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Flagstar Bancorp Reports Second Quarter 2019 Net Income of $61 million, or $1.06 Per Diluted Share


TROY, Mich., July 23, 2019 /PRNewswire/ --

Key Highlights - Second Quarter 2019

  • Adjusted net income of $41 million, or $0.71 per diluted share, excluding Department of Justice ("DOJ") benefit of $25 million.
  • Positive operating leverage as total adjusted operating revenue increased $46 million, or 20 percent, while noninterest expense rose $23 million, or 12 percent from last quarter.
  • Mortgage revenues increased $25 million from prior quarter, led by margin expansion of 17 basis points and an increase in fallout-adjusted locks, partially offset by lower net return on MSRs.
  • Net interest income increased $12 million, driven by broad-based earning asset growth.

Flagstar Bancorp, Inc. (FBC), the holding company for Flagstar Bank, FSB, today reported second quarter 2019 net income of $61 million, or $1.06 per diluted share, compared to first quarter 2019 net income of $36 million, or $0.63 per diluted share. On an adjusted basis, Flagstar reported net income of $41 million, or $0.71 per diluted share, for the second quarter 2019, compared to net income of $37 million, or $0.64 per diluted share, for the first quarter 2019. For the second quarter 2018, Flagstar reported net income of $50 million, or $0.85 per diluted share.

Second Quarter 2019 Highlights:

"Our solid second quarter results demonstrate the strength and durability of our franchise," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Our commercial lending, mortgage banking and servicing teams executed well, fueling top-line growth and driving positive operating leverage and an improved efficiency ratio. The flexibility of our business model positioned us to quickly pivot during the quarter to take advantage of attractive market opportunities.

"The community banking and mortgage servicing businesses provided another quarter of stable earnings. Net interest income grew $12 million as earning assets grew $1.5 billion, or 9 percent during the quarter. Our commercial loan growth was 22 percent as we focused on growing our higher-yielding portfolios, such as our warehouse business. Total serviced accounts increased to 983,000, continuing growth in a segment that provides both a stable source of fee income and liquidity.

"Our mortgage team delivered a strong quarter as they maintained pricing discipline and grew gain on sale margin by 17 basis points compared to first quarter 2019 and 18 basis points compared to second quarter 2018. It is also the third consecutive quarter that gain on sale margin expanded and we increased fallout-adjusted locks by 26 percent to $8.3 billion. The improvement in net gain on loan sales more than offset a lower net return on MSRs.

"During the quarter we recognized a $30 million partial charge-off related to the Live Well Financial loan we disclosed in our first quarter Form 10-Q. While we believe a recovery of some amount may be realized through legal remedies, we cannot quantify that at this time. We are confident this is an isolated situation as the credit quality of our loan portfolio remains strong.

"We were very pleased with the quality of earnings this quarter, as we realized earnings per share growth over prior quarter. This performance reflects the strength and flexibility of our unique business model to adapt to ever-changing market conditions and continue to improve profitability. Looking forward, we believe we are positioned well to continue to deliver positive results for our shareholders."

 

Income Statement Highlights






Three Months Ended


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018


(Dollars in millions)

Net interest income

$

138


$

126


$

152


$

124


$

115


Provision (benefit) for loan losses

17



(5)


(2)


(1)


Noninterest income

168


109


98


107


123


Noninterest expense

214


191


189


173


177


Income before income taxes

75


44


66


60


62


Provision for income taxes

14


8


12


12


12


Net income

$

61


$

36


$

54


$

48


$

50








Income per share:






Basic

$

1.08


$

0.64


$

0.94


$

0.84


$

0.86


Diluted

$

1.06


$

0.63


$

0.93


$

0.83


$

0.85


 

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






Three Months Ended


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018


(Dollars in millions)

Net interest income

$

138


$

126


$

123


$

124


$

115


Provision (benefit) for loan losses

17



(5)


(2)


(1)


Noninterest income

143


109


98


107


123


Noninterest expense

214


190


175


172


177


Income before income taxes

50


45


51


61


62


Provision for income taxes

9


8


9


12


12


Net income

$

41


$

37


$

42


$

49


$

50








Income per share:






Basic

$

0.72


$

0.65


$

0.73


$

0.86


$

0.86


Diluted

$

0.71


$

0.64


$

0.72


$

0.85


$

0.85




(1)

     See Non-GAAP Reconciliation for further information.

