26.10.2022 12:45:00

Flagstar Bancorp Reports Third Quarter 2022 Net Income of $73 Million, or $1.35 Per Diluted Share

Key Highlights - Third Quarter 2022

  • Generated adjusted net income of $75 million, or $1.41 per diluted share, excluding merger-related costs.
  • Expanded net interest margin by 29 basis points to 3.98 percent for the quarter and 4.07 percent for September.
  • Grew average commercial loans, excluding warehouse loans, by 15 percent compared to the second quarter.
  • Yielded an annualized 12 percent return on our mortgage servicing rights asset.
  • Produced a 1.2 percent return on assets.
  • Reduced noninterest expense by $20 million and improved the efficiency ratio by 8 percent.
  • Maintained strong asset quality with no nonperforming commercial loans.

TROY, Mich., Oct. 26, 2022 /PRNewswire/ -- Flagstar Bancorp, Inc. (NYSE: FBC) today reported third quarter 2022 adjusted net income of $75 million, or $1.41 per diluted share, compared to second quarter 2022 adjusted net income of $63 million, or $1.17 per diluted share.

"Once again, our results for the quarter demonstrate the business model we built is working just as it was designed to work," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp.

"Overall, all lines of business contributed to earnings growth of 22 percent compared to the second quarter, leading to a strong 1.2 percent return on assets. Our Community bank grew non-warehouse commercial loans by 15 percent and drove new all-time highs for net interest income and net interest margin. Servicing exceeded 1.4 million in serviced and subserviced accounts. Mortgage remained profitable despite unrelenting challenges as our team responded well by managing costs.

"Most noteworthy—and where we continued to shine—is the growth in our net interest margin, which increased 29 basis points for the third quarter to 3.98 percent — a new record for our highest core net interest margin ever, and to 4.07 percent for September – another record. As a result, net interest income grew $26 million, or 13 percent.

"Credit quality continues to hold up well with no nonperforming commercial loans and low levels of delinquency. We also continued to see improvements in forbearance-related delinquencies.

"I couldn't be prouder of how our team has performed. Our results this quarter again showed our ability to find ways to deliver profitability in any economic environment, as all elements of our team came together to deliver their very best."

Income Statement Highlights






Three Months Ended


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021


(Dollars in millions, except per share data)

Net interest income

$                 219

$                 193

$                165

$               181

$                 195

Provision (benefit) for credit losses

5

(9)

(4)

(17)

(23)

Noninterest income

114

131

160

202

266

Noninterest expense

236

256

261

291

286

Income before income taxes

92

77

68

109

198

Provision for income taxes

19

17

15

24

46

Net income

$                   73

$                   60

$                 53

$                 85

$                 152







Income per share:






Basic

$                1.36

$                1.13

$               0.99

$              1.62

$                2.87

Diluted

$                1.35

$                1.12

$               0.99

$              1.60

$                2.83

 

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






Three Months Ended


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021


(Dollars in millions, except per share data)

Net interest income

$                 219

$                 193

$                165

$               181

$                 195

Provision (benefit) for credit losses

5

(9)

(4)

(17)

(23)

Noninterest income

114

131

160

202

266

Noninterest expense

233

253

258

285

281

Income before income taxes

95

80

71

115

203

Provision for income taxes

20

17

16

25

47

Net income

$                   75

$                   63

$                 55

$                 90

$                 156







Income per share:






Basic

$                1.42

$                1.18

$               1.03

$              1.71

$                2.94

Diluted

$                1.41

$                1.17

$               1.02

$              1.69

$                2.90

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

 

Key Ratios






Three Months Ended


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021

Net interest margin

3.98 %

3.69 %

3.11 %

2.96 %

3.00 %

Return on average assets

1.2 %

1.0 %

0.9 %

1.3 %

2.2 %

Return on average common equity

10.4 %

8.7 %

7.9 %

12.7 %

23.4 %

Efficiency ratio

70.9 %

79.1 %

80.4 %

75.9 %

62.2 %

HFI loan-to-deposit ratio

85.0 %

76.3 %

68.5 %

67.2 %

68.8 %

Adjusted HFI loan-to-deposit ratio (1)

88.5 %

71.9 %

64.1 %

60.5 %

60.3 %

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

 

Average Balance Sheet Highlights








Three Months Ended

% Change


September 30,
2022

June 30,
2022

March 31,
2022

June 30,
2021

September 30,
2021

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$          21,905

$         20,958

$          21,569

$          24,291

$          25,656

5 %

(15) %

Average loans held-for-sale (LHFS)

2,976

3,571

4,833

6,384

7,839

(17) %

(62) %

Average loans held-for-investment (LHFI)

14,640

13,339

12,384

13,314

13,540

10 %

8 %

Average total deposits

17,216

17,488

18,089

19,816

19,686

(2) %

(13) %

 

Net Interest Income

Net interest income in the third quarter was $219 million, an increase of $26 million, or 13 percent, as compared to the second quarter 2022. The results primarily reflect a $0.9 billion, or 5 percent, increase in average earning assets along with an increase in net interest margin. We grew our loans held for investment by $1.3 billion, led by our residential mortgage and commercial portfolios. This growth was partially offset by a $0.6 billion decrease in our mortgage loans held-for-sale as a result of lower mortgage volume.

Net interest margin in the third quarter was 3.98 percent, a 29 basis points increase compared to 3.69 percent in the prior quarter. The net interest margin rose every month in the quarter with a September net interest income of 4.07 percent which is largely attributable to our asset sensitivity and our management of deposit costs.

Average total deposits were $17.2 billion in the third quarter, down $0.3 billion, or 2 percent, from the second quarter 2022, largely due to a decrease of $0.3 billion, or 4 percent, in average retail deposits. Total interest-bearing deposit costs increased only 15 basis points compared to short term market rates increasing 135 basis points.

