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Flagstar Bancorp Reports Third Quarter 2019 Net Income of $63 million, or $1.11 Per Diluted Share

TROY, Mich., Oct. 22, 2019 /PRNewswire/ --

Key Highlights - Third Quarter 2019

  • Mortgage revenues increased $28 million from prior quarter, led by margin expansion of 31 basis points and a $0.9 billion increase in fallout-adjusted locks.
  • Net interest income increased $8 million, driven by diversified loan growth and a stable net interest margin.
  • Strong asset quality -- minimal net charge-offs, low delinquencies, and no nonperforming commercial loans.

Flagstar Bancorp, Inc. (FBC), the holding company for Flagstar Bank, FSB, today reported third quarter 2019 net income of $63 million, or $1.11 per diluted share, compared to second quarter 2019 net income of $61 million, or $1.06 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 and $49 million, or $0.85 per diluted share, for the third quarter 2018.

Third Quarter 2019 Highlights:

"The third quarter was a landmark quarter for Flagstar," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "Across the board, our businesses produced solid results, with mortgage banking taking advantage of market opportunities and our community banking and servicing segments again delivering strong, consistent earnings. The quarter also marked a milestone as the consent order with the CFPB expired, officially closing the book on our legacy regulatory matters.

"Community banking once again showed excellent growth, with net interest income climbing $8 million, or 6 percent, on an increase in earning assets of $1.2 billion, or 7 percent. Helping fuel the net interest income growth was a 12 percent increase in commercial loans, led by the continued success of our warehouse business. Also contributing to the growth were solid performances from our commercial real estate and homebuilder finance segments. Importantly, we achieved this growth while holding net interest margin nearly flat, despite two rate cuts, demonstrating strong margin management and the flexibility of our balance sheet.

"Our mortgage team had a strong quarter, with gain on sale rising to $110 million, a 47 percent increase over second quarter 2019 and a 156 percent increase over third quarter 2018. As a result of our continued focus on price discipline, combined with efforts to optimize volume and margin, gain on sale margin increased 31 basis points to 120 basis points in the third quarter 2019. Fallout-adjusted locks increased to $9.2 billion. These results highlight the diligence of our mortgage team to provide value to our customers at returns that maximize revenue for the company.

"We ended the quarter servicing or subservicing nearly 994,000 loans. The significant growth in this business over the past two years is testament to the quality platform and one-stop shop we offer our clients, underpinned by our industry-leading oversight, monitoring and compliance framework. We also successfully closed the default servicing transaction and integrated the business, further strengthening our servicing offering."

"This quarter's results demonstrated the earnings potential of our unique business model. Looking forward, we are confident that our business is well positioned to continue to generate strong risk-adjusted returns and create significant value for our shareholders in a variety of environments."

 

Income Statement Highlights






Three Months Ended


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018


(Dollars in millions)

Net interest income

$

146


$

138


$

126


$

152


$

124


Provision (benefit) for loan losses

1


17



(5)


(2)


Noninterest income

171


168


109


98


107


Noninterest expense

238


214


191


189


173


Income before income taxes

78


75


44


66


60


Provision for income taxes

15


14


8


12


12


Net income

$

63


$

61


$

36


$

54


$

48








Income per share:






Basic

$

1.12


$

1.08


$

0.64


$

0.94


$

0.84


Diluted

$

1.11


$

1.06


$

0.63


$

0.93


$

0.83


 

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






Three Months Ended


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018


(Dollars in millions)

Net interest income

$

146


$

138


$

126


$

123


$

124


Provision (benefit) for loan losses

1


17



(5)


(2)


Noninterest income

171


143


109


98


107


Noninterest expense

238


214


190


175


172


Income before income taxes

78


50


45


51


61


Provision for income taxes

15


9


8


9


12


Net income

$

63


$

41


$

37


$

42


$

49








Income per share:






Basic

$

1.12


$

0.72


$

0.65


$

0.73


$

0.86


Diluted

$

1.11


$

0.71


$

0.64


$

0.72


$

0.85



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

 

Key Ratios






Three Months Ended


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

Net interest margin

3.05

%

3.08

%

3.09

%

3.70

%

2.93

%

Adjusted net interest margin (1)