 

Key Ratios






Three Months Ended


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Net interest margin

3.08

%

3.09

%

3.70

%

2.93

%

2.86

%

Adjusted net interest margin (1)

3.08

%

3.09

%

2.99

%

2.93

%

2.86

%

Return on average assets

1.2

%

0.8

%

1.2

%

1.0

%

1.1

%

Return on average common equity

14.6

%

9.2

%

14.0

%

12.8

%

13.5

%

Efficiency ratio

69.8

%

81.3

%

75.7

%

74.6

%

74.4

%

HFI loan-to-deposit ratio

75.0

%

71.0

%

74.7

%

78.3

%

80.5

%

Adjusted HFI loan-to-deposit ratio (2)

80.6

%

77.0

%

77.3

%

77.8

%

78.1

%



(1)

The three months ended December 31, 2018, excludes $29 million of hedging gains reclassified from AOCI to net interest income in conjunction with the payment of long-term FHLB advances. 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,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

17,759


$

16,294


$

16,391


$

16,786


$

15,993


9

%

11

%

Average loans held-for-sale
(LHFS)

3,539


3,266


3,991


4,393


4,170


8

%

(15)

%

Average loans held-for-
investment (LHFI)

10,613


9,164


8,916


8,872


8,380


16

%

27

%

Average total deposits

14,159


12,906


11,942


11,336


10,414


10

%

36

%

 

Net Interest Income

Net interest income increased $12 million, or 10 percent, to $138 million for the second quarter 2019 as compared to the first quarter 2019. The results reflect a 9 percent increase in average earning assets, led by 22 percent growth in commercial loans.  Net interest margin decreased 1 basis point to 3.08 percent for the second quarter 2019 as compared to the first quarter 2019. This was accomplished all while generating high quality loan and deposit growth despite falling interest rates.

Loans held-for-investment averaged $10.6 billion for the second quarter 2019, increasing $1.4 billion from the prior quarter. During the second quarter 2019, average warehouse loans increased $822 million, or 70 percent, due to actions taken to grow overall net interest income while also benefiting from seasonally higher volume. We also had broad-based commercial real estate and commercial and industrial loan growth as those portfolios rose $294 million, or 8 percent. Average consumer loans increased $333 million, or 8 percent, driven primarily by loan growth in non-auto indirect and mortgage.

Average total deposits were $14.2 billion in the second quarter 2019, increasing $1.3 billion, or 10 percent, from the first quarter 2019. The increase reflects $936 million higher custodial deposits and $332 million higher retail deposits.

Provision for Loan Losses

The provision for loan losses was $17 million for the second quarter 2019, as compared to no provision for the first quarter 2019. The higher provision was due to the $30 million Live Well Financial partial loan charge-off resulting from the borrower unexpectedly ceasing operations under unusual circumstances and $4 million of net charge-offs primarily on unsecured consumer loans. This was partially offset by $9 million from the payoff of substandard commercial loans and the continued strength of our consumer portfolio.

Noninterest Income

Noninterest income increased $59 million, or 54 percent, to $168 million in the second quarter 2019, as compared to $109 million for the first quarter 2019. Excluding the $25 million DOJ benefit, adjusted noninterest income rose $34 million, or 31 percent, primarily due to actions we took to increase gain on sale margin while also benefiting from increased refinance activity and the seasonality of our mortgage business. During the quarter, certain available for sale securities were sold, which resulted in a gain. These increases were partially offset by lower net loan administration income.

Second quarter 2019 net gain on loan sales increased $26 million, or 53 percent, to $75 million, versus $49 million in the first quarter 2019. The net gain on loan sale margin expanded 17 basis points to 0.89 percent for the second quarter 2019, as compared to 0.72 percent for the first quarter 2019. Fallout-adjusted locks increased 26 percent to $8.3 billion, reflecting seasonally higher volume and increased refinance activity due to the persistence of lower mortgage rates.

Loan fees and charges increased $7 million, or 41 percent, to $24 million for the second quarter 2019, as compared to $17 million for the first quarter 2019, driven by seasonally higher mortgage loan closings.

The DOJ settlement liability fair value adjustment was $25 million for the quarter, reducing the liability to $35 million at June 30, 2019.  The lower value resulted from a change in the expectation as to the likelihood and timing of payments to the DOJ.