Provision for Credit Losses

The provision for credit losses was $5 million for the third quarter, as compared to a $9 million benefit for the second quarter 2022. The third quarter net provision was driven by an increase to the reserve due to HFI loan growth which was focused in well collateralized portfolios. The strong performance of our portfolio continued with a low number of consumer non-accrual loans and no commercial non-accrual loans at September 30, 2022.

Noninterest Income

Noninterest income decreased to $114 million in the third quarter, as compared to $131 million for the second quarter 2022, primarily due to lower loan administration and fee income.

Third quarter net gain on loan sales increased $5 million, to $32 million, as compared to $27 million in the second quarter 2022. Gain on sale margins increased 27 basis points to 66 basis points for the third quarter 2022, compared to 39 basis points for the second quarter 2022. The improved result was driven by improved secondary marketing performance which was partially offset by a 32 percent decline in fallout-adjusted locks.

Our mortgage servicing rights portfolio yielded an annualized 12 percent return for the quarter. The net return on mortgage servicing rights increased $4 million to $26 million for the third quarter 2022, compared to a $22 million net return for the second quarter 2022. We grew the MSR asset by $213 million and our return benefited from our partial hedge position, which we transitioned to a fully hedged position as rates rose during the quarter.

Loan administration income was $18 million for the third quarter 2022, as compared to $33 million for the second quarter 2022. The decline in income was driven primarily by higher LIBOR-based fee credits paid on custodial deposits that are subserviced.

Loan fees and charges decreased $9 million to $20 million for the third quarter, compared to $29 million for the second quarter 2022, primarily due to lower originations and lower ancillary fee income driven by lower loss mitigation fees associated with loans coming out of forbearance.

Mortgage Metrics








As of/Three Months Ended

Change (% / bps)


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021

Seq

Yr/Yr


(Dollars in millions)



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

$         4,800

$       7,100

$        7,700

$        8,900

$       11,300

(32) %

(58) %

Mortgage loans closed (1)

$         6,900

$       7,700

$        8,200

$      10,700

$       12,500

(11) %

(45) %

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

0.66 %

0.39 %

0.58 %

1.02 %

1.50 %

27

(84)

Net gain on loan sales

$             32

$           27

$            45

$            91

$           169

19 %

(81) %

Net return on mortgage servicing rights (MSR)

$             26

$           22

$            29

$            19

$               9

N/M

N/M

Gain on loan sales + net return on the MSR

$             58

$           49

$            74

$           110

$           178

18 %

(67) %

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

1,421

1,383

1,256

1,234

1,203

3 %

18 %

Capitalized value of MSRs

1.51 %

1.50 %

1.31 %

1.12 %

1.08 %

1

43

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 $236 million for the third quarter, compared to $256 million for the second quarter 2022. Excluding $3 million of merger costs in the second and third quarter of 2022, noninterest expense decreased $20 million, or 8 percent, primarily driven by our actions taken to reduce scale in the mortgage business.

Mortgage expenses were $80 million for the third quarter, a decrease of $10 million compared to the prior quarter. The ratio of mortgage expenses to closings—our mortgage expense ratio— was 1.12 percent, a decrease of 2 basis points from the second quarter 2022. The reduction in expense was primarily driven by the actions we have taken to reduce mortgage costs. Additionally, we have taken a significant cost cutting measure at the end of the quarter to reduce our mortgage workforce by another 7 percent.

The efficiency ratio was 71 percent for the third quarter, as compared to 79 percent for the second quarter 2022. Excluding $3 million of merger expenses in the third quarter of 2022, the adjusted efficiency ratio was 70 percent and 78 percent, respectively.

Income Taxes

The third quarter provision for income taxes totaled $19 million, with an effective tax rate of 21.3 percent, compared to an effective tax rate of 21.7 percent for the second quarter 2022.

Asset Quality

Credit Quality Ratios








As of/Three Months Ended

Change (% / bps)


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021

Seq

Yr/Yr


(Dollars in millions)



Allowance for credit losses (1)

$           140

$           135

$           145

$           170

$           190

4 %

(26) %

Credit reserves to LHFI

0.89 %

0.92 %

1.10 %

1.27 %

1.33 %

(3)

-44

Credit reserves to LHFI excluding warehouse

1.14 %

1.27 %

1.64 %

1.96 %

2.29 %

(13)

(115)

Net charge-offs

$             —

$               1

$             21

$               3

$               6

(100) %

(100) %

Total nonperforming LHFI and TDRs

$             94

$             99

$           107

$             94

$             96

(5) %

(2) %

Net charge-offs to LHFI ratio (annualized)

— %

0.03 %

0.69 %

0.08 %

0.19 %

(3)

(19)

Ratio of nonperforming LHFI and TDRs to LHFI

0.59 %

0.68 %

0.80 %

0.70 %

0.66 %

(9)

(7)









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



Residential first mortgage

0.06 %

0.12 %

0.31 %

0.04 %

— %

(6)

6

Home equity and other consumer

0.24 %

0.09 %

0.07 %

0.14 %

0.01 %

15

23

Commercial real estate

— %

— %

— %

— %

0.03 %

(3)

Commercial and industrial

(0.24) %

0.02 %

4.31 %

0.53 %

1.87 %

(26)

(211)

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 continues to exhibit strong credit quality that resulted in a small net recovery in the third quarter 2022. This compares to net charge-offs of $1 million, or 3 basis points, in the prior quarter.

Nonperforming loans held-for-investment and troubled debt restructurings (TDRs) were $94 million at the end of the third quarter, a decrease of $5 million as compared to the second quarter 2022. Our ratio of nonperforming loans held-for-investment and TDRs to loans held-for-investment was 0.59% basis points at September 30, 2022, a 9 basis point decrease compared to June 30, 2022. At September 30, 2022, early stage loan delinquencies totaled $34 million, or 22 basis points of total loans, compared to $22 million, or 15 basis points, at June 30, 2022.

