guarantees that have not been repurchased and don't accrue interest are not reflective of our ongoing operations and, therefore, have been excluded from our U.S. GAAP results. The Company believes that tangible book value per share, tangible common equity to assets ratio, return on average tangible common equity, adjusted return on average tangible common equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, 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.



March 31,
2022


December 31,
2021


September 30,
2021


June 30,
2021


March 31,
2021


(Dollars in millions, except share data)

Total stockholders' equity

$           2,733


$           2,718


$           2,645


$        2,498


$           2,358

Less: Goodwill and intangible assets

145


147


149


152


155

     Tangible book value

$           2,588


$           2,571


$           2,496


$        2,346


$           2,203











Number of common shares outstanding

53,236,067


53,197,650


52,862,383


52,862,264


52,752,600

Tangible book value per share

$           48.61


$           48.33


$           47.21


$        44.38


$           41.77











Total assets

$         23,244


$         25,483


$         27,042


$      27,065


$         29,449

Tangible common equity to assets ratio

11.13 %


10.09 %


9.23 %


8.67 %


7.48 %

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


Three Months Ended


March 31,
2022


December 31,
2021


March 31,
2021


(Dollars in millions)

Net income

$                   53


$                  85


$                 149

Add: Intangible asset amortization, net of tax

1


2


2

     Tangible net income

$                   54


$                  87


$                 151







Total average equity

$              2,687


$             2,692


$              2,319

Less: Average goodwill and intangible assets

146


148


156

     Total tangible average equity

$              2,541


$             2,544


$              2,163







Return on average tangible common equity

8.61 %


13.79 %


27.99 %

Adjustment to remove DOJ settlement expense

— %


— %


4.98 %

Adjustment for merger costs

0.49 %


1.11 %


— %

Adjusted return on average tangible common equity

9.10 %


14.90 %


32.97 %







Return on average assets

0.89 %


1.28 %


1.98 %

Adjustment to remove DOJ settlement expense

— %


— %


0.36 %

Adjustment for merger costs

0.03 %


0.07 %


— %

Adjusted return on average assets

0.92 %


1.35 %


2.34 %

Adjusted HFI loan-to-deposit ratio.


March 31,
2022


December 31,
2021


September 30,
2021


June 30,
2021


March 31,
2021


(Dollars in millions)

Average LHFI

$       12,384


$       13,314


$       13,540


$       13,688


$       14,915

Less: Average warehouse loans

3,973


5,148


5,392


5,410


6,395

     Adjusted average LHFI

$         8,411


$         8,166


$         8,148


$         8,278


$         8,520











Average deposits

$       18,089


$       19,816


$       19,686


$       19,070


$       20,043

Less: Average custodial deposits

4,970


6,309


6,180


6,188


7,194

     Adjusted average deposits

$       13,119


$       13,507


$       13,506


$       12,882


$       12,849











HFI loan-to-deposit ratio

68.5 %


67.2 %


68.8 %


71.8 %


74.4 %

Adjusted HFI loan-to-deposit ratio

64.1 %


60.5 %


60.3 %


64.3 %


66.3 %

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


Three Months Ended


March 31,
2022


December 31,
2021


September 30,
2021


June 30,
2021


March 31,
2021


(Dollar in millions)

Noninterest expense

$           261


$             291


$             286


$             289


$           347

Adjustment to remove DOJ settlement expense





35

Adjustment for former CEO SERP agreement




(10)


Adjustment for merger costs

3


6


5


9


Adjusted noninterest expense

$           258


$             285


$             281


$             290


$           312











Income before income taxes

$             68


$             109


$             198


$             190


$           194

Adjustment to remove DOJ settlement expense





35

Adjustment for former CEO SERP agreement




(10)


Adjustment for merger costs

3


6


5


9


Adjusted income before income taxes

$             71


$             115


$             203


$             189


$           229











Provision for income taxes

$             15


$               24


$               46


$               43


$             45

Adjustment to remove DOJ settlement expense





(8)

Adjustment for former CEO SERP agreement




2


Adjustment for merger costs

(1)


(1)


(1)


(2)


Adjusted provision for income taxes

$             16


$               25


$               47


$               43


$             53











Net income

$             53


$               85


$             152


$             147


$           149

Adjusted net income

$             55


$               90


$             156


$             146


$           176











Weighted average common shares outstanding

53,219,866


52,867,138


52,862,288


52,763,868


52,675,562

Weighted average diluted common shares

53,578,001


53,577,832


53,659,422


53,536,669


53,297,803

Adjusted basic earnings per share

$          1.03


$            1.71


$            2.94


$            2.78


$          3.34

Adjusted diluted earnings per share

$          1.02


$            1.69


$            2.90


$            2.74


$          3.31











Efficiency ratio

80.4 %


75.9 %


62.2 %


66.6 %


67.7 %

Adjustment to remove DOJ settlement expense

— %


— %


— %


— %


(6.8) %

Adjustment for former CEO SERP agreement

— %


— %


— %


1.6 %


— %

Adjustment for merger costs

(0.8) %


(1.5) %


(1.1) %


(1.4) %


— %

Adjusted efficiency ratio

79.6 %


74.4 %


61.1 %


66.8 %


60.9 %

Adjusted net interest margin


Three Months Ended


March 31,
2022


December 31,
2021


September 30,
2021


June 30,
2021


March 31,
2021

Average interest earning assets

$       21,569


$       24,291


$       25,656


$       25,269


$       27,178

Net interest margin

3.11 %


2.96 %


3.00 %


2.90 %


2.82 %

Adjustment to LGG loans available for repurchase

0.01 %


0.02 %


0.04 %


0.16 %


0.20 %

Adjusted net interest margin

3.12 %


2.98 %


3.04 %


3.06 %


3.02 %

 

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

Cision View original content:https://www.prnewswire.com/news-releases/flagstar-bancorp-reports-first-quarter-2022-net-income-of-53-million-or-0-99-per-diluted-share-301533818.html

SOURCE Flagstar Bancorp, Inc.

View all news