 

Mortgage Metrics









Change (% / bps)


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Seq

Yr/Yr


(Dollars in millions)



For the three months ended:








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

$

8,344


$

6,602


$

5,284


$

8,290


$

9,011


26

%

(7)

%

Net margin on mortgage rate lock commitments
fallout-adjusted) (1) (2)

0.89

%

0.72

%

0.60

%

0.51

%

0.71

%

17

18

Net gain on loan sales

$

75


$

49


$

34


$

43


$

63


53

%

19

%

Net return on the mortgage servicing rights (MSR)

$

5


$

6


$

10


$

13


$

9


(17)

%

(44)

%

Gain on loan sales + net return on the MSR

$

80


$

55


$

44


$

56


$

72


45

%

11

%

At the end of the period:








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

983


962


851


627


543


2

%

81

%

Capitalized value of MSRs

1.23

%

1.27

%

1.35

%

1.43

%

1.34

%

(4)

(11)




(1)

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



(2)

Based on net gain on loan sales (excludes net gain on loan sales of $2 million from loans transferred from LHFI during both the three months ended March 31, 2019 and December 31, 2018) to fallout-adjusted mortgage rate lock commitments.



(3)

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

 

Noninterest Expense

Noninterest expense increased to $214 million for the second quarter 2019, as compared to $191 million for the first quarter 2019. The increase is primarily attributable to mortgage-related expenses driven by seasonally higher mortgage closings.

The Company's efficiency ratio was 70 percent for the second quarter 2019, as compared to 81 percent for the first quarter 2019. The adjusted efficiency ratio was 76 percent in the second quarter 2019. The results reflect positive operating leverage as adjusted total revenue increased 20 percent while expenses rose 12 percent during the second quarter of 2019.

Income Taxes

The second quarter 2019 provision for income taxes totaled $14 million, compared to $8 million for the first quarter 2019. The Company's effective tax rate was 19 percent for the second quarter 2019, compared to 18 percent for the first quarter 2019.

Asset Quality

 


Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Seq

Yr/Yr


(Dollars in millions)



Allowance for loan loss to LHFI

0.9

%

1.3

%

1.4

%

1.5

%

1.5

%

(40)

(60)

Charge-offs, net of recoveries

$

34


$

1


$

1


$

1


$

1


N/M

N/M

Total nonperforming LHFI and TDRs

$

63


$

24


$

22


$

25


$

27


N/M

N/M

Net charge-offs to LHFI ratio (annualized)

1.29

%

0.05

%

0.04

%

0.05

%

0.02

%

N/M

N/M

Ratio of nonperforming LHFI and TDRs to LHFI

0.54

%

0.24

%

0.24

%

0.28

%

0.30

%

30

24

N/M - Not meaningful













 

The allowance for loan losses was $110 million at June 30, 2019, compared to $127 million at March 31, 2019. The allowance for loan losses covered 0.9 percent of loans held-for-investment at June 30, 2019, as compared to 1.3 percent of loans held-for-investment at March 31, 2019.

Net charge-offs in the second quarter 2019 were $34 million, or 129 basis points of LHFI, compared to $1 million, or 5 basis points in the prior quarter. Charge-offs in the second quarter included the $30 million loss mentioned above and $4 million in other net charge-offs primarily related to unsecured consumer credits acquired in the December branch acquisition.

Nonperforming loans were $63 million at June 30, 2019, compared to $24 million at March 31, 2019. Nonperforming loans at June 30, 2019 includes $37 million collateral dependent commercial loan noted above. The ratio of nonperforming loans to loans held-for-investment was 0.54 percent at June 30, 2019, compared to 0.24 percent at March 31, 2019. At June 30, 2019, early stage loan delinquencies totaled $8 million, or 0.07 percent, of total loans, compared to $9 million, or 0.09 percent, at March 31, 2019.

Capital

Capital Ratios (Bancorp)



Change (% / bps)



June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018

Seq


Yr/Yr


Tangible common equity to assets ratio (1)

7.31

%

7.16

%

7.45

%

7.74

%

7.74

%

15


(43)


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

7.96

%

8.37

%

8.29

%

8.36

%

8.65

%

(41)


(69)


Tier 1 common equity (to RWA)

9.13

%

9.69

%

10.54

%

11.01

%

10.84

%

(56)


(171)


Tier 1 capital (to RWA)

10.78

%

11.51

%

12.54

%

13.04

%

12.86

%

(73)


(208)


Total capital (to RWA)

11.56

%

12.49

%

13.63

%

14.20

%

14.04

%

(93)


(248)


MSRs to Tier 1 capital

20.2

%

18.3

%

19.3

%

20.3

%

16.9

%

190


330


Tangible book value per share (1)

$

26.16


$

24.65


$

23.90


$

25.13


$

24.37



6

%


7

%























(1)

    See Non-GAAP Reconciliation for further information.