The allowance for credit losses was $140 million and covered 0.89 percent of loans held-for-investment at September 30, 2022, a 3 basis point decrease from June 30, 2022. Excluding warehouse loans, the allowance coverage ratio was 1.14 percent, a 13 basis point decrease from June 30, 2022. The increase in the allowance for credit losses reflects growth in our HFI loan portfolio. Loan growth occurred in well-collateralized portfolios, including $944 million in residential first mortgage and $340 million in MSR loans (included in our C&I portfolio) which have lower reserve levels. The impact of this loan growth was partially offset by reductions in our reserves related to residential first mortgages, consumer loans and our loans with government guarantees as a result of pay-offs and improvements in the delinquency trends of expired forbearance loans. Overall, our portfolio quality remains solid with low levels of nonperforming loans and low delinquency levels, including no commercial nonperforming loans.

Capital

Capital Ratios (Bancorp)


Change (% / bps)


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021

Seq

Yr/Yr

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

11.06 %

12.17 %

11.83 %

10.54 %

9.72 %

(111)

134

Tier 1 common equity (to RWA)

11.97 %

13.22 %

13.89 %

13.19 %

11.95 %

(125)

2

Tier 1 capital (to RWA)

13.11 %

14.41 %

15.17 %

14.43 %

13.11 %

(130)

Total capital (to RWA)

14.32 %

15.68 %

16.59 %

15.88 %

14.55 %

(136)

(23)

Tangible common equity to asset ratio (1)

9.73 %

10.25 %

11.13 %

10.09 %

9.23 %

(52)

50

Tangible book value per share (1)

$         46.42

$         47.83

$         48.61

$         48.33

$         47.21

(3) %

(2) %

(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. 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 12.97 percent and a total risk-based capital ratio of 15.52 percent at September 30, 2022.

Tangible book value per share declined to $46.42, down $1.41, or 3 percent from last quarter due to a $150 million decline in other comprehensive income primarily driven by the impact of higher interest rates on our investment securities portfolio.

About Flagstar

Flagstar Bancorp, Inc. (NYSE: FBC) is a $25.4 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 81 retail locations in 26 states. Flagstar is a leading national originator and servicer of mortgage and other consumer loans, handling payments and record keeping for $360 billion of loans representing more than 1.4 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 its respective financial and other strategic goals. Forward‐looking statements are typically identified by such words as "believe," "expect," "anticipate," "intend," "outlook," "estimate," "forecast," "project," "should," and other similar words and expressions, and are subject to numerous assumptions, risks, and uncertainties, which change over time. 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 https://www.sec.gov and in the "Documents" section of Flagstar's website, https://investors.flagstar.com.

 

Flagstar Bancorp, Inc.
Consolidated Statements of Financial Condition 
(Dollars in millions)
(Unaudited)



September 30,
2022


June 30,
2022


December 31,
2021


September 30,
2021

Assets








Cash

$              313


$              198


$              277


$              103

Interest-earning deposits

105


237


774


46

Total cash and cash equivalents

418


435


1,051


149

Investment securities available-for-sale

2,627


2,346


1,804


1,802

Investment securities held-to-maturity

159


173


205


236

Loans held-for-sale

1,830


3,482


5,054


6,378

Loans held-for-investment

15,793


14,655


13,408


14,268

Loans with government guarantees

1,370


1,144


1,650


1,945

Less: allowance for loan losses

(126)


(122)


(154)


(171)

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

17,037


15,677


14,904


16,042

Mortgage servicing rights

1,026


622


392


340

Federal Home Loan Bank stock

329


329


377


377

Premises and equipment, net

354


354


360


370

Goodwill and intangible assets

140


142


147


149

Bank-owned life insurance

372


370


365


363

Other assets

1,151


969


824


836

Total assets

$         25,443


$         24,899


$         25,483


$         27,042

Liabilities and Stockholders' Equity








Noninterest-bearing deposits

$           6,802


$           6,664


$           7,088


$           8,108

Interest-bearing deposits

9,789


9,984


10,921


11,228

Total deposits

16,591


16,648


18,009


19,336

Short-term Federal Home Loan Bank advances and other

3,450


3,301


1,880


1,870

Long-term Federal Home Loan Bank advances

1,000


700


1,400


1,400

Other long-term debt

390


394


396


396

Loan with government guarantees repurchase liability

156


101


200


163

Other liabilities

1,240


1,062


880


1,232

Total liabilities

22,827


22,206


22,765


24,397

Stockholders' Equity








Common stock

1


1


1


1

Additional paid in capital

1,361


1,358


1,355


1,362

Accumulated other comprehensive income

(249)


(99)


35


38

Retained earnings

1,503


1,433


1,327


1,244

Total stockholders' equity

2,616


2,693


2,718


2,645

Total liabilities and stockholders' equity

$         25,443


$         24,899


$         25,483


$         27,042

 

Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)





Change compared to:


Three Months Ended


2Q22


3Q21


September 30,
2022

June 30,
2022

March 31,
2022

December 31,
2021

September 30,
2021


Amount

Percent


Amount

Percent

Interest Income












Total interest income

$              254

$              209

$              177

$              196

$              209


$      45

22 %


$      45

22 %

Total interest expense

35

16

12

15

14


19

119 %


21

150 %

Net interest income

219

193

165

181

195


26

13 %


24

12 %

Provision (benefit) for credit losses

5

(9)

(4)

(17)

(23)


14

N/M


28

(122) %

Net interest income after
provision for credit losses

214

202

169

198

218


12

6 %


(4)

(2) %

Noninterest Income












Net gain on loan sales

32

27

45

91

169


5

19 %


(137)

