FBC
$35.82
Flagstar Bancorp
($.01)
(.03%)
Earnings Details
3rd Quarter September 2020
Wednesday, October 21, 2020 6:30:00 AM
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Summary

Flagstar Bancorp (FBC) Recent Earnings

Flagstar Bancorp (FBC) reported 3rd Quarter September 2020 earnings of $3.88 per share on revenue of $658.0 million. The consensus earnings estimate was $2.28 per share on revenue of $506.0 million. Revenue grew 75.9% on a year-over-year basis.

Flagstar Bancorp, Inc., is a savings and loan holding company. The Company through its subsidiaries is engaged in offering consumer and commercial financial products and services to individuals, and small and middle market businesses in Michigan.

Results
Reported Earnings
$3.88
Earnings Whisper
-
Consensus Estimate
$2.28
Reported Revenue
$658.0 Mil
Revenue Estimate
$506.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Flagstar Bancorp Reports Third Quarter 2020 Net Income of $222 million, or $3.88 Per Diluted Share

TROY, Mich., Oct. 21, 2020 /PRNewswire/ --

Key Highlights - Third Quarter 2020

  • Surpassed record results from second quarter 2020 as all segments posted strong earnings
  • Grew net interest income by $12 million to $180 million
  • Achieved mortgage revenue of $358 million on strong gain on sale margin and volume growth
  • Increased the allowance for credit losses by $30 million, raising the coverage ratio to 1.7 percent, or 3.1 percent excluding warehouse loans
  • Generated tangible book value growth of 25 percent through the first nine months of 2020

Flagstar Bancorp, Inc. (NYSE: FBC), the holding company for Flagstar Bank, today reported third quarter 2020 net income of $222 million, or $3.88 per diluted share, compared to second quarter 2020 net income of $116 million, or $2.03 per diluted share and third quarter 2019 net income of $63 million, or $1.11 per diluted share.

"It was another quarter for the record books as we surpassed the high-water mark for earnings we set last quarter," said Alessandro DiNello, president and chief executive officer of Flagstar Bancorp, Inc. "We once again demonstrated the power of our business model as strong results across all of our primary business segments combined to produce record earnings of $3.88 per share. And while our performance in mortgage is a headline, it shares the space with outstanding results from our banking and servicing teams."

"Banking performed remarkably well during the quarter, growing net interest income $12 million to $180 million. Our warehouse business—and our success in safely growing low-risk balances without sacrificing yield—was a big contributor to our performance. Our solid performance in warehouse, combined with a concerted effort to reduce deposit funding costs, resulted in a 6-basis-point increase in net interest margin, excluding loans with government guarantees that have not been repurchased.

"We also were pleased to see commercial loan deferrals end the quarter at just $47 million. That's less than 1 percent of our commercial loan portfolio, down significantly from their peak in the second quarter. Still, we felt it was prudent to increase our credit reserves to $280 million to reflect the continued uncertainty of COVID-19 and its ongoing economic impact. We believe our conservative approach to fortify the bank's balance sheet positions us well in an unpredictable economy. Our coverage ratio is now 3.1 percent, excluding warehouse loans, which places it among the strongest in the industry.

"In Servicing, we closed the quarter with a 6 percent increase over the second quarter in loans serviced and subserviced, bringing our servicing book to a little more than 1.1 million loans. This growth is especially strong considering the headwinds from the continued pressure of elevated prepayments, and it's a testament to our business model and the strength of the relationships we have developed with our subservicing partners.

"Our mortgage team was absolutely stellar, producing revenue of $358 million on a 12-basis-point expansion of gain on sale margin and an 9 percent increase in fallout adjusted locks over the prior quarter. While a robust mortgage market fueled our revenue growth in the business, it is our diverse, multi-channel mortgage platform that allowed us to maximize mortgage profitability by optimizing product and channel mix.

"Like prior quarters, our results in the third quarter show the power of our business model. Mortgage was once again a standout, but it shares the stage with our unique and diversified businesses that deliver solid net interest income and margin in banking—led by contributions from warehouse lending—and predictable fee income from Servicing. Combined, they generated the capital that produced a tangible book value of $35.60 per share at quarter end."

Income Statement Highlights






Three Months Ended


September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019


(Dollars in millions)

Net interest income

$

180


$

168


$

148


$

152


$

146


Provision for credit losses

32


102


14



1


Noninterest income

452


378


157


162


171


Noninterest expense

305


296


235


245


238


Income before income taxes

295


148


56


69


78


Provision for income taxes

73


32


10


11


15


Net income

$

222


$

116


$

46


$

58


$

63


Income per share:






Basic

$

3.90


$

2.04


$

0.80


$

1.01


$

1.12


Diluted

$

3.88


$

2.03


$

0.80


$

1.00


$

1.11


 

Key Ratios






Three Months Ended


September 30,
2020

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019

Net interest margin

2.78

%

2.86

%

2.81

%

2.91

%

3.05

%

Adjusted net interest margin (2)

2.94

%

2.88

%

2.81

%

2.91

%

3.05

%

Return on average assets

3.1

%

1.8

%

0.8

%

1.0

%

1.2

%

Return on average common equity

41.5

%

23.5

%

9.8

%

12.7

%

14.7

%

Efficiency ratio

48.3

%

54.3

%

77.1

%

78.2

%

75.2

%

HFI loan-to-deposit ratio

75.9

%

76.7

%

74.9

%

76.5

%

74.2

%

Adjusted HFI loan-to-deposit ratio (1)

74.8

%

85.4

%

86.3

%

84.6

%

82.0

%



(1)

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

(2)

Excludes LGG loans available for repurchase. See Non-GAAP Reconciliation for further information.