3.05

%

3.08

%

3.09

%

2.99

%

2.93

%

Return on average assets

1.2

%

1.2

%

0.8

%

1.2

%

1.0

%

Return on average common equity

14.7

%

14.6

%

9.2

%

14.0

%

12.8

%

Efficiency ratio

75.2

%

69.8

%

81.3

%

75.7

%

74.6

%

HFI loan-to-deposit ratio

74.2

%

75.0

%

71.0

%

74.7

%

78.3

%

Adjusted HFI loan-to-deposit ratio (2)

82.0

%

80.6

%

77.0

%

77.3

%

77.8

%



(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


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

18,997


$

17,759


$

16,294


$

16,391


$

16,786


7

%

13

%

Average loans held-for-sale
(LHFS)

3,786


3,539


3,266


3,991


4,393


7

%

(14)

%

Average loans held-for-
investment (LHFI)

11,743


10,613


9,164


8,916


8,872


11

%

32

%

Average total deposits

15,817


14,159


12,906


11,942


11,336


12

%

40

%


 

Net Interest Income

Net interest income increased $8 million, or 6 percent, to $146 million for the third quarter 2019 as compared to the second quarter 2019. The results reflect a 7 percent increase in average earning assets, fueled by 12 percent growth in commercial loans. Net interest margin remained stable, decreasing only 3 basis points despite two rate cuts in the quarter, to 3.05 percent for the third quarter 2019 as compared to the second quarter 2019.

Loans held-for-investment averaged $11.7 billion for the third quarter 2019, increasing $1.1 billion from the prior quarter. During the third quarter 2019, average warehouse loans increased $511 million, or 26 percent, benefiting from growth in the overall mortgage market. We also had solid growth in our commercial real estate portfolio as average balances increased $200 million, or 8 percent. Average consumer loans increased $396 million, or 9 percent, driven evenly by loan growth in non-auto indirect, mortgage and HELOCs.

Average total deposits were $15.8 billion in the third quarter 2019, increasing $1.7 billion, or 12 percent, from the second quarter 2019. The increase primarily reflects $1.1 billion higher custodial deposits driven by refinance activity and $328 million higher wholesale deposits.

Provision for Loan Losses

The provision for loan losses was $1 million for the third quarter 2019, as compared to $17 million for the second quarter 2019 reflecting strong asset quality, low delinquencies and no nonperforming commercial loans.

Noninterest Income

Noninterest income increased $3 million, or 2 percent, to $171 million in the third quarter 2019, as compared to $168 million for the second quarter 2019. Excluding the $25 million DOJ benefit in the second quarter, noninterest income rose $28 million, or 20 percent, primarily due to higher mortgage revenue.

Third quarter 2019 net gain on loan sales increased $35 million, or 47 percent, to $110 million, versus $75 million in the second quarter 2019. The net gain on loan sale margin expanded 31 basis points to 1.20 percent for the third quarter 2019, as compared to 0.89 percent for the second quarter 2019. Fallout-adjusted locks increased 10 percent to $9.2 billion, primarily reflecting increased refinance activity due to the continuation of lower mortgage rates.

This increased refinance activity accelerated prepayments, creating a net loss on mortgage servicing rights (including hedging) of $2 million for the third quarter 2019, compared to a $5 million net return for the second quarter 2019.

Loan fees and charges increased $5 million, or 21 percent, to $29 million for the third quarter 2019, as compared to $24 million for the second quarter 2019, driven by $621 million of higher mortgage loan closings.

Mortgage Metrics









Change (% / bps)


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

Seq

Yr/Yr


(Dollars in millions)



For the three months ended:








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

$

9,197


$

8,344


$

6,602


$

5,284


$

8,290


10%

11%

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

1.20

%

0.89

%

0.72

%

0.60

%

0.51

%

31

69

Net gain on loan sales

$

110


$

75


$

49


$

34


$

43


47%

156%

Net return on the mortgage servicing rights
(MSR)

$

(2)


$

5


$

6


$

10


$

13


NM

NM

Gain on loan sales + net return on the MSR

$

108


$

80


$

55


$

44


$

56


35%

93%

At the end of the period:








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

994


983


962


851


619


1%

61%

Capitalized value of MSRs

1.14

%

1.23

%

1.27

%

1.35

%

1.43

%

(9)

(29)


(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.