(81) %

Loan fees and charges

20

29

27

29

33


(9)

(31) %


(13)

(39) %

Net return on the mortgage
servicing rights

26

22

29

19

9


4

18 %


17

N/M

Loan administration income

18

33

33

36

31


(15)

(45) %


(13)

(42) %

Deposit fees and charges

8

9

9

8

9


(1)

(11) %


(1)

(11) %

Other noninterest income

10

11

17

19

15


(1)

(9) %


(5)

(33) %

Total noninterest income

114

131

160

202

266


(17)

(13) %


(152)

(57) %

Noninterest Expense












Compensation and benefits

113

122

127

137

130


(9)

(7) %


(17)

(13) %

Occupancy and equipment

45

46

45

47

46


(1)

(2) %


(1)

(2) %

Commissions

15

22

26

38

44


(7)

(32) %


(29)

(66) %

Loan processing expense

21

23

21

21

22


(2)

(9) %


(1)

(5) %

Legal and professional
expense

11

10

11

13

12


1

10 %


(1)

(8) %

Federal insurance premiums

4

4

4

4

6


— %


(2)

(33) %

Intangible asset
amortization

2

3

2

3

3


(1)

(33) %


(1)

(33) %

Other noninterest expense

25

26

25

28

23


(1)

(4) %


2

9 %

Total noninterest expense

236

256

261

291

286


(20)

(8) %


(50)

(17) %

Income before income taxes

92

77

68

109

198


15

19 %


(106)

(54) %

Provision for income taxes

19

17

15

24

46


2

12 %


(27)

(59) %

Net income

$                73

$                60

$                53

$                85

$              152


$      13

22 %


$    (79)

(52) %

Income per share












Basic

$             1.36

$             1.13

$             0.99

$             1.62

$             2.87


$    0.23

20 %


$  (1.51)

(53) %

Diluted

$             1.35

$             1.12

$             0.99

$             1.60

$             2.83


$    0.23

21 %


$  (1.48)

(52) %













Cash dividends declared

$             0.06

$             0.06

$             0.06

$             0.06

$             0.06


$      —

— %


$      —

— %

N/M - Not meaningful












 

Flagstar Bancorp, Inc.
Condensed Consolidated Statements of Operations
(Dollars in millions, except per share data)
(Unaudited)



Nine Months Ended


Change


September 30,
2022


September 30,
2021


Amount


Percent

Interest Income








Total interest income

$                  640


$                614


$           26


4 %

Total interest expense

63


48


15


31 %

Net interest income

577


566


11


2 %

(Benefit) provision for credit losses

(8)


(95)


87


N/M

Net interest income after provision for credit losses

585


661


(76)


(11) %

Noninterest Income








Net gain on loan sales

104


564


(460)


(82) %

Loan fees and charges

76


112


(36)


(32) %

Net return (loss) on the mortgage servicing rights

77


4


73


1,825 %

Loan administration income

84


85


(1)


(1) %

Deposit fees and charges

26


26



— %

Other noninterest income

38


51


(13)


(25) %

Total noninterest income

405


842


(437)


(52) %

Noninterest Expense








Compensation and benefits

362


396


(34)


(9) %

Occupancy and equipment

136


141


(5)


(4) %

Commissions

63


156


(93)


(60) %

Loan processing expense

65


65



— %

Legal and professional expense

32


32



— %

Federal insurance premiums

12


16


(4)


(25) %

Intangible asset amortization

7


8


(1)


(13) %

Other noninterest expense

76


108


(32)


(30) %

Total noninterest expense

753


922


(169)


(18) %

Income before income taxes

237


581


(344)


(59) %

Provision for income taxes

51


133


(82)


(62) %

Net income

$                  186


$                448


$        (262)


(58) %

Income per share








Basic

$                 3.49


$               8.48


$       (4.99)


(59) %

Diluted

$                 3.47


$               8.37


$       (4.90)


(59) %









Cash dividends declared

$                 0.18


$               0.18


$           —


— %

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,
2022


June 30,
2022


September 30,
2021


September 30,
2022


September 30,
2021

Selected Mortgage Statistics (1):










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

$       4,800


$     7,100


$     11,300


$     11,800


$     36,000

Mortgage loans closed

$       6,900


$     7,700


$     12,500


$     14,600


$     39,100

Mortgage loans sold and securitized

$       7,200


$     6,900


$     12,400


$     14,100


$     40,100

Selected Ratios:










Interest rate spread (3)

3.62 %


3.47 %


2.84 %


3.33 %


2.70 %

Net interest margin

3.98 %


3.69 %


3.00 %


3.60 %


2.90 %

Net margin on loans sold and securitized

0.4 %


0.4 %


1.4 %


0.7 %


1.4 %

Return on average assets

1.2 %


1.0 %


2.2 %


1.0 %


2.1 %

Adjusted return on average assets (4)

1.2 %


1.1 %


2.2 %


1.1 %


2.2 %

Return on average common equity

10.4 %


8.7 %


23.4 %


9.0 %


24.3 %

Return on average tangible common equity (5)

11.2 %


9.5 %


25.2 %


9.8 %


24.7 %

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

11.9 %


10.1 %


26.2 %


10.4 %


27.2 %

Efficiency ratio

70.9 %


79.1 %


62.2 %


76.7 %


65.5 %

Adjusted efficiency ratio (4)

69.8 %


78.1 %


61.1 %


75.8 %


62.8 %

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

11.1 %


11.5 %


9.2 %


11.2 %


8.6 %

Average Balances:










Average interest-earning assets

$     21,905


$   20,958


$     25,656


$     21,479


$     26,029

Average interest-bearing liabilities

$     14,075


$   12,889


$     15,590


$     13,313


$     15,083

Average stockholders' equity

$       2,785


$     2,754


$       2,592


$       2,742


$       2,454


(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. 