 

Average Balance Sheet Highlights








Three Months Ended

% Change


September 30,

2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019

Seq

Yr/Yr


(Dollars in millions)



Average interest-earning assets

$

25,738


$

23,692


$

21,150


$

20,708


$

18,997


9

%

35

%

Average loans held-for-sale (LHFS)

5,602


5,645


5,248


5,199


3,786


(1)

%

48

%

Average loans held-for-investment (LHFI)

14,839


13,596


11,823


12,168


11,743


9

%

26

%

Average total deposits

19,561


17,715


15,795


15,904


15,817


10

%

24

%

Net Interest Income

Net interest income in the third quarter 2020 was $180 million, an increase of $12 million (7 percent) compared to the second quarter 2020. The increase was primarily driven by warehouse loan growth and the impact of lower rates on deposit and borrowing costs, which was partially offset by lower yields on earning assets. Average earning assets increased $2.0 billion, reflecting increases of $2.5 billion in average total loans partially offset by a $0.6 billion decrease in average investment securities. 

The net interest margin in the third quarter 2020 was 2.78 percent, an 8 basis point decrease from the prior quarter. Excluding the impact from the loans with government guarantees that have not been repurchased and do not accrue interest, adjusted net interest margin expanded 6 basis points to 2.94 percent in the third quarter, compared to adjusted net interest margin of 2.88 percent in the prior quarter. The increase in the adjusted net interest margin was primarily driven by a shift to higher yielding warehouse loans and lower rates on deposit and borrowing costs. Retail banking deposit rates decreased 22 basis points driven by the expiration of promotional rates on some of our savings deposits and the maturity of higher cost time deposits and a higher balance of noninterest bearing deposits. This improvement more than offset the impact of declining interest rates on the loans held-for-investment portfolio.

Loans held-for-investment averaged $14.8 billion for the third quarter 2020, increasing $1.2 billion (9 percent) from the prior quarter. The increase was primarily driven by $1.9 billion (51 percent) higher average warehouse loan balances as we grew this business and took advantage of the strong mortgage market. The result was partially offset by $0.5 billion (9 percent) lower average commercial loans, excluding warehouse, primarily due to a decrease in our home builder finance portfolio and the completion of the sale of the Paycheck Protection Program loans during the third quarter.

Average total deposits were $19.6 billion in the third quarter 2020, increasing $1.8 billion (10 percent) from the second quarter 2020. Average custodial deposits increased $1.1 billion (18 percent) due to higher prepayments from refinancing, average government deposits increased $0.3 billion (29 percent) and retail deposits increased $0.2 billion (2 percent) primarily due to the continued impact of COVID-19 on consumer behavior and spending patterns and higher cash balances being carried by commercial depositors.  

Provision for Credit Losses

The provision for credit losses was $32 million for the third quarter 2020, as compared to $102 million for the second quarter 2020. We have continued to add to our reserve balance as we believe the economic recovery will continue to be challenged due to the COVID-19 pandemic for an extended period of time, especially as it relates to consumer loan forbearance and the commercial real estate sector.

Noninterest Income

Noninterest income increased $74 million to $452 million in the third quarter 2020, as compared to $378 million for the second quarter 2020, primarily due to higher mortgage revenues.

Third quarter 2020 net gain on loan sales increased $43 million, to $346 million, as compared to $303 million in the second quarter 2020. The net gain on loan sale margin increased 12 basis points, to 2.31 percent for the third quarter 2020, as compared to 2.19 percent for the second quarter 2020. The increase was primarily driven by improved execution in secondary marketing and the gain associated with the residential mortgage-backed securitization transaction we executed during the quarter. Fallout -adjusted locks increased $1.2 billion, or 9 percent, to $15.0 billion, as historically low interest rates continued to fuel a strong refinance market.

Net return on mortgage servicing rights increased $20 million, to a $12 million net return for the third quarter 2020, compared to an $8 million net loss for the second quarter 2020. The third quarter 2020 MSR return normalized following the MSR valuation decrease caused by rising prepayment speeds in the second quarter 2020 which did not reoccur.

Loan administration income increased $5 million, to $26 million for the third quarter 2020, compared to $21 million for the second quarter 2020, largely driven by an increase in the average number of loans being subserviced and higher level of fees for loans in forbearance.

Loan fees and charges increased $4 million, to $45 million for the third quarter 2020, compared to $41 million for the second quarter 2020, resulting from a 19 percent increase in mortgage closings. 

Mortgage Metrics










As of/Three months ended

Change (% / bps)


September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019

Seq


Yr/Yr



(Dollars in millions)





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

$

15,000


$

13,800


$

11,200


$

8,200


$

9,200


9

%

63

%

Mortgage loans closed (1)

$

14,400


$

12,200


$

8,600


$

9,300


$

9,300


19

%

56

%

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


2.31

%

2.19

%

0.80

%

1.23

%

1.20

%

12


111


Net gain on loan sales

$

346


$

303


$

90


$

101


$

110


14

%

N/M


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

$

12


$

(8)


$

6


$

(3)


$

(2)


N/M


N/M


Gain on loan sales + net return on the MSR

$

358


$

295


$

96


$

98


$

108


21

%

N/M


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

1,105


1,042


1,082


1,091


994


6

%

11

%

Capitalized value of MSRs

0.85

%

0.87

%

0.95

%

1.21

%

1.14

%

(2)


(29)


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 increased to $305 million for the third quarter 2020, compared to $296 million for the second quarter 2020. This increase was primarily due to the capitalization of origination costs in the second quarter for the PPP loans and the accelerated vesting of certain components of executive compensation that resulted from the most recent secondary share offering. Despite increased volume, mortgage expenses were flat quarter over quarter as the ratio of mortgage noninterest expense to closings – our mortgage expense ratio – declined. This improvement was due to certain expenses in the second quarter that did not reoccur this quarter and are not expected to reoccur in the future, including certain performance-related incentives related to our Opes Advisors division.