NM - Not meaningful


 

Noninterest Expense

Noninterest expense increased to $238 million for the third quarter 2019, as compared to $214 million for the second quarter 2019, primarily reflecting higher mortgage-related expenses driven by an increase in mortgage closings.

The Company's efficiency ratio was 75 percent for the third quarter 2019, as compared to the second quarter 2019 adjusted efficiency ratio of 76 percent. The results reflect positive operating leverage as total adjusted revenue increased 13 percent while expenses rose 11 percent during the third quarter of 2019.

Income Taxes

The third quarter 2019 provision for income taxes totaled $15 million, compared to $14 million for the second quarter 2019. The effective tax rate was 18 percent for the third quarter 2019, compared to 19 percent for the second quarter 2019.

Asset Quality

Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

Seq

Yr/Yr


(Dollars in millions)



Allowance for loan loss to LHFI

0.9

%

0.9

%

1.3

%

1.4

%

1.5

%

0

(60)

Charge-offs, net of recoveries

$

1


$

34


$

1


$

1


$

1


N/M

—%

Total nonperforming LHFI and TDRs

$

26


$

63


$

24


$

22


$

25


N/M

4%

Net charge-offs to LHFI ratio (annualized)

0.02

%

1.29

%

0.05

%

0.04

%

0.05

%

N/M

(3)

Ratio of nonperforming LHFI and TDRs to LHFI

0.21

%

0.54

%

0.24

%

0.24

%

0.28

%

(33)

(7)














N/M - Not meaningful













 

The allowance for loan losses was $110 million and covered 0.9 percent of loans held-for-investment at September 30, 2019, consistent with reserve and coverage ratios as of June 30, 2019.

Net charge-offs in the third quarter 2019 were $1 million, or 2 basis points of LHFI, compared to $34 million, or 129 basis points in the prior quarter. The current period results reflect low net charge-offs, including a $1 million Live Well recovery. Charge-offs in the second quarter included the $30 million Live Well credit loss and $4 million in other net charge-offs primarily related to unsecured consumer credits acquired in the December branch acquisition.

Nonperforming loans were $26 million at September 30, 2019, compared to $63 million at June 30, 2019. Nonperforming loans at June 30, 2019 included the $37 million Live Well loan. The ratio of nonperforming loans to loans held-for-investment was 0.21 percent at September 30, 2019, compared to 0.54 percent at June 30, 2019. At September 30, 2019, early stage loan delinquencies totaled $12 million, or 0.10 percent, of total loans, compared to $8 million, or 0.07 percent, at June 30, 2019.

Capital

Capital Ratios (Bancorp)


Change
(% / bps)


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018

Seq

Yr/Yr

Tangible common equity to assets ratio (1)

7.09

%

7.31

%

7.16

%

7.45

%

7.74

%

(22)

(65)

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

7.98

%

7.94

%

8.37

%

8.29

%

8.36

%

4

(38)

Tier 1 common equity (to RWA)

9.25

%

9.08

%

9.69

%

10.54

%

11.01

%

17

(176)

Tier 1 capital (to RWA)

10.80

%

10.73

%

11.51

%

12.54

%

13.04

%

7

(224)

Total capital (to RWA)

11.53

%

11.51

%

12.49

%

13.63

%

14.20

%

2

(267)

Tangible book value per share (1)

$

27.62


$

26.16


$

24.65


$

23.90


$

25.13


6%

10%


(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 September 30, 2019, the Company had a total risk-based capital ratio of 11.53 percent, as compared to 11.51 percent at June 30, 2019.

Under the terms of recently approved regulatory capital requirements, the Company's Tier 1 leverage ratio would have increased approximately 46 basis points and risk-based capital ratios would have increased by approximately 20 to 30 basis points at September 30, 2019 (pro forma basis).

Earnings Conference Call

As previously announced, the Company's third quarter 2019 earnings call will be held Tuesday, October 22, 2019 at 11 a.m. (ET).

To join the call, please dial (888) 254-3590 toll free or (786) 789-4797 and use passcode 2306380. 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 2306380.