 


September 30,
2022


June 30,
2022


December 31,
2021


September 30,
2021

Selected Statistics:








Book value per common share

$              49.05


$              50.50


$              51.09


$              50.04

Tangible book value per share (1)

$              46.42


$              47.83


$              48.33


$              47.21

Number of common shares outstanding

53,330,827


53,329,993


53,197,650


52,862,383

Number of FTE employees

4,911


5,036


5,395


5,461

Number of bank branches

158


158


158


158

Ratio of nonperforming assets to total assets (2)

0.39 %


0.42 %


0.39 %


0.37 %

Common equity-to-assets ratio

10.3 %


10.8 %


10.7 %


9.8 %

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

30.8


31.7


31.5


32.1

Capitalized value of mortgage servicing rights

1.51 %


1.50 %


1.12 %


1.08 %


(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


September 30, 2022


June 30, 2022


September 30, 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

$       2,976

$           34

4.58 %


$      3,571

$          36

4.10 %


$      7,839

$          63

3.22 %

Loans held-for-investment












Residential first mortgage

2,633

26

3.97 %


1,789

16

3.68 %


1,706

14

3.14 %

Home equity

699

11

6.29 %


614

7

4.74 %


686

6

3.64 %

Other

1,381

17

4.99 %


1,302

16

4.80 %


1,177

14

4.76 %

Total consumer loans

4,713

54

4.61 %


3,705

39

4.25 %


3,569

34

3.77 %

Commercial real estate

3,542

49

5.40 %


3,366

41

4.78 %


3,238

28

3.43 %

Commercial and industrial

2,844

37

5.06 %


2,169

26

4.65 %


1,341

12

3.56 %

Warehouse lending

3,541

42

4.63 %


4,099

34

3.27 %


5,392

52

3.76 %

Total commercial loans

9,927

128

5.03 %


9,634

101

4.11 %


9,971

92

3.62 %

Total loans held-for-investment

14,640

182

4.90 %


13,339

140

4.15 %


13,540

126

3.66 %

Loans with government guarantees

1,275

14

4.39 %


1,161

15

5.13 %


2,046

8

1.61 %

Investment securities

2,723

22

3.32 %


2,310

17

2.89 %


2,058

12

2.15 %

Interest-earning deposits

291

2

1.83 %


577

1

0.64 %


173

0.18 %

Total interest-earning assets

21,905

$          254

4.59 %


20,958

$        209

3.96 %


25,656

$        209

3.22 %

Other assets

3,243




2,909




2,391



Total assets

$     25,148




$    23,867




$    28,047



Interest-Bearing Liabilities












Retail deposits












Demand deposits

$       1,640

$             1

0.34 %


$      1,725

$            1

0.10 %


$      1,603

$          —

0.05 %

Savings deposits

4,082

3

0.27 %


4,251

2

0.16 %


4,144

2

0.14 %

Money market deposits

854

1

0.28 %


926

0.16 %


840

0.08 %

Certificates of deposit

848

1

0.58 %


851

1

0.35 %


1,038

1

0.50 %

Total retail deposits

7,424

6

0.32 %


7,753

4

0.17 %


7,625

3

0.16 %

Government deposits

1,731

4

0.93 %


1,699

1

0.32 %


2,148

1

0.17 %

Wholesale deposits and other

830

1

0.73 %


935

2

0.98 %


1,342

3

0.99 %

Total interest-bearing deposits

9,985

11

0.46 %


10,387

7

0.26 %


11,115

7

0.26 %

Short-term FHLB advances and other

2,653

15

2.23 %


1,124

3

1.05 %


2,736

1

0.18 %

Long-term FHLB advances

1,041

4

1.35 %


982

3

1.15 %


1,343

3

0.92 %

Other long-term debt

396

5

4.40 %


396

3

3.07 %


396

3

3.16 %

Total interest-bearing liabilities

14,075

$           35

0.96 %


12,889

$          16

0.48 %


15,590

14

0.38 %

Noninterest-bearing deposits












Retail deposits and other

2,550




2,460




2,391



Custodial deposits (1)

4,681




4,641




6,180



Total noninterest-bearing deposits

7,231




7,101




8,571



Other liabilities

1,057




1,123




1,294



Stockholders' equity

2,785




2,754




2,592



Total liabilities and stockholders'
equity

$     25,148




$    23,867




$    28,047



Net interest-earning assets

$       7,830




$      8,069




$    10,066



Net interest income


$          219




$        193




$        195


Interest rate spread (2)



3.62 %




3.47 %




2.84 %

Net interest margin (3)



3.98 %




3.69 %




3.00 %

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



155.6 %




162.6 %




164.6 %

Total average deposits

$     17,216




$    17,488




$    19,686



(1)

Approximately 70 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.

 

Average Balances, Yields and Rates
(Dollars in millions)
(Unaudited)