The Company's efficiency ratio was 48 percent for the third quarter 2020, as compared to 54 percent for the second quarter 2020, primarily driven lower by extraordinary levels of gain on sale margin.

Income Taxes

The third quarter 2020 provision for income taxes totaled $73 million, with an effective tax rate of 24.7 percent, compared to $32 million and an effective tax rate of 21.5 percent for the second quarter 2020. Our effective tax rate increased due to the higher level of income, which is taxed at higher marginal tax rates. Additionally, we delayed certain tax planning strategies.

Asset Quality

Credit Quality Ratios










As of/Three Months Ended

Change (% / bps)


September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019

Seq


Yr/Yr



(Dollars in millions)





Allowance for credit losses

$

280


$

250


$

152


$

110


$

113


12

%

N/M


Credit reserves to LHFI


1.70

%

1.69

%

1.10

%

0.91

%

0.90

%

1


80


Credit reserves to LHFI excluding warehouse

3.07

%

2.60

%

1.54

%

1.12

%

1.16

%

47


191


Charge-offs, net of recoveries

$

2


$

3


$

2


$

3


$

1


(33)

%

100

%

Total nonperforming LHFI and TDRs

$

45


$

33


$

29


$

26


$

26


36

%

73

%

Net charge-offs to LHFI ratio (annualized)

0.05

%

0.11

%

0.08

%

0.10

%

0.02

%

(6)


3


Ratio of nonperforming LHFI and TDRs to LHFI

0.28

%

0.22

%

0.21

%

0.21

%

0.21

%

6


7












Net charge-offs/(recoveries) to LHFI ratio (annualized) by loan type (1):





Residential first mortgage

0.07

%

0.26

%

0.08

%

0.08

%

0.07

%

(19)



Home equity and other consumer

0.23

%

0.28

%

0.28

%

0.49

%

0.27

%

(5)


(4)


Commercial real estate

(0.01)

%

0.01

%

(0.01)

%

%

%

(2)


(1)


Commercial and industrial

0.06

%

0.08

%

0.09

%

0.07

%

(0.22)

%

(2)


28


N/M - Not meaningful











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

 

The allowance for credit losses was $280 million and covered 1.70 percent of loans held-for-investment at September 30, 2020, flat compared to June 30, 2020. Excluding warehouse loans, the allowance coverage ratio was 3.07 percent, a 47 basis point increase from June 30, 2020. The increase in the allowance coverage reflects our forecast of economic conditions and our view that the economy will continue to be challenged for an extended period of time as a result of the COVID-19 pandemic.

Net charge-offs in the third quarter 2020 were negligible at $2 million, or 5 basis points of LHFI, compared to $3 million, or 11 basis points in the prior quarter.

Nonperforming loans were $45 million and our ratio of nonperforming loans to loans held-for-investment was 28 basis points at September 30, 2020, a 6 basis point increase compared to June 30, 2020. The increase was due to one commercial loan that was placed on nonaccrual during the quarter. At September 30, 2020, early stage loan delinquencies totaled $13 million, or 8 basis points, of total loans, compared to $15 million, or 10 basis points, at June 30, 2020.

Capital

Capital Ratios (Bancorp)


Change (% / bps)


September 30,

2020

June 30,

2020

March 31,

2020

December 31,

2019

September 30,

2019

Seq


Yr/Yr


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

8.04

%

7.76

%

8.09

%

7.57

%

7.98

%

28


6


Tier 1 common equity (to RWA)

9.21

%

9.11

%

9.17

%

9.32

%

9.25

%

10


(4)


Tier 1 capital (to RWA)

10.31

%

10.33

%

10.52

%

10.83

%

10.81

%

(2)


(50)


Total capital (to RWA)

11.29

%

11.32

%

11.18

%

11.52

%

11.54

%

(3)


(25)


Tangible common equity to asset ratio (1)

6.90

%

6.58

%

6.25

%

6.95

%

7.08

%

32


(18)


Tangible book value per share (1)

$

35.60


$

31.74


$

29.52


$

28.57


$

27.62


12

%

29

%





















(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. The capital ratios are impacted by a 100 percent risk-weighting of the warehouse loan portfolio – the largest component of the Company's held for sale portfolio.  Adjusting the risk-weighting of warehouse loans to 50 percent, because of the historically low level of losses from this loan portfolio and the fact that the portfolio is fully collateralized with assets that would receive a 50 percent risk weighting, the Company would have had a Tier 1 common equity ratio of 10.9 percent and a total risk-based capital ratio of 13.4 percent at September 30, 2020.

Importantly, tangible book value per share grew to $35.60, up $3.86 from last quarter and $7.98 higher than the same quarter last year, an increase of 29 percent.

Earnings Conference Call

As previously announced, the Company's third quarter 2020 earnings call will be held Wednesday, October 21, 2020 at 11 a.m. (ET).

To join the call, please dial (800) 353-6461 toll free or (334) 323-0501 and use passcode 9179222. 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 9179222.