 

The Company maintained a solid capital position with regulatory ratios well above current regulatory quantitative guidelines for "well capitalized" institutions. At June 30, 2019, the Company had a total risk-based capital ratio of 11.56 percent, as compared to 12.49 percent at March 31, 2019. The decrease in the ratio resulted primarily from $1 billion of warehouse loan growth during the quarter which will naturally decline due to the seasonality of the mortgage business.

Under the terms of recently approved regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 63 basis points and risk-based capital ratios by approximately 40-50 basis points at June 30, 2019 (pro forma basis).

Earnings Conference Call

As previously announced, the Company's second quarter 2019 earnings call will be held Tuesday, July 23, 2019 at 11 a.m. (ET).

To join the call, please dial (888) 599-8686 toll free or (786) 789-4797 and use passcode 6186033. Please call at least 10 minutes before the conference is scheduled to begin. A replay will be available for five business days by calling (888) 203-1112 toll free or (719) 457-0820 and using passcode 6186033.

The conference call will also be available as a live audiocast on the Investor Relations section of flagstar.com, where it will be archived and available for replay and download. The slide presentation accompanying the conference call will be posted on the site.

About Flagstar

Flagstar Bancorp, Inc. (FBC) is an $20.2 billion savings and loan holding company headquartered in Troy, Mich. Flagstar Bank, FSB, provides commercial, small business, and consumer banking services through 160 branches in Michigan, Indiana, California, Wisconsin and Ohio. It also provides home loans through a wholesale network of brokers and correspondents in all 50 states, as well as 78 retail locations in 21 states, representing the combined retail branches of Flagstar and its Opes Advisors mortgage division. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $203 billion of loans representing 983,000 borrowers. For more information, please visit flagstar.com.

Use of Non-GAAP Financial Measures

In addition to results presented in accordance with GAAP, this news release includes non-GAAP financial measures, such as tangible book value per share, tangible common equity to assets ratio, return on average tangible equity, adjusted return on average tangible equity, adjusted return on average assets, adjusted HFI loan-to-deposit ratio, adjusted net interest income, adjusted noninterest income, adjusted noninterest expense, adjusted income before income taxes, adjusted provision for income taxes, adjusted net income, adjusted basic and diluted earnings per share, adjusted net interest margin, and adjusted efficiency ratio. The Company believes these non-GAAP financial measures provide additional information that is useful to investors in helping to understand the capital requirements Flagstar will face in the future and underlying performance and trends of Flagstar.

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

Where non-GAAP financial measures are used, the most directly comparable GAAP or regulatory financial measure, as well as the reconciliation to the most directly comparable GAAP or regulatory financial measure, can be found in this news release. Additional discussion of the use of non-GAAP measures can also be found in conference call slides, the Form 8-K Current Report related to this news release and in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission. These documents can all be found on the Company's website at flagstar.com.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the current beliefs and expectations of Flagstar Bancorp, Inc.'s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The Company's actual results could differ materially from those described in the forward-looking statements depending upon various factors as described in periodic Flagstar reports filed with the U.S. Securities and Exchange Commission, which are available on the Company's website (flagstar.com) and on the Securities and Exchange Commission's website (sec.gov). Other than as required under United States securities laws, Flagstar Bancorp does not undertake to update the forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.

 

 

 

Flagstar Bancorp, Inc.