Nine Months Ended


September 30, 2022


September 30, 2021


Average
Balance

Interest

Annualized
Yield/Rate


Average
Balance

Interest

Annualized
Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$         3,787

$            111

3.89 %


$         7,403

$            169

3.04 %

Loans held-for-investment








Residential first mortgage

1,978

55

3.72 %


1,907

46

3.21 %

Home equity

637

24

5.10 %


751

20

3.59 %

Other

1,313

48

4.88 %


1,106

40

4.78 %

Total consumer loans

3,928

127

4.33 %


3,764

106

3.75 %

Commercial real estate

3,379

119

4.63 %


3,125

80

3.38 %

Commercial and industrial

2,286

78

4.52 %


1,425

39

3.60 %

Warehouse lending

3,869

108

3.68 %


5,729

170

3.91 %

Total commercial loans

9,534

305

4.22 %


10,279

289

3.71 %

Total loans held-for-investment

13,462

432

4.25 %


14,043

395

3.72 %

Loans with government guarantees

1,279

44

4.62 %


2,295

15

0.95 %

Investment securities

2,354

50

2.85 %


2,130

35

2.19 %

Interest-earning deposits

597

3

0.59 %


158

0.15 %

Total interest-earning assets

21,479

$            640

3.96 %


26,029

$            614

3.13 %

Other assets

2,918




2,672



Total assets

$        24,397




$        28,701



Interest-Bearing Liabilities








Retail deposits








Demand deposits

$         1,664

$                2

0.18 %


$         1,713

$                1

0.06 %

Savings deposits

4,195

6

0.19 %


4,058

4

0.14 %

Money market deposits

889

1

0.18 %


763

0.07 %

Certificates of deposit

876

3

0.43 %


1,152

6

0.71 %

Total retail deposits

7,624

12

0.21 %


7,686

11

0.20 %

Government deposits

1,769

6

0.47 %


1,907

3

0.19 %

Wholesale deposits and other

944

6

0.87 %


1,182

11

1.27 %

Total interest-bearing deposits

10,337

24

0.32 %


10,775

25

0.32 %

Short-term FHLB advances and other

1,486

18

1.64 %


2,646

3

0.17 %

Long-term FHLB advances

1,094

10

1.15 %


1,248

9

0.99 %

Other long-term debt

396

11

3.54 %


414

11

3.50 %

Total interest-bearing liabilities

13,313

$              63

0.63 %


15,083

$              48

0.43 %

Noninterest-bearing deposits








Retail deposits and other

2,495




2,307



Custodial deposits (1)

4,763




6,517



Total noninterest-bearing deposits

7,258




8,824



Other liabilities

1,084




2,340



Stockholders' equity

2,742




2,454



Total liabilities and stockholders' equity

$        24,397




$        28,701



Net interest-earning assets

$         8,166




$        10,946



Net interest income


$            577




$            566


Interest rate spread (2)



3.33 %




2.70 %

Net interest margin (3)



3.60 %




2.90 %

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



161.3 %




172.6 %

Total average deposits

$        17,595




$        19,598



(1)

Approximately 70 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


Nine Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


September 30,
2022


September 30,
2021

Net income

$                     73


$                     60


$                   152


$                   186


$                   448

Weighted average common shares outstanding

53,330,518


53,269,631


52,862,288


53,273,743


52,767,923

Stock-based awards

279,748


265,817


797,134


300,947


731,366

Weighted average diluted common shares

53,610,266


53,535,448


53,659,422


53,574,690


53,499,289

Basic earnings per common share

$                  1.36


$                  1.13


$                  2.87


$                  3.49


$                  8.48

Stock-based awards

(0.01)


(0.01)


(0.04)


(0.02)


(0.11)

Diluted earnings per common share

$                  1.35


$                  1.12


$                  2.83


$                  3.47


$                  8.37

 

Regulatory Capital - Bancorp
(Dollars in millions)
(Unaudited)



September 30, 2022


June 30, 2022


December 31, 2021


September 30, 2021


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$      2,759

11.06 %


$      2,900

12.17 %


$      2,798

10.54 %


$      2,709

9.72 %

Total adjusted avg. total asset base

$    24,939



$    23,835



$    26,545



$    27,863


Tier 1 common equity (to risk weighted assets)

$      2,519

11.97 %


$      2,660

13.22 %


$      2,558

13.19 %


$      2,469

11.95 %

Tier 1 capital (to risk weighted assets)

$      2,759

13.11 %


$      2,900

14.41 %


$      2,798

14.43 %


$      2,709

13.11 %

Total capital (to risk weighted assets)

$      3,015

14.32 %


$      3,155

15.68 %


$      3,080

15.88 %


$      3,006

14.55 %

Risk-weighted asset base

$    21,047



$    20,130



$    19,397



$    20,664


 

Regulatory Capital - Bank
(Dollars in millions)
(Unaudited)



September 30, 2022


June 30, 2022


December 31, 2021


September 30, 2021


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$      2,741

10.99 %


$      2,824

11.87 %


$      2,706

10.21 %


$      2,619

9.40 %

Total adjusted avg. total asset base

$    24,938



$    23,786



$    26,502



$    27,851


Tier 1 common equity (to risk weighted assets)

$      2,741

12.96 %


$      2,824

14.04 %


$      2,706

13.96 %


$      2,619

12.71 %

Tier 1 capital (to risk weighted assets)

$      2,741

12.96 %


$      2,824

14.04 %


$      2,706

13.96 %


$      2,619

12.71 %

Total capital (to risk weighted assets)

$      2,853

13.49 %


$      2,931

14.57 %


$      2,839

14.65 %


$      2,766

13.42 %

Risk-weighted asset base

$    21,144



$    20,113



$    19,383



$    20,609


 

Loans Serviced and Subserviced
(Dollars in millions)
(Unaudited)



September 30, 2022


June 30, 2022


December 31, 2021


September 30, 2021


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts


Unpaid
Principal
Balance (1)

Number of
accounts

Subserviced for others (2)

$    284,120

1,090,130


$    293,808

1,160,087


$    246,858

1,032,923


$    230,045

1,007,557

Serviced for others (3)

67,918

267,416


41,557

160,387


35,074

137,243


31,354

124,665

Serviced for own loan portfolio (4)

7,801

63,461


7,959

62,217


8,793

63,426


10,410

70,738

Total loans serviced and subserviced

$    359,839

1,421,007


$    343,324

1,382,691


$    290,725

1,233,592


$    271,809

1,202,960

(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)