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. (NYSE: FBC) is a $29.5 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 87 retail locations in 29 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 $227 billion of loans representing slightly over 1.1 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 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). The COVID-19 pandemic is adversely affecting us, our customers, counterparties, employees, and third-party service providers, and the ultimate extent of the impacts on our business, financial position, results of operations, liquidity, and prospects is uncertain. 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,

2020


June 30,

2020


December 31,
2019


September 30,
2019

Assets








Cash

$

194



$

204



$

220



$

234


Interest-earning deposits

86



23



206



119


  Total cash and cash equivalents

280



227



426



353


Investment securities available-for-sale

2,165



2,348



2,116



1,697


Investment securities held-to-maturity

440



496



598



635


Loans held-for-sale

5,372



5,615



5,258



4,196


Loans held-for-investment

16,476



14,808



12,129



12,548


Loans with government guarantees

2,500



1,791



736



607


Less: allowance for loan losses

(255)



(229)



(107)



(110)


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

18,721



16,370



12,758



13,045


Mortgage servicing rights

323



261



291



285


Federal Home Loan Bank stock

377



377



303



303


Premises and equipment, net

410



410



416



417


Goodwill and intangible assets

160



164



170



174


Other assets

1,228



1,200



930



943


Total assets

$

29,476



$

27,468



$

23,266



$

22,048


Liabilities and Stockholders' Equity








Noninterest-bearing deposits

$

9,429



$

7,921



$

5,467



$

5,649


Interest-bearing deposits

10,516



9,977



9,679



10,096


  Total deposits

19,945



17,898



15,146



15,745


Short-term Federal Home Loan Bank advances and other

2,226



3,354



4,165



2,329


Long-term Federal Home Loan Bank advances

1,200



1,200



650



650


Other long-term debt

493



493



496



496


Other liabilities

3,417



2,552



1,021



1,094


Total liabilities

27,281



25,497



21,478



20,314


Stockholders' Equity








Common stock

1



1



1



1


Additional paid in capital

1,493



1,488



1,483



1,481


Accumulated other comprehensive income

46



46



1



5


Retained earnings

655



436



303



247


  Total stockholders' equity

2,195



1,971



1,788



1,734


Total liabilities and stockholders' equity

$

29,476



$

27,468



$

23,266



$

22,048


 

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









Change compared to:


Three Months Ended


2Q20


3Q19


September 30,
2020

June 30,
2020

March 31,
2020

December 31,
2019

September 30,
2019


Amount Percent


Amount Percent

Interest Income












Total interest income

$

206


$

201


$

201


$

213


$

203



$

5


2

%


$

3


1

%

Total interest expense

26


33


53


61


57



(7)


(21)

%


(31)


(54)

%

  Net interest income

180


168


148


152


146



12


7

%


34


23

%

Provision for credit losses

32


102


14



1



(70)


(69)

%


31


N/M

  Net interest income after provision for credit losses

148


66


134


152


145



82


124

%


3


2

%

Noninterest Income












Net gain on loan sales

346


303


90


101


110



43


14

%


236


N/M

Loan fees and charges

45


41


26


30


29



4


10

%


16


55

%

Net return (loss) on the mortgage servicing rights

12


(8)


6


(3)


(2)



20


N/M


14


N/M

Loan administration income

26


21


12


8


5



5


24

%


21


N/M

Deposit fees and charges

8


7


9


10


10



1


14

%


(2)


(20)

%

Other noninterest income

15


14


14


16


19



1


7

%


(4)


(21)

%

  Total noninterest income

452


378


157


162


171



74


20

%


281


164

%

Noninterest Expense












Compensation and benefits

123


116


102


102


98



7


6

%


25


26

%

Occupancy and equipment

47


44


41


43


40



3


7

%


7


18

%

Commissions

72


61


29


35


38



11


18

%


34


89

%

Loan processing expense

24


25


20


20


22



(1)


(4)

%


2


9

%

Legal and professional expense

9


5


6


9


6



4


80

%


3


50

%

Federal insurance premiums

6


7


6


6


5



(1)


(14)

%


1


20

%

Intangible asset amortization

3


4


3


4


3



(1)


(25)

%



%

Other noninterest expense

21


34


28


26


26



(13)


(38)

%


(5)


(19)

%

  Total noninterest expense

305


296


235


245


238



9


3

%


67


28

%

Income before income taxes

295


148


56


69


78



147


99

%


217


278

%

Provision for income taxes

73


32


10


11


15



41


128

%


58


N/M

Net income

$

222


$

116


$

46


$

58


$

63



$

106


91

%


$

159


252

%

Income per share












  Basic

$

3.90


$

2.04


$

0.80


$

1.01


$

1.12



$

1.86


91

%


$

2.78


248

%

  Diluted

$

3.88


$

2.03


$

0.80


$

1.00


$

1.11



$

1.85


91

%


$

2.77


250

%













Cash dividends declared

$

0.05


$

0.05


$

0.05


$

0.04


$

0.04



$


%


$

0.01


25

%

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,

2020


September 30,

2019


Amount

Percent

Interest Income







Total interest income

$

608



$

581



$

27


5

%

Total interest expense

112



171



(59)


(35)

%

  Net interest income

496



410



86


21

%

Provision for credit losses

148



18



130


N/M

  Net interest income after provision for credit losses

348



392



(44)


(11)

%

Noninterest Income







Net gain on loan sales

739



234



505


N/M

Loan fees and charges

112



70



42


60

%

Net return (loss) on the mortgage servicing rights

10



9



1


11

%

Loan administration income

59



22



37


168

%

Deposit fees and charges

24



28



(4)


(14)

%

Other noninterest income

44



85



(41)


(48)

%

  Total noninterest income

988



448



540


121

%

Noninterest Expense







Compensation and benefits

341



275



66


24

%

Occupancy and equipment

132



118



14


12

%

Commissions

162



76



86


N/M

Loan processing expense

69



60



9


15

%

Legal and professional expense

20



18



2


11

%

Federal insurance premiums

19



14



5


36

%

Intangible asset amortization

10



11



(1)


(9)