Consolidated Statements of Financial Condition

(Dollars in millions)

(Unaudited)



June 30,
2019


March 31,
2019


December 31,
2018


June 30,
2018

Assets








Cash

$

268



$

268



$

260



$

139


Interest-earning deposits

51



122



148



220


Total cash and cash equivalents

319



390



408



359


Investment securities available-for-sale

1,718



2,142



2,142



1,871


Investment securities held-to-maturity

661



683



703



748


Loans held-for-sale

3,345



3,874



3,869



4,291


Loans held-for-investment

11,655



9,936



9,088



8,904


Loans with government guarantees

507



470



392



278


Less: allowance for loan losses

(110)



(127)



(128)



(137)


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

12,052



10,279



9,352



9,045


Mortgage servicing rights

316



278



290



257


Net deferred tax asset

71



90



103



119


Federal Home Loan Bank stock

303



303



303



303


Premises and equipment, net

415



414



390



355


Goodwill and intangible assets

178



182



190



71


Other assets

828



810



781



711


Total assets

$

20,206



$

19,445



$

18,531



$

18,130


Liabilities and Stockholders' Equity








Noninterest bearing deposits

$

4,784



$

4,016



$

2,989



$

2,781


Interest bearing deposits

9,632



9,437



9,391



7,807


Total deposits

14,416



13,453



12,380



10,588


Short-term Federal Home Loan Bank advances and other

2,550



3,101



3,244



3,840


Long-term Federal Home Loan Bank advances

500



250



150



1,280


Other long-term debt

495



495



495



494


Other liabilities

589



572



692



453


Total liabilities

18,550



17,871



16,961



16,655


Stockholders' Equity








Common stock

1



1



1



1


Additional paid in capital

1,477



1,476



1,522



1,514


Accumulated other comprehensive loss

(8)



(31)



(47)



(32)


Retained earnings/(accumulated deficit)

186



128



94



(8)


Total stockholders' equity

1,656



1,574



1,570



1,475


Total liabilities and stockholders' equity

$

20,206



$

19,445



$

18,531



$

18,130


 

 


Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)




Second Quarter 2019 Compared to:


Three Months Ended


First Quarter

2019


Second Quarter

2018


June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

June 30,
2018


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$

198


$

180


$

181


$

183


$

167



$

18


10

%


$

31


19

%

Total interest expense

60


54


29


59


52



6


11

%


8


15

%

Net interest income

138


126


152


124


115



12


10

%


23


20

%

Provision (benefit) for loan losses

17



(5)


(2)


(1)



17


N/M


18


N/M

Net interest income after provision
(benefit) for loan losses

121


126


157


126


116



(5)


(4)

%


5


4

%

Noninterest Income












Net gain on loan sales

75


49


34


43


63



26


53

%


12


19

%

Loan fees and charges

24


17


20


23


24



7


41

%



%

Net return on the mortgage servicing rights

5


6


10


13


9



(1)


(17)

%


(4)


(44)

%

Loan administration income

6


11


8


5


5



(5)


(45)

%


1


20

%

Deposit fees and charges

10


8


6


5


5



2


25

%


5


100

%

Other noninterest income

48


18


20


18


17



30


167

%


31


182

%

Total noninterest income

168


109


98


107


123



59


54

%


45


37

%

Noninterest Expense












Compensation and benefits

90


87


82


76


80



3


3

%


10


13

%

Occupancy and equipment

40


38


36


31


30



2


5

%


10


33

%

Commissions

25


13


16


21


25



12


92

%



%

Loan processing expense

21


17


16


14


15



4


24

%


6


40

%

Legal and professional expense

6


6


9


7


6




%



%

Federal insurance premiums

5


4


4


6


6



1


25

%


(1)


(17)

%

Intangible asset amortization

4


4


3


1


1




%


3


N/M

Other noninterest expense

23


22


23


17


14



1


5

%


9


64

%

Total noninterest expense

214


191


189


173


177



23


12

%


37


21

%

Income before income taxes

75


44


66


60


62



31


70

%


13


21

%

Provision for income taxes

14


8


12


12


12



6


75

%


2


17

%

Net income

$

61


$

36


$

54


$

48


$

50



$

25


69

%


$

11


22

%

Income per share












Basic

$

1.08


$

0.64


$

0.94


$

0.84


$

0.86



$

0.44


69

%


$

0.22


26

%

Diluted

$

1.06


$

0.63


$

0.93


$

0.83


$

0.85



$

0.43


68

%


$

0.21


25

%













   Cash dividends declared

$

0.04


$

0.04


$


$


$



$


%


$

0.04


100

%

N/M - Not meaningful

 

 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

(Dollars in millions, except per share data)

(Unaudited)





Six Months Ended June 30, 2019


Six Months Ended


Compared to:

Six Months Ended June 30, 2018


June 30, 2019


June 30, 2018


Amount

Percent

Interest Income







Total interest income

$

378



$

319



$

59


18

%

Total interest expense

114



98



16


16

%

Net interest income

264



221



43


19

%

Provision (benefit) for loan losses

17



(1)



18


N/M


Net interest income after provision (benefit) for loan losses

247



222



25


11

%

Noninterest Income







Net gain on loan sales

124



123



1


1

%

Loan fees and charges

41



44



(3)


(7)

%

Net return on the mortgage servicing rights

11



13



(2)


(15)

%

Loan administration income

17



10



7


70

%

Deposit fees and charges

18



10



8


80

%

Other noninterest income

66



34



32


94

%

Total noninterest income

277



234



43


18

%

Noninterest Expense







Compensation and benefits

177



160



17


11

%

Occupancy and equipment

78



60



18


30

%

Commissions

38



43



(5)


(12)

%

Loan processing expense

38



29



9


31

%

Legal and professional expense

12



12




%

Federal insurance premiums

9



12



(3)


(25)

%

Intangible asset amortization

8



1



7


N/M


Other noninterest expense

45



33



12


36

%

Total noninterest expense

405



350



55


16

%

Income before income taxes

119



106



13


12

%

Provision for income taxes

22



21



1


5

%

Net income

$

97



$

85



$

12


14

%

Income per share







Basic

$

1.71



$

1.47



$

0.24


16

%

Diluted

$

1.69



$

1.45



$

0.24


17

%








   Cash dividends declared

$

0.08



$



$

0.08


100

%

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, 2019


March 31, 2019


June 30, 2018


June 30, 2019


June 30, 2018

Selected Mortgage Statistics:










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

$

8,344



$

6,602



$

9,011



$

14,946



$

16,734


Mortgage loans originated (2)

$

8,641



$

5,513



$

9,040



$

14,154



$

16,926


Mortgage loans sold and securitized

$

8,838



$

5,170



$

9,260



$

14,008



$

16,506


Selected Ratios:










Interest rate spread (3)

2.57

%


2.69

%


2.58

%


2.63

%


2.56

%

Net interest margin

3.08

%


3.09

%


2.86

%


3.08

%


2.81

%

Net margin on loans sold and securitized

0.84

%


0.92

%


0.69

%


0.87

%


0.75

%

Return on average assets

1.22

%


0.79

%


1.12

%


1.01

%


0.97

%

Adjusted return on average assets (4) (5)

0.81

%


0.80

%


1.12

%


0.81

%


0.97

%

Return on average common equity

14.58

%


9.16

%


13.45

%


11.94

%


11.73

%

Return on average tangible common equity (6)

17.14

%


11.33

%


14.38

%


14.33

%


12.32

%

Adjusted return on average tangible common equity (4)(5)(6)

11.69

%


11.78

%


14.38

%


11.63

%


12.32

%

Efficiency ratio

69.8

%


81.3

%


74.4

%


74.8

%


76.9

%

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

8.35

%


8.59

%


8.29

%


8.46

%


8.28

%

Average Balances:










Average interest-earning assets

$

17,759



$

16,294



$

15,993



$

17,030



$

15,675


Average interest-bearing liabilities

$

12,898



$

12,505



$

13,164



$

12,702



$

13,069


Average stockholders' equity

$

1,668



$

1,583



$

1,475



$

1,626



$

1,445


(1)

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

(2)

Includes residential first mortgage. 

(3)

Interest rate spread is the difference between the annualized yield earned on average interest-earning assets for the period and the annualized rate of interest paid on average interest-bearing liabilities for the period.

(4)

Excludes acquisition-related expenses attributable to the Wells Fargo branch acquisition of $1 million for the three months ended March 31, 2019 and the six months ended June 30, 2019.

(5)

Excludes DOJ benefit of $25 million during the three and six months ended June 30, 2019.

(6)

Excludes goodwill, intangible assets and the associated amortization.