September 30, 2022


June 30, 2022


December 31, 2021


September 30, 2021

Consumer loans












Residential first mortgage

$      3,147

19.9 %


$      2,205

15.0 %


$      1,536

11.5 %


$      1,626

11.5 %

Home equity

769

4.9 %


645

4.4 %


613

4.6 %


657

4.6 %

Other

1,411

8.9 %


1,331

9.1 %


1,236

9.2 %


1,203

8.3 %

Total consumer loans

5,327

33.7 %


4,181

28.5 %


3,385

25.3 %


3,486

24.4 %

Commercial loans












Commercial real estate

3,721

23.6 %


3,387

23.1 %


3,223

24.0 %


3,216

22.6 %

Commercial and industrial

3,188

20.2 %


2,653

18.1 %


1,826

13.6 %


1,387

9.7 %

Warehouse lending

3,557

22.5 %


4,434

30.3 %


4,974

37.1 %


6,179

43.3 %

Total commercial loans

10,466

66.3 %


10,474

71.5 %


10,023

74.7 %


10,782

75.6 %

Total loans held-for-investment

$    15,793

100.0 %


$    14,655

100.0 %


$    13,408

100.0 %


$    14,268

100.0 %

 

Other Consumer Loans Held-for-Investment
(Dollars in millions)
(Unaudited)



September 30, 2022


June 30, 2022


December 31, 2021


September 30, 2021

Indirect lending

$      1,071

75.9 %


$         972

73.0 %


$         926

74.8 %


$         916

76.2 %

Point of sale

283

20.1 %


300

22.6 %


272

22.0 %


248

20.6 %

Other

57

4.0 %


59

4.4 %


38

3.2 %


39

3.2 %

Total other consumer loans

$      1,411

100.0 %


$      1,331

100.0 %


$      1,236

100.0 %


$      1,203

100.0 %

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)



September 30, 2022


June 30, 2022


September 30, 2021

Residential first mortgage

$                               32


$                               33


$                               43

Home equity

23


21


15

Other

29


31


32

Total consumer loans

84


85


90

Commercial real estate

26


22


35

Commercial and industrial

16


11


43

Warehouse lending 

1


4


3

Total commercial loans

43


37


81

Allowance for loan losses

127


122


171

Reserve for unfunded commitments

13


13


19

Allowance for credit losses

$                             140


$                             135


$                             190

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)



Three Months Ended September 30, 2022


Residential
First
Mortgage

Home
Equity

Other
Consumer

Commercial
Real Estate

Commercial
and
Industrial

Warehouse
Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Beginning balance

$            33

$          21

$            31

$            22

$            11

$              4

$          122

$                13

Provision (benefit) for credit losses:









Loan volume

10

2

2

2

4

20

Economic forecast (2)

1

(1)

Credit (3)

(10)

(3)

2

(1)

(12)

Qualitative factor adjustments

(1)

1

(3)

(3)

Charge-offs

(1)

(2)

(3)

Recoveries

1

2

3

Ending allowance balance

$            32

$          23

$            29

$            26

$            16

$              1

$          127

$                13

(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, changes in duration, as well as individually evaluated reserves.

 

Allowance for Credit Losses
(Dollars in millions)
(Unaudited)



Nine Months Ended September 30, 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

14

3

5

3

11

36

(3)

Economic forecast (2)

3

3

(4)

2

(4)

Credit (3)

(23)

2

(5)

(5)

(2)

(33)

Qualitative factor adjustments

(2)

(3)

(3)

(8)

Charge-offs

(2)

(7)

(20)

(29)

Recoveries

1

4

2

7

Ending allowance balance

$            32

$          23

$            29

$            26

$            16

$              1

$          127

$                13

(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, changes in duration, as well as individually evaluated reserves.

 

Nonperforming Loans and Assets
(Dollars in millions)
(Unaudited)



September 30,
2022


June 30,
2022


December 31,
2021


September 30,
2021

Nonperforming LHFI

$            64


$            79


$            81


$            82

Nonperforming TDRs

6


6


8


5

Nonperforming TDRs at inception but performing for less than six months

24


14


5


9

Total nonperforming LHFI and TDRs (1)

94


99


94


96

Other nonperforming assets, net

6


5


6


6

LHFS

17


20


17


10

Total nonperforming assets

$          117


$          124


$          117


$          112









Ratio of nonperforming assets to total assets (2)

0.39 %


0.42 %


0.39 %


0.37 %

Ratio of nonperforming LHFI and TDRs to LHFI

0.59 %


0.68 %


0.70 %


0.66 %

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

0.63 %


0.71 %


0.74 %


0.70 %

(1)

Includes $44 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 September 30, 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

September 30, 2022










Consumer loans

$               16


$                 7


$               94


$             117


$          5,327

Commercial loans

2


9


2


13


10,466

Total loans

$               18


$               16


$               96


$             130


$        15,793

June 30, 2022










Consumer loans (1)

$               15


$                 7


$               99


$             121


$          4,181

Commercial loans





10,474

     Total loans

$               15


$                 7


$               99


$             121


$        14,655

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

September 30, 2021










Consumer loans

$               12


$                 2


$               58


$               72


$          3,486

Commercial loans



35


35


10,782

     Total loans

$               12


$                 2


$               93


$             107


$        14,268

(1)

Includes $44 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 September 30, 2022.

 

Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)



TDRs


Performing


Nonperforming


Total

September 30, 2022


Consumer loans

$                             25


$                             30


$                             55

Commercial loans



Total TDR loans

$                             25


$                             30


$                             55

June 30, 2022






Consumer loans

$                             22


$                             20


$                             42

Commercial loans



Total TDR loans

$                             22


$                             20


$                             42

December 31, 2021






Consumer loans

$                             22


$                             13


$                             35

Commercial loans

2



2

Total TDR loans

$                             24


$                             13


$                             37

September 30, 2021






Consumer loans

$                             34


$                             12


$                             46

Commercial loans


2


2

Total TDR loans

$                             34


$                             14


$                             48

 

Non-GAAP Reconciliation
(Unaudited)


In addition to analyzing the Company's results on a reported basis, management reviews the Company's 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 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.