%

Other noninterest expense

84



71



13


18

%

  Total noninterest expense

837



643



194


30

%

Income before income taxes

499



197



302


153

%

Provision for income taxes

115



37



78


N/M

Net income

$

384



$

160



$

224


140

%

Income per share







  Basic

$

6.76



$

2.83



$

3.93


139

%

  Diluted

$

6.71



$

2.80



$

3.91


140

%








Cash dividends declared

$

0.15



$

0.12



$

0.03


25

%

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,
2020

June 30,

2020

September 30,
2019


September 30,
2020

September 30,
2019

Selected Mortgage Statistics (1):







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

$

15,000


$

13,800


$

9,200



$

40,000


$

24,100


Mortgage loans closed

$

14,400


$

12,200


$

9,300



$

35,200


$

23,400


Mortgage loans sold and securitized

$

14,500


$

12,900


$

8,200



$

34,900


$

22,200


Selected Ratios:







Interest rate spread (3)

2.44

%

2.52

%

2.48

%


2.41

%

2.57

%

Net interest margin

2.78

%

2.86

%

3.05

%


2.81

%

3.07

%

Net margin on loans sold and securitized

2.39

%

2.35

%

1.34

%


2.12

%

1.05

%

Return on average assets

3.15

%

1.77

%

1.20

%


1.97

%

1.08

%

Adjusted return on average assets (4) (5)

3.15

%

1.77

%

1.20

%


1.97

%

0.98

%

Return on average common equity

41.54

%

23.47

%

14.72

%


25.71

%

12.90

%

Return on average tangible common equity (5)

45.42

%

26.16

%

17.12

%


28.58

%

15.30

%

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

45.42

%

26.16

%

17.12

%


28.58

%

13.99

%

Efficiency ratio

48.3

%

54.3

%

75.2

%


56.4

%

75.0

%

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

7.57

%

7.53

%

8.12

%


7.66

%

8.34

%

Average Balances:







Average interest-earning assets

$

25,738


$

23,692


$

18,997



$

23,535


$

17,693


Average interest-bearing liabilities

$

14,281


$

15,119


$

12,893



$

14,625


$

12,767


Average stockholders' equity

$

2,141


$

1,977


$

1,722



$

1,991


$

1,658




(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,

2020


June 30,

2020


December 31,

2019


September 30,

2019

Selected Statistics:








Book value per common share

$

38.41



$

34.62



$

31.57



$

30.69


Tangible book value per share (1)

$

35.60



$

31.74



$

28.57



$

27.62


Number of common shares outstanding

57,150,470



56,943,979



56,631,236



56,510,341


Number of FTE employees

4,871



4,641



4,453



4,171


Number of bank branches

160



160



160



160


Ratio of nonperforming assets to total assets (2)

0.17

%


0.14

%


0.15

%


0.16

%

Common equity-to-assets ratio

7.45

%


7.18

%


7.68

%


7.88

%

MSR Key Statistics and Ratios:








Weighted average service fee (basis points)

35.0



37.0



39.7



39.9


Capitalized value of mortgage servicing rights

0.85

%


0.87

%


1.21

%


1.14

%



(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, 2020


June 30, 2020


September 30, 2019


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

$

5,602


$

45


3.21%


$

5,645


$

48


3.42%


$

3,786


$

40


4.22%

Loans held-for-investment












  Residential first mortgage

2,584


21


3.24%


2,822


24


3.41%


3,282


29


3.58%

  Home equity

951


9


3.77%


1,001


9


3.78%


934


13


5.37%

  Other

950


13


5.28%


881


12


5.42%


658


10


5.99%

Total consumer loans

4,485


43


3.78%


4,704


45


3.87%


4,874


52


4.24%

  Commercial real estate

3,007


27


3.47%


3,101


28


3.64%


2,594


35


5.39%

  Commercial and industrial

1,650


14


3.25%


2,006


17


3.34%


1,767


22


4.97%

  Warehouse lending

5,697


56


3.92%


3,785


38


3.88%


2,508


32


5.00%

  Total commercial loans

10,354


97


3.68%


8,892


83


3.67%


6,869


89


5.14%

Total loans held-for-investment

14,839


140


3.71%


13,596


128


3.74%


11,743


141


4.77%

Loans with government guarantees

2,122


5


0.89%


858


4


1.97%


574


4


2.78%

Investment securities

2,807


16


2.29%


3,417


21


2.42%


2,713


17


2.63%

Interest-earning deposits

368



0.11%


176



0.11%


181


1


2.22%

  Total interest-earning assets

25,738


$

206


3.16%


23,692


$

201


3.38%


18,997


$

203


4.27%

Other assets

2,539





2,569





2,207




Total assets

$

28,277





$

26,261





$

21,204




Interest-Bearing Liabilities












Retail deposits












  Demand deposits

$

1,824


$


0.09%


$

1,800


$

1


0.22%


$

1,388


$

3


0.88%

  Savings deposits

3,675


3


0.34%


3,476


4


0.52%


3,262


10


1.20%

  Money market deposits

733



0.09%


716



0.12%


722


1


0.34%

  Certificates of deposit

1,672


8


1.62%


1,987


10


2.00%


2,583


15


2.40%

  Total retail deposits

7,904


11


0.53%


7,979


15


0.78%


7,955


29


1.42%

Government deposits

1,403


1


0.35%


1,088


2


0.63%


1,253


4


1.45%

Wholesale deposits and other

953


4


1.77%


738


4


2.07%


744


5


2.42%

Total interest-bearing deposits

10,260


16


0.62%


9,805


21


0.86%


9,952


38


1.52%

Short-term FHLB advances and other

2,328


2


0.20%


3,753


2


0.26%


1,910


10


2.24%

Long-term FHLB advances

1,200


3


1.03%


1,068


3


1.13%


536


2


1.72%

Other long-term debt

493


5


4.52%


493


7


4.99%


495


7


5.60%

  Total interest-bearing liabilities

14,281


26


0.72%


15,119


33


0.86%


12,893


57


1.79%

Noninterest-bearing deposits












  Retail deposits and other

1,954





1,687





1,315




  Custodial deposits (1)