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 $22.0 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 88 retail locations in 26 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 $204 billion of loans representing 994,000 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)



September 30,
2019


June 30,
2019


December 31,
2018


September 30,
2018

Assets








Cash

$

234



$

268



$

260



$

150


Interest-earning deposits

119



51



148



114


Total cash and cash equivalents

353



319



408



264


Investment securities available-for-sale

1,697



1,718



2,142



1,857


Investment securities held-to-maturity

635



661



703



724


Loans held-for-sale

4,196



3,345



3,869



4,835


Loans held-for-investment

12,548



11,655



9,088



8,966


Loans with government guarantees

607



507



392



305


Less: allowance for loan losses

(110)



(110)



(128)



(134)


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

13,045



12,052



9,352



9,137


Mortgage servicing rights

285



316



290



313


Net deferred tax asset

58



71



103



111


Federal Home Loan Bank stock

303



303



303



303


Premises and equipment, net

417



415



390



360


Goodwill and intangible assets

174



178



190



70


Other assets

860



828



781



723


Total assets

$

22,023



$

20,206



$

18,531



$

18,697


Liabilities and Stockholders' Equity








Noninterest bearing deposits

$

5,649



$

4,784



$

2,989



$

3,096


Interest bearing deposits

10,096



9,632



9,391



8,493


Total deposits

15,745



14,416



12,380



11,589


Short-term Federal Home Loan Bank advances and other

2,329



2,550



3,244



3,199


Long-term Federal Home Loan Bank advances

650



500



150



1,280


Other long-term debt

496



495



495



495


Other liabilities

1,069



589



692



616


Total liabilities

20,289



18,550



16,961



17,179


Stockholders' Equity








Common stock

1



1



1



1


Additional paid in capital

1,481



1,477



1,522



1,519


Accumulated other comprehensive income (loss)

5



(8)



(47)



(42)


Retained earnings

247



186



94



40


Total stockholders' equity

1,734



1,656



1,570



1,518


Total liabilities and stockholders' equity

$

22,023



$

20,206



$

18,531



$

18,697


 

Flagstar Bancorp, Inc.

 Condensed Consolidated Statements of Operations

 (Dollars in millions, except per share data)

(Unaudited)




Third Quarter 2019 Compared to:


Three Months Ended


Second Quarter

2019


Third Quarter

2018


September 30,
2019

June 30,
2019

March 31,
2019

December 31,
2018

September 30,
2018


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$

203


$

198


$

180


$

181


$

183



$

5


3

%


$

20


11

%

Total interest expense

57


60


54


29


59



(3)


(5)

%


(2)


(3)

%

Net interest income

146


138


126


152


124



8


6

%


22


18

%

Provision (benefit) for loan losses

1


17



(5)


(2)



(16)


N/M



3


N/M


Net interest income after provision (benefit) for loan losses

145


121


126


157


126



24


20

%


19


15

%

Noninterest Income












Net gain on loan sales

110


75


49


34


43



35


47

%


67


156

%

Loan fees and charges

29


24


17


20


23



5


21

%


6


26

%

Net return on the mortgage servicing rights

(2)


5


6


10


13



(7)


(140)

%


(15)


(115)

%

Loan administration income

5


6


11


8


5



(1)


(17)

%



%

Deposit fees and charges

10


10


8


6


5




%


5


100

%

Other noninterest income

19


48


18


20


18



(29)


(60)

%


1


6

%

Total noninterest income

171


168


109


98


107



3


2

%


64


60

%

Noninterest Expense












Compensation and benefits

98


90


87


82


76



8


9

%


22


29

%

Occupancy and equipment

40


40


38


36


31




%


9


29

%

Commissions

38


25


13


16


21



13


52

%


17


81

%

Loan processing expense

22


21


17


16


14



1


5

%


8


57

%

Legal and professional expense

6


6


6


9


7




%


(1)


(14)

%

Federal insurance premiums

5


5


4


4


6




%


(1)


(17)

%

Intangible asset amortization

3


4


4


3


1



(1)


(25)

%


2


N/M


Other noninterest expense

26


23


22


23


17



3


13

%


9


53

%

Total noninterest expense

238


214


191


189


173



24


11

%


65


38

%

Income before income taxes

78


75


44


66


60



3


4

%


18


30

%

Provision for income taxes

15


14


8


12


12



1


7

%


3


25

%

Net income

$

63


$

61


$

36


$

54


$

48



$

2


3

%


$

15


31

%

Income per share












Basic

$

1.12


$

1.08


$

0.64


$

0.94


$

0.84



$

0.04


4

%


$

0.28


33

%

Diluted

$

1.11


$

1.06


$

0.63


$

0.93


$

0.83



$

0.05


5

%


$

0.28


34

%













Cash dividends declared

$

0.04


$

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)