September 30,
2022


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2021


(Dollars in millions, except share data)

Total stockholders' equity

$           2,616


$           2,693


$           2,733


$           2,718


$           2,645

Less: Goodwill and intangible assets

140


142


145


147


149

Tangible book value

$           2,476


$           2,551


$           2,588


$           2,571


$           2,496











Number of common shares outstanding

53,330,827


53,329,993


53,236,067


53,197,650


52,862,383

Tangible book value per share

$           46.42


$           47.83


$           48.61


$           48.33


$           47.21











Total assets

$         25,443


$         24,899


$         23,244


$         25,483


$         27,042

Tangible common equity to assets ratio

9.7 %


10.2 %


11.1 %


10.1 %


9.2 %

 

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



Three Months Ended


Nine Months Ended


September 30,
2022


June 30,
2022


September 30,
2021


September 30,
2022


September 30,
2021


(Dollars in millions)





Net income

$             73


$             60


$           152


$           186


$           448

Add: Intangible asset amortization, net of tax

2


3


2


5


6

Tangible net income

$             75


$             63


$           154


$           191


$           454











Total average equity

$        2,785


$        2,754


$        2,592


$        2,742


$        2,454

Less: Average goodwill and intangible assets

141


144


151


144


Total tangible average equity

$        2,644


$        2,610


$        2,441


$        2,598


$        2,454











Return on average tangible common equity

11.2 %


9.5 %


25.2 %


9.8 %


24.7 %

Adjustment to remove DOJ settlement expense

— %


— %


— %


— %


2.3 %

Adjustment for former CEO SERP agreement

— %


— %


— %


— %


(0.7) %

Adjustment for merger costs

0.7 %


0.6 %


1.0 %


0.6 %


0.9 %

Adjusted return on average tangible common equity

11.9 %


10.1 %


26.2 %


10.4 %


27.2 %











Return on average assets

1.2 %


1.0 %


2.2 %


1.0 %


2.1 %

Adjustment to remove DOJ settlement expense

— %


— %


— %


— %


0.1 %

Adjustment for former CEO SERP settlement agreement

— %


— %


— %


— %


— %

Adjustment for merger costs

— %


— %


0.1 %


— %


— %

Adjusted return on average assets

1.2 %


1.0 %


2.3 %


1.0 %


2.2 %

 

Adjusted HFI loan-to-deposit ratio.



September 30,
2022


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2021


(Dollars in millions)

Average LHFI

$       14,640


$       13,339


$       12,384


$       13,314


$       13,540

Less: Average warehouse loans

3,541


4,099


3,973


5,148


5,392

Adjusted average LHFI

$       11,099


$         9,240


$         8,411


$         8,166


$         8,148











Average deposits

$       17,216


$       17,488


$       18,089


$       19,816


$       19,686

Less: Average custodial deposits

4,681


4,641


4,970


6,309


6,180

Adjusted average deposits

$       12,535


$       12,847


$       13,119


$       13,507


$       13,506











HFI loan-to-deposit ratio

85.0 %


76.3 %


68.5 %


67.2 %


68.8 %

Adjusted HFI loan-to-deposit ratio

88.5 %


71.9 %


64.1 %


60.5 %


60.3 %

 

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


September 30,
2022


June 30,
2022


March 31,
2022


December 31,
2021


September 30,
2021


(Dollar in millions)

Noninterest expense

$            236


$            256


$            261


$            291


$            286

Adjustment for merger costs

3


3


3


6


5

Adjusted noninterest expense

$            233


$            253


$            258


$            285


$            281











Income before income taxes

$              92


$              77


$              68


$            109


$            198

Adjustment for merger costs

3


3


3


6


5

Adjusted income before income taxes

$              95


$              80


$              71


$            115


$            203











Provision for income taxes

$              19


$              17


$              15


$              24


$              46

Adjustment for merger costs

(1)



(1)


(1)


(1)

Adjusted provision for income taxes

$              20


$              17


$              16


$              25


$              47











Net income

$              73


$              60


$              53


$              85


$            152

Adjusted net income

$              75


$              63


$              55


$              90


$            156











Weighted average common shares outstanding

53,330,518


53,269,631


53,219,866


52,867,138


52,862,288

Weighted average diluted common shares

53,610,266


53,535,448


53,578,001


53,577,832


53,659,422

Adjusted basic earnings per share

$           1.42


$           1.18


$           1.03


$           1.71


$           2.94

Adjusted diluted earnings per share

$           1.41


$           1.17


$           1.02


$           1.69


$           2.90











Efficiency ratio

70.9 %


79.1 %


80.4 %


75.9 %


62.2 %

Adjustment for merger costs

(1.1) %


(1.0) %


(0.8) %


(1.5) %


(1.1) %

Adjusted efficiency ratio

69.8 %


78.1 %


79.6 %


74.4 %


61.1 %

 



Nine Months Ended



September 30,
2022


September 30,
2021

Efficiency ratio


76.7 %


65.5 %

Adjustment to remove DOJ settlement expense


— %


(2.5) %

Adjustment for former CEO SERP agreement


— %


0.7 %

Adjustment for merger costs


(1.0) %


(1.0) %

Adjusted efficiency ratio


75.7 %


62.7 %

 

For more information, contact:             
Bryan Marx
FBCInvestorRelations@flagstar.com
(248) 312-5699

Cision View original content:https://www.prnewswire.com/news-releases/flagstar-bancorp-reports-third-quarter-2022-net-income-of-73-million-or-1-35-per-diluted-share-301659350.html

SOURCE Flagstar Bancorp, Inc.

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