7,347





6,223





4,550




Total noninterest-bearing deposits

9,301





7,910





5,865




Other liabilities

2,554





1,255





717




Stockholders' equity

2,141





1,977





1,722




Total liabilities and stockholders' equity

$

28,277





$

26,261





$

21,197




Net interest-earning assets

$

11,457





$

8,573





$

6,104




  Net interest income


$

180





$

168





$

146



Interest rate spread (2)



2.44%




2.52%




2.48%

Net interest margin (3)



2.78%




2.86%




3.05%

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



180.2%




156.7%




147.3%

Total average deposits

$

19,561





$

17,715





$

15,817































(1)

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

(2)

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

(3)

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

 

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



Nine Months Ended,


September 30, 2020


September 30, 2019


Average Balance

Interest

Annualized

Yield/Rate


Average Balance

Interest

Annualized

Yield/Rate

Interest-Earning Assets


Loans held-for-sale

$

5,499


$

142


3.44

%


$

3,532


$

119


4.48

%

Loans held-for-investment








  Residential first mortgage

2,822


72


3.40

%


3,158


85


3.61

%

  Home equity

990


30


4.10

%


832


34


5.50

%

  Other

882


36


5.47

%


512


25


6.51

%

  Total consumer loans

4,694


138


3.94

%


4,502


144


4.29

%

  Commercial real estate

3,019


90


3.90

%


2,414


102


5.56

%

  Commercial and industrial

1,774


50


3.68

%


1,702


67


5.20

%

  Warehouse lending

3,937


119


3.98

%


1,898


74


5.17

%

  Total commercial loans

8,730


259


3.89

%


6,014


243


5.34

%

Total loans held-for-investment

13,424


397


3.91

%


10,516


387


4.89

%

Loans with government guarantees

1,267


12


1.23

%


511


11


2.88

%

Investment securities

3,094


56


2.40

%


2,957


61


2.77

%

Interest-earning deposits

251


1


0.56

%


177


3


2.38

%

  Total interest-earning assets

23,535


608


3.42

%


17,693


581


4.37

%

Other assets

2,457





2,184




Total assets

$

25,992





$

19,877




Interest-Bearing Liabilities








Retail deposits








  Demand deposits

$

1,737


$

4


0.33

%


$

1,311


$

8


0.80

%

  Savings deposits

3,513


17


0.63

%


3,181


26


1.10

%

  Money market deposits

712


1


0.17

%


748


2


0.31

%

  Certificates of deposit

1,970


29


1.98

%


2,561


44


2.29

%

Total retail deposits

7,932


51


0.86

%


7,801


80


1.37

%

Government deposits

1,208


6


0.68

%


1,184


13


1.49

%

Wholesale deposits and other

758


12


2.03

%


518


9


2.35

%

Total interest-bearing deposits

9,898


69


0.93

%


9,503


102


1.44

%

Short-term FHLB advances and other

3,212


16


0.65

%


2,420


44


2.45

%

Long-term FHLB advances

1,021


9


1.13

%


349


4


1.71

%

Other long-term debt

494


18


4.94

%


495


21


5.84

%

  Total interest-bearing liabilities

14,625


112


1.01

%


12,767


171


1.80

%

Noninterest-bearing deposits








  Retail deposits and other

1,680





1,278




  Custodial deposits (1)

6,120





3,524




  Total noninterest-bearing deposits

7,800





4,802




Other liabilities

1,576





650




Stockholders' equity

1,991





1,658




Total liabilities and stockholders' equity

$

25,992





$

19,877




Net interest-earning assets

$

8,910





$

4,926




  Net interest income


$

496





$

410



Interest rate spread (2)



2.41

%




2.57

%

Net interest margin (3)



2.81

%




3.07

%

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



160.9

%




138.6

%

Total average deposits

17,698





14,305




(1)

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

(2)

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

(3)

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

 

Earnings Per Share
(Dollars in millions, except share data)
(Unaudited)



Three Months Ended


Nine Months Ended


September 30,

2020


June 30

2020


September 30,
2019


September 30,

2020


September 30,
2019

Net Income

$

222



$

116



$

63



$

384



$

160


Weighted average common shares outstanding

57,032,746



56,790,642



56,484,499



56,827,171



56,607,944


Stock-based awards

347,063



333,064



626,297



404,518



644,596


  Weighted average diluted common shares

57,379,809



57,123,706



57,110,796



57,231,689



57,252,540


Basic earnings per common share

$

3.90



$

2.04



$

1.12



$

6.76



$

2.83


Stock-based awards

(0.02)



(0.01)



(0.01)



(0.05)



(0.03)


  Diluted earnings per common share

$

3.88



$

2.03



$

1.11



$

6.71



$

2.80


 

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



September 30, 2020


June 30, 2020


December 31, 2019


September 30, 2019


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,256


8.04

%


$

2,021


7.76

%


$

1,826


8.00

%


$

1,668


7.98

%

Total adjusted avg. total asset base

$

28,069




$

26,040




$

22,830




$

20,901



Tier 1 common equity (to risk weighted assets)

$

2,016


9.21

%


$

1,781


9.11

%


$

1,586


9.62

%


$

1,428


9.25

%

Tier 1 capital (to risk weighted assets)

$

2,256


10.31

%


$

2,021


10.33

%


$

1,826


11.07

%


$

1,668


10.81

%

Total capital (to risk weighted assets)

$

2,471


11.29

%


$

2,214


11.32

%


$

1,936


11.74

%


$

1,781


11.54

%

Risk-weighted asset base

$

21,882




$

19,562




$

16,493




$

15,432



 