Nine Months Ended


Compared to:

Nine Months Ended
September 30, 2018


September 30,
2019


September 30,
2018


Amount

Percent

Interest Income







Total interest income

$

581



$

502



$

79


16

%

Total interest expense

171



157



14


9

%

Net interest income

410



345



65


19

%

Provision (benefit) for loan losses

18



(3)



21


N/M


Net interest income after provision (benefit) for loan losses

392



348



44


13

%

Noninterest Income







Net gain on loan sales

234



166



68


41

%

Loan fees and charges

70



67



3


4

%

Net return on the mortgage servicing rights

9



26



(17)


(65)

%

Loan administration income

22



15



7


47

%

Deposit fees and charges

28



15



13


87

%

Other noninterest income

85



52



33


63

%

Total noninterest income

448



341



107


31

%

Noninterest Expense







Compensation and benefits

275



236



39


17

%

Occupancy and equipment

118



91



27


30

%

Commissions

76



64



12


19

%

Loan processing expense

60



43



17


40

%

Legal and professional expense

18



19



(1)


(5)

%

Federal insurance premiums

14



18



(4)


(22)

%

Intangible asset amortization

11





11


N/M


Other noninterest expense

71



52



19


37

%

Total noninterest expense

643



523



120


23

%

Income before income taxes

197



166



31


19

%

Provision for income taxes

37



33



4


12

%

Net income

$

160



$

133



$

27


20

%

Income per share







Basic

$

2.83



$

2.32



$

0.51


22

%

Diluted

$

2.80



$

2.28



$

0.52


23

%








Cash dividends declared

$

0.12



$



$

0.12


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


Nine Months Ended


September 30,
2019


June 30,
2019


September 30,
2018


September 30,
 2019


September 30,
2018

Selected Mortgage Statistics:










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

$

9,197



$

8,344



$

8,290



$

24,143



$

25,024


Mortgage loans originated (2)

$

9,262



$

8,641



$

9,199



$

23,416



$

26,125


Mortgage loans sold and securitized

$

8,186



$

8,838



$

8,423



$

22,194



$

24,930


Selected Ratios:










Interest rate spread (3)

2.48

%


2.57

%


2.57

%


2.57

%


2.57

%

Net interest margin

3.05

%


3.08

%


2.93

%


3.07

%


2.85

%

Net margin on loans sold and securitized

1.34

%


0.84

%


0.51

%


1.05

%


0.66

%

Return on average assets

1.20

%


1.22

%


1.04

%


1.08

%


1.00

%

Adjusted return on average assets (4) (5)

1.20

%


0.81

%


1.05

%


0.95

%


1.00

%

Return on average common equity

14.72

%


14.58

%


12.80

%


12.90

%


12.10

%

Return on average tangible common equity (6)

17.12

%


17.14

%


13.67

%


15.30

%


12.78

%

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

17.12

%


11.69

%


13.67

%


13.54

%


12.78

%

Efficiency ratio

75.2

%


69.8

%


74.6

%


75.0

%


76.2

%

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

8.12

%


8.35

%


8.13

%


8.34

%


8.23

%

Average Balances:










Average interest-earning assets

$

18,997



$

17,759



$

16,786



$

17,693



$

16,050


Average interest-bearing liabilities

$

12,893



$

12,898



$

13,308



$

12,767



$

13,150


Average stockholders' equity

$

1,722



$

1,668



$

1,514



$

1,658



$

1,468






(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 and nine months ended September 30, 2018 and the nine months ended September 30, 2019. See Non-GAAP Reconciliation for further information.


(5)

Excludes DOJ benefit of $25 million during the three months ended June 30, 2019 and the nine months ended September 30, 2019. See Non-GAAP Reconciliation for further information.