 

 


June 30,
2019


March 31,
2019


December 31,
2018


June 30,
2018

Selected Statistics:








Book value per common share

$

29.31



$

27.86



$

27.19



$

25.61


Tangible book value per share (1)

$

26.16



$

24.65



23.90



$

24.37


Number of common shares outstanding

56,483,937



56,480,086



57,749,464



57,598,406


Number of FTE employees

4,147



3,996



3,938



3,682


Number of bank branches

160



160



160



107


Ratio of nonperforming assets to total assets (2)

0.36

%


0.17

%


0.16

%


0.19

%

Common equity-to-assets ratio

8.19

%


8.09

%


8.47

%


8.14

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

39.7



38.0



35.8



32.4


Capitalized value of mortgage servicing rights

1.23

%


1.27

%


1.35

%


1.34

%

(1)

Excludes goodwill and intangibles of $178 million, $182 million, $190 million and $71 million at June 30, 2019, March 31, 2019, December 31,2018 and June 30, 2018, respectively. See Non-GAAP Reconciliation for further information.

(2)

Ratio excludes LHFS.


 

 

...

Average Balances, Yields and Rates

(Dollars in millions)

(Unaudited)



Three Months Ended


June 30, 2019


March 31, 2019


June 30, 2018


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

$

3,539


$

40


4.55

%


$

3,266


$

38


4.72

%


$

4,170


$

47


4.50

%

Loans held-for-investment












Residential first mortgage

3,146


28


3.61

%


3,044


28


3.64

%


2,875


25


3.53

%

Home equity

814


11


5.54

%


745


10


5.63

%


679


8


5.05

%

Other

518


9


6.78

%


356


6


7.11

%


57


1


5.39

%

Total Consumer loans

4,478


48


4.33

%


4,145


44


4.30

%


3,611


34


3.85

%

Commercial Real Estate

2,394


35


5.65

%


2,250


33


5.66

%


2,017


26


5.09

%

Commercial and Industrial

1,744


23


5.26

%


1,594


21


5.39

%


1,257


17


5.30

%

Warehouse Lending

1,997


27


5.21

%


1,175


16


5.47

%


1,495


19


5.03

%

Total Commercial loans

6,135


85


5.40

%


5,019


70


5.53

%


4,769


62


5.13

%

Total loans held-for-investment

10,613


133


4.95

%


9,164


114


4.97

%


8,380


96


4.58

%

Loans with government guarantees

502


4


2.94

%


455


3


2.96

%


280


2


3.66

%

Investment securities

2,907


20


2.75

%


3,258


24


2.91

%


3,049


21


2.72

%

Interest-earning deposits

198


1


2.23

%


151


1


2.77

%


114


1


1.72

%

Total interest-earning assets

17,759


$

198


4.42

%


16,294


$

180


4.43

%


15,993


$

167


4.17

%

Other assets

2,207





2,144





1,791




Total assets

$

19,966





$

18,438





$

17,784




Interest-Bearing Liabilities












Retail deposits












Demand deposits

$

1,323


$

3


0.84

%


$

1,220


$

2


0.68

%


$

704


$

1


0.60

%

Savings deposits

3,191


9


1.16

%


3,089


7


0.95

%


3,412


8


0.86

%

Money market deposits

745


1


0.32

%


778


1


0.27

%


247



0.54

%

Certificates of deposit

2,611


15


2.34

%


2,488


13


2.13

%


2,006


8


1.63

%

Total retail deposits

7,870


28


1.42

%


7,575


23


1.22

%


6,369


17


1.06

%

Government deposits

1,128


5


1.51

%


1,170


4


1.51

%


1,111


3


1.12

%

Wholesale deposits and other

417


2


2.35

%


387


2


2.23

%


264


1


1.96

%

Total interest-bearing deposits

9,415


35


1.47

%


9,132


29


1.30

%


7,744


21


1.10

%

Short-term FHLB advances and other

2,633


17


2.53

%


2,725


17


2.54

%


3,646


17


1.85

%

Long-term FHLB advances

354


1


1.72

%


153


1


1.54

%


1,280


7


2.25

%

Other long-term debt

496


7


5.77

%


495


7


5.90

%


494


7


5.60

%

Total interest-bearing liabilities

12,898


60


1.85

%


12,505


54


1.75

%


13,164


52


1.58

%

Noninterest-bearing deposits












Retail deposits and other

1,275





1,241





1,067




Custodial deposits (1)

3,469





2,533





1,603




Noninterest-bearing deposits

4,744





3,774





2,670




Other liabilities

656





576





475




Stockholders' equity

1,668





1,583





1,475




Total liabilities and stockholders' equity

$

19,966





$

18,438





$

17,784




Net interest-earning assets

$

4,861






$

3,789






$

2,829





Net interest income


$

138