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



September 30, 2020


June 30, 2020


December 31, 2019


September 30, 2019


Amount

Ratio


Amount

Ratio


Amount

Ratio


Amount

Ratio

Tier 1 leverage (to adjusted avg. total assets)

$

2,212


7.89

%


$

1,969


7.57

%


$

1,752


7.71

%


$

1,747


8.35

%

Total adjusted avg. total asset base

28,051




$

26,020




22,727




$

19,614



Tier 1 common equity (to risk weighted assets)

$

2,212


10.11

%


$

1,969


10.07

%


$

1,752


11.04

%


$

1,747


11.33

%

Tier 1 capital (to risk weighted assets)

$

2,212


10.11

%


$

1,969


10.07

%


$

1,752


11.04

%


$

1,747


11.33

%

Total capital (to risk weighted assets)

$

2,427


11.09

%


$

2,161


11.05

%


$

1,862


11.73

%


$

1,860


12.06

%

Risk-weighted asset base

21,882




$

19,559




$

15,873




$

14,538



 

Loans Serviced
(Dollars in millions)
(Unaudited)



September 30, 2020


June 30, 2020


December 31, 2019


September 30, 2019


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)

$

180,981


893,559



$

174,517


854,693


$

194,638


918,662



$

171,145


826,472


Serviced for others

37,908


148,868



29,846


122,779


24,003


105,469



25,039


106,992


Serviced for own loan portfolio (3)

8,469


62,486



9,211


64,142


9,536


66,526



8,058


60,088


Total loans serviced

$

227,358


1,104,913



$

213,574


1,041,614



$

228,177


1,090,657



$

204,242


993,552


























(1)

Unpaid principal balance, net of write downs, does not include premiums or discounts.

(2)

Includes temporary short-term subservicing performed as a result of sales of servicing-released mortgage servicing rights. Includes repossessed assets.

(3)

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, 2020


June 30, 2020


December 31, 2019


September 30, 2019

Consumer loans












Residential first mortgage

$

2,472


15.0

%


$

2,716


18.3

%


$

3,154


26.0

%


$

3,258


26.0

%

Home equity

924


5.6

%


978


6.6

%


1,024


8.4

%


985


7.8

%

Other

973


5.9

%


898


6.1

%


729


6.0

%


693


5.5

%

  Total consumer loans

4,369


26.5

%


4,592


31.0

%


4,907


40.4

%


4,936


39.3

%

Commercial loans












Commercial real estate

2,996


18.2

%


3,016


20.4

%


2,828


23.3

%


2,697


21.5

%

Commercial and industrial

1,520


9.2

%


1,968


13.3

%


1,634


13.5

%


1,700


13.6

%

Warehouse lending

7,591


46.1

%


5,232


35.3

%


2,760


22.8

%


3,215


25.6

%

  Total commercial loans

12,107


73.5

%


10,216


69.0

%


7,222


59.6

%


7,612


60.7

%

Total loans held-for-investment

$

16,476


100.0

%


$

14,808


100.0

%


$

12,129


100.0

%


$

12,548


100.0

%

 

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



September 30, 2020


June 30, 2020


December 31, 2019


September 30, 2019

Indirect Lending

$

710


73.0

%


$

647


72.0

%


$

578


79.3

%


$

519


74.9

%

Point of Sale

202


20.8

%


181


20.2

%


63


8.6

%


58


8.4

%

Other

61


6.3

%


70


7.8

%


88


12.1

%


116


16.7

%

Total other consumer loans

$

973


100.0

%


$

898


100.0

%


$

729


100.0

%


$

693


100.0

%

 

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



September 30, 2020

June 30, 2020


September 30, 2019

Residential first mortgage

$

52



$

60



$

28


Home equity

29



28



16


Other

38



34



6


Total consumer loans

119



122



50


Commercial real estate

89



83



33


Commercial and industrial

42



23



22


Warehouse lending 

5



1



5


Total commercial loans

136



107



60


  Allowance for loan losses

255



229



110


  Reserve for unfunded commitments

25



21



3


Allowance for credit losses

$

280



$

250



$

113


 

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



Three Months Ended September 30, 2020


Residential
First
Mortgage

Home

 Equity

Other

Consumer

Commercial

Real Estate

Commercial
and
Industrial

Warehouse

Lending

Total LHFI
Portfolio (1)

Unfunded
Commitments

Beginning balance

$

60


$

28


$

34


$

83


$

23


$

1


$

229


$

21


Provision (benefit) for credit losses:









  Loan volume

(4)


(1)


3



(4)


1


(5)


4


  Economic forecast (2)

(3)


(3)


(1)





(7)



  Credit (3)

(7)


1


(4)


13


12



15



  Qualitative factor adjustments (4)

6


3


5


(7)


11


3


21



Charge-offs

(2)


(1)


(1)





(4)



Provision for charge-offs

2


1


1





4



Recoveries


1


1





2



Ending allowance balance

$

52


$

29


$

38


$

89


$

42


$

5


$

255


$

25











(1)

Excludes loans carried under the fair value option.

(2)

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

(3)

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

(4)

Includes $10 million of unallocated reserves attributed to various portfolios for presentation purposes.

 

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



September 30,

2020


June 30,

2020


December 31,

2019


September 30,

2019

Nonperforming LHFI

$

36



$

23



$

16



$

16


Nonperforming TDRs

4



4



3



3


Nonperforming TDRs at inception but performing for less than six months

5



6



7



7


Total nonperforming LHFI and TDRs (1)

45



33



26



26


Other nonperforming assets, net

6



7



10



9


LHFS

6



7



5



17


Total nonperforming assets

$

57



$

47



$

41



$

52










Ratio of nonperforming assets to total assets (2)

0.17

%


0.14

%


0.15

%


0.16

%

Ratio of nonperforming LHFI and TDRs to LHFI

0.28

%


0.22

%


0.21

%


0.21

%

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

0.31

%


0.27

%


0.30

%


0.29

%



(1)

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

(2)

Ratio excludes LHFS.