(6)

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

 


September 30,
2019


June 30,
2019


December 31,
2018


September 30,
2018

Selected Statistics:








Book value per common share

$

30.69



$

29.31



$

27.19



$

26.34


Tangible book value per share (1)

$

27.62



$

26.16



$

23.90



$

25.13


Number of common shares outstanding


56,510,341




56,483,937




57,749,464




57,625,439


Number of FTE employees

4,171



4,147



3,938



3,496


Number of bank branches

160



160



160



108


Ratio of nonperforming assets to total assets (2)

0.16

%


0.36

%


0.16

%


0.17

%

Common equity-to-assets ratio

7.88

%


8.19

%


8.47

%


8.12

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

39.9



39.7



35.8



34.3


Capitalized value of mortgage servicing rights

1.14

%


1.23

%


1.35

%


1.43

%





(1)

Excludes goodwill and intangibles of $174 million, $178 million, $190 million and $70 million at September 30, 2019, June 30, 2019, December 31,2018 and September 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


September 30, 2019


June 30, 2019


September 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

$

3,786


$

40


4.22

%


$

3,539


$

40


4.55

%


$

4,393


$

52


4.69

%

Loans held-for-investment












Residential first mortgage

3,282


29


3.58

%


3,146


28


3.61

%


3,027


27


3.63

%

Home equity

934


13


5.37

%


814


11


5.54

%


695


9


5.12

%

Other

658


10


5.99

%


518


9


6.78

%


128


2


5.54

%

Total Consumer loans

4,874


52


4.24

%


4,478


48


4.33

%


3,850


38


3.96

%

Commercial Real Estate

2,594


35


5.39

%


2,394


35


5.65

%


2,106


29


5.37

%

Commercial and Industrial

1,767


22


4.97

%


1,744


23


5.26

%


1,330


18


5.28

%

Warehouse Lending

2,508


32


5.00

%


1,997


27


5.21

%


1,586


21


5.10

%

Total Commercial loans

6,869


89


5.14

%


6,135


85


5.40

%


5,022


68


5.26

%

Total loans held-for-investment

11,743


141


4.77

%


10,613


133


4.95

%


8,872


106


4.70

%

Loans with government guarantees

574


4


2.78

%


502


4


2.94

%


292


3


4.20

%

Investment securities

2,713


17


2.63

%


2,907


20


2.75

%


3,100


21


2.81

%

Interest-earning deposits

181


1


2.22

%


198


1


2.23

%


129


1


2.38

%

Total interest-earning assets

18,997


$

203


4.27

%


17,759


$

198


4.42

%


16,786


$

183


4.32

%

Other assets

2,200





2,207





1,825




Total assets

$

21,197





$

19,966





$

18,611




Interest-Bearing Liabilities












Retail deposits












Demand deposits

$

1,388


$

3


0.88

%


$

1,323


$

3


0.84

%


$

727


$

3


1.62

%

Savings deposits

3,262


10


1.20

%


3,191


9


1.16

%


3,229


7


0.90

%

Money market deposits

722


1


0.34

%


745


1


0.32

%


252



0.62

%

Certificates of deposit

2,583


15


2.40

%


2,611


15


2.34

%


2,150


10


1.78

%

Total retail deposits

7,955


29


1.45

%


7,870


28


1.42

%


6,358


20


1.27

%

Government deposits

1,253


4


1.45

%


1,128


5


1.51

%


1,174


4


1.28

%

Wholesale deposits and other

744


5


2.42

%


417


2


2.35

%


537


3


2.03

%

Total interest-bearing deposits

9,952


38


1.52

%


9,415


35


1.47

%


8,069


27


1.32

%

Short-term FHLB advances and other

1,910


10


2.24

%


2,633


17


2.53

%


3,465


18


2.10

%

Long-term FHLB advances

536


2


1.72

%


354


1


1.72

%


1,280


7


2.11

%

Other long-term debt

495


7


5.60

%


496


7


5.77

%


494


7


5.62

%

Total interest-bearing liabilities

12,893


57


1.79

%


12,898


60


1.85

%


13,308


59


1.75

%

Noninterest-bearing deposits












Retail deposits and other

1,315





1,275





1,298




Custodial deposits (1)

4,550





3,469





1,969




Total Noninterest-bearing deposits

5,865





4,744





3,267




Other liabilities

717





656





522




Stockholders' equity

1,722





1,668





1,514




Total liabilities and stockholders' equity

$

21,197





$

19,966





$

18,611




Net interest-earning assets

$

6,104





$

4,861





$

3,478




Net interest income


$

146





$

138





$

124



Interest rate spread (2)



2.48

%




2.57

%




2.57

%

Net interest margin (3)



3.05

%




3.08

%




2.93

%

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



147.3