 

Asset Quality - Loans Held-for-Investment
(Dollars in millions)
(Unaudited)



30-59 Days
Past Due


60-89 Days
Past Due


Greater than

90 days (1)


Total Past

Due


Total LHFI

September 30, 2020










Consumer loans

$

9


$

6


$

4


$

48


$

36



$

49



$

4,369


Commercial loans





10



10



12,107


  Total loans

$

9



$

4



$

46



$

59



$

16,476


June 30, 2020










Consumer loans

$

9



$

6



$

33



$

48



$

4,592


Commercial loans









10,216


       Total loans

$

9



$

6



$

33



$

48



$

14,808


December 31, 2019










Consumer loans

$

9



$

5



$

26



$

40



$

4,907


Commercial loans









7,222


  Total loans

$

9



$

5



$

26



$

40



$

12,129


September 30, 2019










Consumer loans

$

9



$

3



$

26



$

38



$

4,936


Commercial loans









7,612


  Total loans

$

9



$

3



$

26



$

38



$

12,548


























(1)

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

 

Troubled Debt Restructurings
(Dollars in millions)
(Unaudited)



TDRs


Performing


Nonperforming


Total

September 30, 2020


Consumer loans

$

34



$

9



$

43


Commercial loans

5





5


  Total TDR loans

$

39



$

9



$

48


June 30, 2020






Consumer loans

$

35



$

10



$

45


Commercial loans

5





5


  Total TDR loans

$

40



$

10



$

50


December 31, 2019






Consumer loans

$

38



$

10



$

48


  Total TDR loans

$

38



$

10



$

48


September 30, 2019






Consumer loans

$

39



$

10



$

49


  Total TDR loans

$

39



$

10



$

49


 

Non-GAAP Reconciliation
(Unaudited)


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

2020


June 30,

2020


March 31,

2020


December 31,

2019


September 30,

2019


(Dollars in millions, except share data)

Total stockholders' equity

$

2,195



$

1,971



$

1,842



$

1,788



$

1,734


Less: Goodwill and intangible assets

160



164



167



170



174


Tangible book value

$

2,035



$

1,807



$

1,675



$

1,618



$

1,560












Number of common shares outstanding

57,150,470



56,943,979



56,729,789



56,631,236



56,510,341


Tangible book value per share

$

35.60



$

31.74



$

29.52



$

28.57



$

27.62












Total assets

$

29,476



$

27,468



$

26,805



$

23,266



$

22,048


Tangible common equity to assets ratio

6.90

%


6.58

%


6.25

%


6.95

%


7.08

%

 

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



Three Months Ended


Nine Months Ended


September 30,
2020


December 31,

2019


September 30,
2019


September 30,
2020


September 30,
2019


(Dollars in millions)

Net income

$

222



$

58



$

63



$

384



$

160


Add: Intangible asset amortization, net of tax

3



3



2



7



10


Tangible net income

$

225



$

61



$

65



$

391



$

170












Total average equity

$

2,141



$

1,803



$

1,722



$

1,991



$

1,658


Less: Average goodwill and intangible assets

162



172



176



165



184


Total tangible average equity

$

1,979



$

1,631



$

1,546



$

1,826



$

1,474












Return on average tangible common equity

45.42

%


14.76

%


17.12

%


28.58

%


15.30

%

Adjustment to remove DOJ adjustment

%


%


%


%


(1.31)

%

Adjusted return on average tangible common equity

45.42

%


14.76

%


17.12

%


28.58

%


13.99

%











Return on average assets

3.15

%


0.99

%


1.20

%


1.97

%


1.08

%

Adjustment to remove DOJ adjustment

%


%


%


%


(0.10)

%

Adjusted return on average assets

3.15

%


0.99

%


1.20

%


1.97

%


0.98

%

 

Adjusted HFI loan-to-deposit ratio.



September 30,

2020


June 30,

2020


March 31,

2020


December 31,
2019


September 30,

2019


(Dollars in millions)

Average LHFI

$

14,839



$

13,596



$

11,823



$

12,168



$

11,743


Less: Average warehouse loans

5,697



3,785



2,310



2,747



2,508


Adjusted average LHFI

$

9,142



$

9,811



$

9,513



$

9,421



$

9,235












Average deposits

$

19,561



$

17,715



$

15,795



$

15,904



$

15,817


Less: Average custodial deposits

7,347



6,223



4,776



4,772



4,550


Adjusted average deposits

$

12,214



$

11,492



$

11,019



$

11,132



$

11,267












HFI loan-to-deposit ratio

75.9

%


76.7

%


74.9

%


76.5

%


74.2

%

Adjusted HFI loan-to-deposit ratio

74.8

%


85.4

%


86.3

%


84.6

%


82.0

%

 

Adjusted net interest margin.



Three Months Ended


September 30,

2020


June 30,

2020


March 31,

2020


December 31,
2019


September 30,
2019











Net interest margin

2.78

%


2.86

%


2.81

%


2.91

%


3.05

%

Adjustment to LGG loans available for repurchase

0.16

%


0.02

%


%


%


%

Adjusted net interest margin

2.94

%


2.88

%


2.81

%


2.91

%


3.05

%

 

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

Cision View original content:http://www.prnewswire.com/news-releases/flagstar-bancorp-reports-third-quarter-2020-net-income-of-222-million-or-3-88-per-diluted-share-301156455.html

SOURCE Flagstar Bancorp, Inc.